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How to Evaluate Your Passive Income Ideas for Opportunities

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Read Time: 11 mins
This post is part of a series called How to Create Passive Income (Complete Beginner’s Guide).
8 Best Ways to Make Passive Income Online in 2022
How to Create Multiple Streams of Passive Income

Over the past few tutorials in this series, we’ve dived deep into how to get started making passive income: 

In this tutorial we’re going to take this series a step further and look at how to evaluate your passive income ideas to see if they have potential. 

There are a series of questions that you need to answer honestly to properly evaluate your ideas. Not every idea will work, or work for you. These guidelines are here to help you vet your passive income ideas for the best opportunities to take action on. 

On the other hand, these are only guidelines. If you really think your idea could work, regardless of how you answer these questions, you should go for it. 

I’ve broken these helpful questions into two sections:

  1. The Build which covers actually creating the product or service you’re going to offer.
  2. The Marketing which covers finding a market and selling your product.

As I go through these questions, I’m going to use a practical example of one of the passive income ideas I’m working on myself: a humorous psychology t-shirt. 

Is your passive income idea a good opportunity? Is your passive income idea a good opportunity? Is your passive income idea a good opportunity?
Is your passive income idea a good opportunity? Image source: Envato Elements

Let's look at passive income opportunities you're considering, and filter out the not so good ideas, to narrow down what you should move forward with.  

1. The Build

There’s no point trying to sell a product if you’re not even capable of creating it, so before worrying about markets and customers, let’s work out whether it’s even feasible. Consider these five important preliminary questions: 

Q1. Are You Solving a Problem?

First, we need to decide whether the ideas is even good. If it’s not, you’ll just waste time working on something that will never pay off. 

Be Sure to Solve Someone's Real Problems

While there’s a lot of things that determine whether a product or service is good or not, the simplest test is to ask yourself one question: are you solving somebody’s problem? 

If there’s someone out there who needs (or at least wants) what you’re offering, then, at least to that one person, it’s a good product. The more people who’s problem you solve, the better. 

Let’s look at my t-shirt idea. Although I’m not solving a unique or difficult problem, there are people out there who like to buy funny t-shirts. There are psychology grad students who like psychology themed clothes. While it might not be revolutionary, I would be offering a solution to a problem (finding funny/psychology t-shirts) that real people are having.

Remember Scams Don't Solve Problems

This should go without saying, but now is the time to stress it. Scams and rip off products are not solving any problems. If you plan to pay someone to churn out bad information eBooks in the hopes of getting suckers to buy them on Amazon, you’re not going to get very far. This is not the right type of passive income opportunity to pursue.

You might see some short term success but, in the long run, Amazon will shut you down. Sure, you can move onto the next hot scam, but it’s better to take the time to develop a real, sustainable business that can deliver passive income over the long term.

Good passive income opportunities solve peoples problems. The best ideas help customers. It's best to avoid scamy approaches and instead focus on delivering real value.

Q2. Do You Have the Skills to Do It?

Even the best passive income idea is worthless if you can’t actually build it. My coding skills are… basic. It doesn’t matter how good an idea for an app I come up with, I’m never going to be able to build it. Unless you’re able to actually create the project you’re planning, it won’t work out.

Now there are two side notes here: 

1. Leverage Learning as a Gateway

First, if you’re planning to learn a skill anyway just for the pleasure of it, then you can use your passive income project as a good goal. If I was serious about learning to code properly, I’d probably come up with an app I wanted to build and work on it.

2. Put Your Capital to Work for You

Second, capital can be a replacement for skills. This works better for smaller projects than bigger ones. I’m paying a designer about $200 to create the t-shirt design. That’s a reasonable investment. 

To pay a developer to create an app would take thousands or tens of thousands of dollars. Unless you’re expecting huge returns, relying on paying freelancers to get the idea off the ground is a bad idea. 

Q3. Do You Have What’s Required to Do It Well?

Just being able to technically build something isn’t enough: you have to be able to do it well. If you want to stand out in a crowded marketplace, your product has to be great. 

What’s required to do something well depends. If you’re launching a travel blog, you need really awesome, unique stories. For my t-shirt, I knew I needed a really really funny concept. 

Don’t just commit to an idea because you’re technically capable of doing it. If you don’t have the flair, money, contacts, or any of a thousand other intangible things that are required to make something great, you’re better off reconsidering. 

Q4. How Long Will It Take You To Do It?

With passive income, the whole point is to avoid trading time for money. Instead, you’re investing your time in the hopes of making a good return down the line. There are, however, good investments and bad investments when considering passive income opportunities.

Something that’s going to take a weekend to put together has to bring in a lot less money to be worth doing than something that takes six months. If you’re going to take a long time to create something that will only sell for a few dollars, the investment probably won’t pay off.

With my t-shirt idea, I’m confident I can put it together in under a week. There’ll be some ongoing work with organising ad campaigns and the like, but most of it won’t take too long. This means that I only need to make a few hundred dollars for the investment to, at worst, be neutral.

Q5. Is It Actually a Passive Income Project?

Finally, are you actually working on a passive income project? It’s very easy to fall in the trap of doing something that’s going to require a lot of ongoing maintenance. Something like an app often isn’t that passive. 

Sure, you put it up for sale and the money comes rolling in (if you’re successful), but you have to add new features, keep up with OS updates, and so on. If you want your app to be relevant for longer than a year, it quickly becomes a pretty full time job.

With my t-shirt plan, things are pretty safe. Unless I’m going to be personally hand sewing them, it’s unlikely it will take more than an hour or two’s work a week to keep on top of everything.

2. The Marketing

If you’ve worked out something you can make, put together well, is a decent use of your time, and is really a passive income project, then it’s time to start looking at how you’re going to sell it. Let's review this set of helpful marketing questions when considering passive income opportunities: 

Q1. How Will You Sell It?

To make money from your passive income project, you actually need to be able to sell whatever you create. This isn’t necessarily a difficult problem, but you do need to think about how you’re going to do it. 

If you’re creating something like Wordpress themes, you can sell them through ThemeForest. If you’re creating a physical product, Amazon is the biggest marketplace in the world. 

For my t-shirt, I’m going to sell it through Amazon and also my own small eCommerce store. 

If you can’t think of a place to sell your idea, you have a problem.

Discover great Wordpress Themes on Envato Elements or ThemeForest.

Q2. Do You Have a Market For It?

If you already have access to an existing market, things are a lot easier. First time authors always have a massive struggle to get people to read their book but Stephen King has hundreds of thousands of fans who’ll rush out and buy anything he writes on the release day. If you’ve got a loyal blog following, a newsletter, or even just a lot of friends on Facebook, you’re starting with an edge.

For me, I have a psychology degree so I know at least a few people who might be into a psych themed t-shirt. It’s not a massive existing market, but it’s something. 

Q3. Is There Even a Market?

If you don’t have access to an existing market, are you sure there even is one? Tens of thousands of self-published books sell less than twenty copies on Amazon. The author couldn’t even get their friends and family to buy it. Before you invest months into something, make sure that you’ll have a market to sell it to. If, however, something is quick to do, it’s better to just get it done and find the market later. 

My t-shirt is quick and cheap to do with very low upfront costs; rather than spending a few weeks doing market research, I’m just going to launch it and see what happens.

Q4. How Are You Going to Find People? 

Unless you’ve got fans waiting to buy your new product, you need to do some marketing to reach out to people. Depending on what you’re doing you’ve got a few options:

  • Facebook ads are very popular at the moment. You can target very specific groups of people.
  • Google ads are also a good alternative.
  • Affiliate schemes can encourage other people to market your product for you, in return for a cut of the profits.
  • Organic marketing, like reaching out to bloggers and other “influencers”, can work especially if you’re creating a high quality information product.

Those are just a few ideas. There are hundreds more potential way to get your product in front of people. We’ll explore some of them in more depth in a later tutorial. You just have to decide which ones are the best for you.

For my t-shirt, I’m going to rely heavily on Facebook ads. I’ll also try some organic marketing by reaching out to psychology Facebook pages. Here's a quick look at the first draft of the t-shirt mockup: 

Funny Psychology T-shirt Funny Psychology T-shirt Funny Psychology T-shirt
Funny Psychology T-shirt mockup (early-stage first draft).

Pulling It All Together

If you’ve reached this point, you should now have a pretty deep understanding of your idea’s potential. It doesn’t have to score perfectly in every category to be a good passive income opportunity, but the more the better. 

Low cost and time investments have a much lower bar to clear than something like creating a massive website. While I don’t have a guaranteed market for my t-shirt, because it is so quick and cheap to do, it’s worth giving it a shot. If it was going to take me a month and several thousand dollars to design, I’d have to be a lot more cautious.

You also need to expect to fail. Even if your idea looks good on paper, it might never take off. I could sell a grand total of two t-shirts. I accept that. If that happens, rather than being disheartened, I’ll just try something else. 

So go, work on your idea, launch it, and see if it works. Or, dive into our tutorial on how to start making passive income now, if you're in need of a quick jump off point: 

And if you do use these tutorials to help you, please let us know.

Editorial Note: This content was originally published in 2017. We're sharing it again because our editors have determined that this information is still accurate and relevant.

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