The Kickass Entrepreneur
  • About
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Book
  • Courses
  • Podcast
  • Resources
  • Contact
The Kickass Entrepreneur
Subscribe
The Kickass Entrepreneur
  • About
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Book
  • Courses
  • Podcast
  • Resources
  • Contact
  • Create Wealth (Investing)
  • Retirement

Building Wealth Through Passive Income and Business Ownership

  • September 29, 2020
  • 1.4K views
  • 8 minute read
  • Jeff Wiener
passive income
Share
Tweet
Share

This article is about two things that are closely related.  Generating wealth through:

  1. passive and residual income, and
  2. through small business ownership.

One of the things I’ve written extensively about over the last few years is the idea of creating wealth by building multiple streams of passive sustainable income.

Next, and germane to this article is that I just negotiated, agreed to, and will soon complete the purchase of a going concern small business, I’m going to dive into how I view the sources of passive and residual income streams within my portfolio and then discuss the business I bought and my investment thesis around creating a platform ventures portfolio. 

Before I get into my business purchase, including the what and why, I wanted to review some of the assets I hold inside my portfolio and how I measure and view these returns.

A Review of Passive Income Sources Including Real Estate, Dividends, Royalties, and Business Ownership

Residual Income in Real Estate

Buying an income-producing real estate property – like an apartment building, for example – is an excellent source of residual income. Not only will you recognize gains from the increased value in the building itself, but the building will also be a source of monthly inflation-protected income.

Notice I used the word “residual income” instead of passive.  Although the income might be somewhat passive, it does require management, and there are expenses associated with real estate ownership, so, the residual is the amount of profit at the end of the month/year.

Passive Income Dividend Investing

Dividend stocks are an example of passive income and simple passive cashflow.  I say “simple passive cashflow” because unlike apartment buildings, the dividend income you receive from owning a stock is truly passive, whereas owning a building requires more active management.

Enbridge, for instance, is a large, multinational corporation that’s been around for decades and pays an 8.1% dividend. A $10,000 investment in Enbridge will provide $810 in tax-preferred income per year.

Passive Income from Royalties

Royalties from movie or music sources is another example of passive income.

In an article I wrote a few months ago, I mentioned that I was looking at investing in music royalties; in fact, I bought and closed on my first royalty sale a couple of weeks after. The royalties include songs from Rihanna, Kanye West, and a couple of other artists. The sale closed in July, and I received my first royalty check a few days ago.

Passive Income through Music Royalties

The above three are examples of assets that do have some inherent risk; however, they produce consistent streams of income, month after month.

In this super low-interest-rate environment, it’s very difficult to find anything that provides a meaningful yield without taking any risk – after all, the current 5-year risk-free government rate is just slightly above 0%.

Guaranteed Passive Income

You could of course park your money in a GIC, T-Bill, or high-interest savings account and earn somewhere between 0.5% and 1.5% on your money, but at that rate, it’s very difficult to compound your wealth in a meaningful way. 

The current low-interest-rate world is especially difficult for the retiree who is living off their investments and needs to earn a yield of 5 to 7% in order to maintain and fund their retirement. So most retirees are faced with a choice – accept the low-interest rate, low volatility, and low risk associated with a government-guaranteed investment, or stretch for yield and accept the inherent risk.

Guaranteed passive income, like a GIC or a HISA (high-interest savings account) might be guaranteed, and passive, but, the returns are abysmal.

Preferred Shares:

One of my investments that have been disappointingly and particularly volatile over the last year has been preferred shares, and although most of the preferred shares have recovered from their spring lows, I did watch as the preferred share market dropped by close to 30% in March.

The perpetual preferred share market (not fixed reset) shouldn’t be that volatile, but, it was in March 2020, and that was a perfect time for the opportunistic buyer to enter the market to take advantage of the dislocation.

As an example, a Royal Bank perpetual preferred share, which was earning a roughly 5% yield in early February, was trading at yields close to 8% at the March lows. Those types of returns are amazing, and anyone who picked up these preference shares in March is now sitting on a 30% capital gain, and a guaranteed 5% dividend – provided RBC doesn’t go out of business or discontinue their dividends.

Building Wealth and Passive and Residual Income Through Business Ownership

I’m on a constant hunt for business opportunities where I can earn long-term capital gains, ideally somewhere in the area of 10% IRR (or greater), and/or passive income streams that might not produce the same level of capital gains, but can produce a guaranteed yearly income stream. Preferred shares, real estate, royalties, and business income are examples.

Not only am I a passive income investor, but I am an active investor, as well.

Active business investing comes in two forms:

  1. Investing in a fund that invests in businesses, either through private equity, venture capital, or angel investing; and
  2. Investing in a business where I have some form of control, either by directly operating the business, or by being instrumental in some way in the success and outcome of the business itself.

Let me provide you with some examples of both:

Investing in An Angel and Private Equity Fund

I’ve set aside a certain amount of risk capital that I am prepared to “put to work,” and stretch on the risk opportunity spectrum. For example, I recently invested as a limited partner in an angel fund that has had some excellent early success. In fact, I interviewed the managing partner of the Ripple Ventures fund, Matt Cohen, on a recent podcast. You can listen here, where Matt talks about aiming for a 3 to 5 times return on investment.

I am also considering investing in a private equity fund, and am interviewing a couple of different fund managers to assess whether their investment thesis, past success, and management style are consistent with my goals.

Investing in a Private Business Where I Have Control Over the Outcome

I am an entrepreneur at heart. I’ve been an entrepreneur since I was a young teenager, and other than two three-month stints when I was 19, and 21, I haven’t ever had a job.  Frankly, I’m probably not employable.

I enjoy investing. I also enjoy running a business and being an entrepreneur.

And therein lies my personal dilemma.

I wrote about my internal conflict a few weeks ago where I almost bought a business. I was hours away from signing the paperwork but caught myself just in time and fortunately, I didn’t sign. The business would have been way too hands-on for me, and although the business idea was sound, I just wasn’t comfortable with how much of my time it would take.

Having said the above, and although I didn’t buy that small business, I continued to look for a small business that would be in alignment with my return expectations, and more importantly, in line with both my time and personal commitments.

I’m looking for an opportunity that I can run somewhat passively, where I can put a team in place, obtain excellent capital gain and passive income returns, and not have it consume my time beyond 10 to 15 hours per week. I wrote about that here: How to Make a 600% Return on a Business Investment Inside 24-Months, and Compare Returns using IRR

What I decided to start is a platform ventures based business that buys online communities including blogs, forums, and review sites in the business, finance, lifestyle, and pets markets.

I own three blogs at the moment, and I just bought my fourth. I expect to “officially” take possession of that blog in the next week or two, and when I do, I will share the information with you.

My goal, in the as-yet-to-be-named venture, is to own twenty or so blogs in the next two years and to have a team in place that can manage the writing, SEO, advertising, and day-to-day management. I expect to have my first two hires in the next month.

As an example of one of the blogs I just bought (I will share more details in a few weeks once the deal is completed), is a small blog with profits of approximately $3,000 per month. I paid $72,500 for the blog itself.

Passive income Through Business Ownership

I expect that through some effort, we can get the profits to $4,000 per month inside three months.

I’m in the process of hiring two individuals:  1. a virtual assistant/writer for a full-time position to help run the business, and 2. a full-time graphic designer with skills in HTML/CSS, affiliate marketing, and landing page optimization/CRO.

Once the team is in place, I plan to buy more blogs, and continue to expand the team of writers, SEO experts, designers, and so on as required.

As long as the business continues to grow, I will continue to buy, and start, more blogs and forums.

My role throughout will be strategic, and not tactical. I enjoy writing for this blog, thekickassentrepreneur.com, and will continue to do so because I find writing to be cathartic, and it helps me formulate my thoughts. Beyond that, I will look for new ideas, help build the business, and continue to manage my other investments.

There is clearly some inherent risk involved with building and/or buying a business, but if you’re looking to create wealth, have an interest and capacity for entrepreneurship, enjoy the challenge, and understand how to manage and mitigate risk (all of which I am still learning by the way), then buying or starting a business could be the way to go.

And bringing this back full circle to how I started this article, I am looking to build streams of passive income. Operating a business is one way. It certainly has its challenges, but can also bring big rewards if done properly.

If you enjoyed this article, you might also enjoy:  How to Become a Decamillionaire, Grow your Net Worth to $10 Million, and Join the 1% Club

And this one: How Do You Know When It’s Time to Sell Your Business? It’s Not All About the Money.

You should also consider subscribing to my blog. I publish one article a week on small business and wealth creation.  You can subscribe here.

Also, I published a book during the summer of 2018, “The Kickass Entrepreneur’s Guide to Investing, Three Simple Steps to Create Massive Wealth with Your Business’s Profits.” It was number 1 on Amazon in both the business and non-fiction sections. You can get a free copy here.

 

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

Related Posts:

  • Create Wealth and Achieve Financial Independence by Creating…
  • Best Passive Income Strategies: Let the Money Work For You
  • The 19 Best Ways to Generate Passive Income in 2021
  • How Do You Grow Your Wealth in 2021? My 5 Step Plan to Building Wealth
  • 14 Wealth Building Secrets You Need To Know
  • 11 Most Effective Wealth Building Strategies Used by Personal…
Share
Tweet
Share
Jeff Wiener
Jeff Wiener

Jeff sold his company to private equity in 2017 and is now semi-retired. Jeff spends time traveling and with his family, writing this blog, managing his real estate portfolio of apartment buildings,  overseeing his investment portfolio, investigating angel investments, coaching other entrepreneurs, and managing his private equity holdings. Jeff is currently on a couple of boards, one for profit, the other not for profit, and now helps entrepreneurs grow their business, profits, and ultimately, create wealth.

You May Also Like
cryptocurrency
View Post
  • Create Wealth (Investing)

The Value of Trading and Investing in Cryptocurrency

  • January 8, 2021
  • Monica Serreon
The Top 1% of Wealth Canada
View Post
  • All Blogs
  • Create Wealth (Investing)

The Top 1% of Wealth Amounts for Canadians in 2021

  • January 8, 2021
  • Jeff Wiener
Entrepreneur Semi-Retirement
View Post
  • Retirement

My Three Year Semi-Retirement Winter 2021 Check-in

  • January 2, 2021
  • Jeff Wiener
passive sustainable income
View Post
  • Create Wealth (Investing)

Create Wealth and Achieve Financial Independence by Creating Multiple Streams of Passive Sustainable Income

  • December 24, 2020
  • Jeff Wiener
When to Sell Your Business
View Post
  • All Blogs
  • Retirement
  • Selling your Business

How Do You Know When to Sell Your Business? It’s Not All About the Money

  • December 19, 2020
  • Jeff Wiener
How to Grow Wealth
View Post
  • All Blogs
  • Create Wealth (Investing)

How Do You Grow Your Wealth in 2021? My 5 Step Plan to Build Wealth

  • December 14, 2020
  • Jeff Wiener
what are real assets
View Post
  • All Blogs
  • Create Wealth (Investing)
  • Real Estate Investing

What are Real Assets, and How to Diversify Your Wealth by Investing in Them?

  • December 14, 2020
  • Jeff Wiener
how to become wealthy
View Post
  • All Blogs
  • Create Wealth (Investing)
  • Featured Post for Main Menu

The Entrepreneur’s Secret to How to Become Wealthy and Build a Personal Fortune

  • December 11, 2020
  • Jeff Wiener

Join 6,472 Entrepreneurs That Get My Business Building and Wealth Creation Posts by Email

I can teach you how to build a successful, profitable business, and turn that into millions in personal wealth.

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

We won’t send you spam. Unsubscribe at any time.

Recent Posts
  • entrepreneur 1
    How to Become a More Successful Entrepreneur
    • January 15, 2021
  • workplace 2
    4 Ways to Protect Your Employees in The Workplace
    • January 14, 2021
  • online presence 3
    Targeting Your Online Presence to Other Locations – Easier Than You Think
    • January 14, 2021
  • online business 4
    7 Online Businesses Set to Thrive in 2021
    • January 14, 2021
  • accounting 5
    7 Tips for Boosting Efficiency in Your Accounting Department
    • January 13, 2021
Featured Posts
  • how to become wealthy
    The Entrepreneur’s Secret to How to Become Wealthy and Build a Personal Fortune
  • Sell me this pen, Wolf of Wall Street
    Sell Me This Pen. I Tackle the Wolf of Wall Street Sales Riddle. Do You Know the Right Way to Sell the Pen?
  • what net worth makes you rich?
    What Net Worth Makes You Rich? The Average Net Worth to Make it Into the Top 1% and How to Get There
Categories
  • All Blogs (207)
  • Canadian Financial Products (3)
  • Create Wealth (Investing) (55)
  • Entrepreneur Interviews (9)
  • Featured Post for Main Menu (4)
  • Featured Top Posts (21)
  • Financial and Investment Calculators and Economic Data (12)
  • Growing Profits (18)
  • Growing Revenues (77)
  • Growing Revenues (43)
  • Marketing (14)
  • Positive State of Mind (35)
  • Real Estate Investing (12)
  • Retirement (16)
  • Reviews (6)
  • Sales (6)
  • Sell Me This Pen (3)
  • Selling your Business (15)
  • SEMrush (1)
  • Top Products (1)
  • Uncategorized (38)
Follow us
Author
Jeff Wiener
Jeff Wiener
Jeff sold his company to private equity in 2017 and is now semi-retired. Jeff spends time…

    CHECK OUT MY BLOG, AND SUBSCRIBE

    about
    The Kickass Entrepreneur

    Expand Your Business, Improve Profits, Create Wealth

    Expand your business, improve your profits, and create wealth. Each one of the three can be elusive goals. Follow the right steps, and you, too, can create financial independence. It is possible … you just have to take the right steps.
    NAVIGATION
    • About
    • Blog
      • All Blogs
      • Create Wealth (Investing)
      • Entrepreneur Interviews
      • Featured Top Posts
      • Growing Profits
      • Growing Revenues
      • Marketing
      • Positive State of Mind
      • Real Estate Investing
      • Retirement
      • Sales
      • Selling your Business
    • Book
    • Courses
    • Podcast
    • Resources
    • Contact
    TAGS
    apartment BATNA Business business failure business growth business sale Capitalization Rate CAP Rate cash cash flow Creating Wealth Discipline entrepreneur entrepreneurship excel goal setting Growing Business investing investment real estate M&A marketing Marketing KPIs Mergers and Acquisitions | M&A | Entrepreneur Blog Millionaire millionaire next door mistakes MUR Negotiation Peter Principle Profit profitability real estate retirement revenue Revenues sales sales management scaling business Semi-Retirement Blog | Entrepreneur Blog | Small Business Blog small business Stagnant stocks success Thomas Stanley wealth
    RECENT ARTICLES
    • workplace
      4 Ways to Protect Your Employees in The Workplace
      • January 14, 2021
    • accounting
      7 Tips for Boosting Efficiency in Your Accounting Department
      • January 13, 2021
    • cryptocurrency
      The Value of Trading and Investing in Cryptocurrency
      • January 8, 2021
    • The Top 1% of Wealth Canada
      The Top 1% of Wealth Amounts for Canadians in 2021
      • January 8, 2021
      • One comment
    • remote leader
      Things That Remote Leaders Should Keep in Mind
      • January 1, 2021
    • financial management
      10 Financial Management Tips for Small Businesses
      • December 29, 2020
    The Kickass Entrepreneur
    • About
    • Coaching
    • Book
    • Blog
    • Contact
    • Privacy Policy
    • Terms
    • Disclaimer
    • Facebook
    • LinkedIn

    Input your search keywords and press Enter.