Active income is the income based on your efforts and hard work. If you work more, you will earn more. On the contrary, for Earning Passive Income you need not work harder. If you want to focus on Next Big Thing, then you will have to stop involving yourself actively in every work. But then, ‘**What is Next Big Thing?**’ Ritesh Agarwal, the Founder of OYO says, “**I want to hire a manpower that can replace me so that I can think of Next Big Thing.**” Similarly, you should also develop a high-performance team and create a business model that will help you generate more passive income, and at the same time, it reduces your active involvement in the business processes. Let’s take an example to understand this. If your income is Rs. 1 Lakh per month and your expense is also Rs. 1 Lakh per month, then you are a very poor man. This is because you have spent it on your lifestyle and depreciating assets like luxury cars, expensive watches, expensive mobile phones, etc. The value of these depreciating assets is decreasing day by day. However, if your income becomes Rs. 10 Lakhs per month while your expense remains Rs. 1 Lakh per month, then you are wealthier. You should reinvest the remaining amount of money (i.e. Rs. 9 Lakhs) in a manner that it generates more passive income for you. # **Four Quadrants** Based on the profession, people can be kept in the following four quadrants: ### **Quadrant 1: Employees Quadrant** Employees can earn only as much as they work. An employee gets a salary only for the days he/she has worked in the office. ### **Quadrant 2: Self-Employed Quadrant** Self-employed people are the people who work for themselves like a doctor, lawyer, trainer, etc. Their earnings are dependent on the amount of work they do. ### **Quadrant 3: Investor Quadrant** Investors like Warren Buffet and Rakesh Jhunjhunwala earn portfolio income by investing in the business. For example, you have invested in Paytm. Now, with the growth in income of PayTM, your invested money is also growing automatically. ### **Quadrant 4: Business Owner Quadrant** Similarly, the business owner develops business models and methods that keep on getting recurring revenue. **95% of Public falls under the Employees and Self-Employed Quadrants, but earn only 5% of the Income.** **On the other hand, 5% of Public falls under Business owners and Investors Quadrants, but earn 95% of the Income.** # **Other Methods to Earn Passive Income** In addition to Business Owner and Investors, there are other methods also to earn passive income. These are: - **Average Revenue per User**: Jio, Amazon Prime and Netflix work on this method. This method is also called Subscription-based Model. - **Franchise**: You created the business model and gave the franchise to others. They are working but you are earning the income. - **Rental Income**: The income earned from rent on the purchased property. **High-Performance Team**: This is the easiest way to earn passive income. But you need to keep two things in mind while building a High-Performance Team. These are: 1. Physical presence** – If your physical presence is necessary for your business, then you are earning active income. On the other hand, if your physical presence is not necessary, then you are earning passive income. 2. Frequency of work** – You need to create or adopt a business model, wherein you are not needed to work. Only your team members work. This will help you to work on the next big thing and expand your business further. Contract Base Agreement and Silent Business Partners are also methods to earn passive income. # **The framework to Generate Passive Income** To generate passive income in your existing business, you need to brainstorm and answer the following Six Questions by giving the rating on a scale of 1-5. ### **Question 1** Will the income come soon in your business? **Give Rating 1-3**: You don’t know when the income will come in your business. **Give Rating 4-5**: You will get the income soon in your business. ### **Question 2** Will the income in your business be regular? **Give Rating 1-3**: Your business is seasonable or project-based and your income is not regular. **Give Rating 4-5**: Your income is predictable or regular. ### **Question 3** Is it a sustainable cash flow? **Give Rating 1-3**: Your business does not have long term income possibilities. **Give Rating 4-5**: You have built a business model that has long term income possibilities. ### **Question 4** Does your business model give increasing cash flow? **Give Rating 1-3**: Your business model will give you cash flows in the future but not increasing cash flows. **Give Rating 4-5**: Your business model gives you high and increasing cash flows year after year. ### **Question 5** How much of your personal time is required in the business? **Give Rating 1-3**: You have to give 90 hours per week to your business. **Give Rating 4-5**: You have to give 10-15 hours or 5-6 hours per week to your business. ### **Question 6** How much your physical on-site engagement is required in your business? **Give Rating 1-3**: You have to do the work yourself and you also need to monitor your team. **Give Rating 4-5**: You do not need to work in your business. Now, add the scores, that is, add the rating given against each question. If your total is below 10, then your business will never make you rich. If your score is more than 20, you will become rich soon. >**Owning a business, but not managing it** It means that the business is yours, but other people are managing it. If you understand this method, then your cash flows will make you rich sooner. Your business will give you extra cash flows and you can invest these cash flows to generate extra income. You can spend this extra income in building your lifestyle.