It seems everywhere you go, you read about the importance of generating passive income for your business—income which just flows into your bank account on a monthly basis. But is it really that passive?
The last example of this I’ve read was in the book The Principles of Successful Freelancing. It’s a really good book but the few particular paragraphs about this so called “passive income” aren’t as smart as they may seem.
I’ve debated and thought over the decision of offering web hosting as a service for my clients. Web hosting is one of the passive incomes that are discussed in the book. The thing is: web hosting is far from passive income.
While you might be very lucky and avoid this, imagine what will happen when the client cannot configure her email client properly. You will get a phone call. You will re-send the account information she has lost. You will try for 30 minutes to guide your client through the configuration process.
Rinse and repeat.
What’s your hourly rate? $100? That means if you spend five hours on support requests every month, that is $500 of potential lost income. Unless you have hundreds or thousands of clients, if you spend more than $500 monthly on web hosting you’re getting royally ripped off.
Another example is CMS licensing which I consider to be even more dangerous. First of all, if a client pays to run his production site using your CMS and he finds a fatal bug, who do you think he’ll call? That’s right—you.
You’ll may very well be spending a lot of time bug fixing, doing sales and answering support requests. The more recurring revenue you make from services or products like these, the more time you’ll spend and the more potential income you likely lose.
As a general guideline, I don’t offer web hosting to clients. Currently there are two client sites hosted on my own server, and they belong to my “regulars” which are great clients and very easy to work with.
As I made my decision, I asked for advice from Andy of Unit Interactive on Twitter, and he says that Unit doesn’t offer web hosting either. Like me, they of course assist in finding the right hosting solution but they are not hosting providers themselves.
Think long and hard before you decide to offer something new. If it’s passive income you want, make sure that it really is passive, and not a nightmare waiting to happen. My advice is to keep your business simple and focused on what you do best.