Six ways to make passive income for start-ups and small businesses

Passive income is a popular way to earn extra money alongside your business, build more predictable revenue, or create an additional funding stream for a start-up.

Unlike active income, which usually depends on trading time for money, passive income can continue to generate revenue with limited ongoing effort once the initial work is complete.

For self-employed entrepreneurs and business owners, a passive income stream could help improve cash flow, support day-to-day costs, and reduce reliance on one source of income.

This can be particularly helpful at a time when profits and earnings might be unstable.

As a business owner, any passive income you could generate could be reinvested into your business to help boost growth.

So, what is passive income, how can you make it, and which passive income ideas could work for a start-up or small business?

What is passive income?

Passive income is money you earn from an asset, product, service, or system that does not require constant day-to-day work once it is set up.

However, the term ‘passive’ can be misleading.

Most passive income streams require some level of set-up and maintenance, at least at the beginning.
The main advantage is that it can create a more stable income stream, giving you more time to focus on customers, operations, or new business opportunities.

It also helps diversify your income, reducing dependence on one source and supporting business growth by reinvesting earnings.

If your start-up needs extra funds, passive income may provide another route to cash flow alongside options such as loans, grants, or investment.

How to make passive income

Here are six passive income ideas that entrepreneurs, start-ups, and small business owners could explore.

Bear in mind that most passive income ideas take time to become profitable. The income you generate will depend on market demand, the quality of your product or service, your sector, your pricing, and your marketing strategy.

1. Rent unused business assets

One way to generate passive income is to rent unused business assets, such as workspaces, vehicles, storage space, or equipment.

For example, if you have extra office space, you could lease it to freelancers or small businesses who need a temporary workspace, but you should first check your lease.

Similarly, renting out storage or garage spaces can attract individuals or other businesses needing extra storage.

If your business owns equipment or vehicles not in constant use, you could consider renting them out for extra income.

Platforms such as Fat Llama or RentMy can connect you with people looking to hire specific items that you may have on hand.

Renting out unused business assets can help you generate a new, effortless revenue stream.

2. Sell digital products

Creating and selling digital products can be a good source of revenue for entrepreneurs with valuable skills and knowledge to share.

Selling ebooks, online courses, photography, or videos could be a lucrative way to earn a passive income.

To create an ebook, you could write your content and self-publish it on platforms like Amazon Kindle, which offers access to a broad audience.

Platforms such as Udemy provide tools for designing, marketing, and selling online courses, allowing you to share your expertise with learners worldwide.

If you have a talent for photography or videography, you could sell your work on platforms such as Shutterstock to reach customers looking for unique digital content.

These platforms handle the transaction process, making it simpler for creators.

If you have the right skills and experience, you might consider developing an app that meets a market need (such as a budgeting app, or an app that helps people to develop a specific skill).

Once the app has been designed and coded (either by yourself or a developer), it could be sold on Google Play or the Apple App Store and generate income through sales, subscriptions, or in-app advertising.

3. Print stores/print-on-demand

Use your creative talents to create a passive income stream – although be aware that this may require some daily input.

One option could be a print-on-demand store that sells several different items featuring your designs.

You would initially need to spend some time creating designs to be printed on the products people choose.

Items for sale could include t-shirts, tote bags, posters, and greeting cards.

Printful and Gelato are platforms you could use for this type of passive income business.

The company handles quality control, order fulfilment, and printing.

There are minimal start-up costs and no need for inventory or bulk buying – printed products can be created on demand when an order is placed.

You could use automation tools to sort orders and manage the customer service and marketing processes, meaning your print business could handle itself as you focus on your priorities.

4. Affiliate marketing

Starting an affiliate marketing business could be an option if you’re looking for a low-cost, flexible, passive income source.

Affiliate marketing involves partnering with brands to promote their products or services and earning a commission for each sale made through an individual referral link.

To do this, you may need to join an affiliate programme – Amazon Associates, ShareASale, and Commission Junction are popular examples.

When choosing the right affiliate programme, you may want to consider:

• the items and services they sell
• commission rates
• payment terms
• the brand’s reputation.

Some work is involved with this type of business.

You may need to promote these products through blogs, social media, email marketing or a website, using engaging content and personal recommendations to encourage sales.

Read our complete guide on how to start an affiliate marketing business.

5. Subscription services

Creating subscription-based models for products or content could be a smart way to generate a steady, passive income.

This model works well for businesses that offer regular value, like exclusive content, products, or services.

For example, if you create engaging and high-quality content such as articles, videos, or podcasts, you may want to consider launching a membership site where subscribers pay a monthly fee for access.
Platforms like Patreon or Substack make it easy to manage subscriptions and deliver content.

You could even combine this business idea with affiliate marketing, earning commission through the links you include in your content.

For physical products, you might consider starting a themed subscription box service.

For this option, you could curate and send curated products – such as snacks, beauty items, or hobby supplies – to subscribers each month.

This approach could provide a consistent revenue stream and foster customer loyalty.

For your best chance of subscription success, you must consider how you can deliver consistent quality and value for money.

You may also need to engage with subscribers and use social media marketing to attract new customers and retain existing ones.

6. Dropshipping

A popular way to generate passive income is through a dropshipping business.

This involves selling products without holding inventory – when a customer purchases, the order is fulfilled directly by a third-party supplier.

To get started, you must create an online storefront using a platform such as Shopify or WooCommerce.

You would also need to use digital marketing, such as social media advertising, search engine optimisation (SEO) strategies, and email campaigns, to drive traffic and attract customers.

The appeal of dropshipping is typically its low upfront costs and the ability to offer a wide range of products without the risk of overinvestment.

However, some work is needed to establish and maintain an online shop.

Read our complete guide on dropshipping and how to start a low-cost business.