A passive income is a way to generate wealth on the side of a full-time job, with minimal time, labor and investment needed. It is much more than a get-rich-quick scheme: a passive income allows small business owners to support themselves by using the assets and skills they already possess to their full potential. There are crucial benefits for doing so: businesses can build a rainy day fund for emergencies, create broader brand awareness with new audiences, and free up time in general.
But contrary to what its name implies, a passive income does not mean that there is no work involved. For starters, researching passive income opportunities and coming up with a strategy can take valuable time. Secondly, side businesses—even passive ones—will require some setup and promotion before they start generating funds on their own.
To better understand how a passive income is feasible for a small business, we chatted with creative entrepreneur Sabreena Haque, founder of henna studio Ritual By Design. While her steady income as a henna tattoo artist came to a standstill during the COVID pandemic, she used the time to set up a passive income business teaching the practice of henna art through online courses. We’ll discuss how Sabreena accomplished this and explore some other strategies businesses can adopt to generate a passive income.
How Ritual by Design created a passive income source
After Sabreena Haque learned the henna tradition from her family in Pakistan, she wanted to start a business that not only kept the ancient ritual alive but created new meaning for younger generations. She founded Ritual by Design, a studio in the historic Mission District that specializes in henna body art and tattoo. Says Sabreena, “Ritual by Design started as a way for me to pursue the henna art and also to bring meaning into people’s lives—to create rituals with them that are going to help them feel empowered and to celebrate these special moments in their lives through art.”
Henna is the practice of body art using a paste dye made from ground henna tree leaves. The dye stains hair and skin, and it lasts for several days. Because it is temporary, henna has been a popular cosmetic treatment for special holidays or celebrations such as weddings since the days of antiquity. It originated in Ancient Persia, traveled to ancient Egypt, down the African subcontinent, and it was ultimately popularized in India. While the practice is now international, henna is often most associated with the South Asian style of design, including lotus flowers, the Hamsa, and mandalas.
Sabreena was first inspired by henna art during family trips to Pakistan as a child. “My grandmother was kind of a party animal,” she jokes. “We would go from wedding house to wedding house and in that I learned about henna art. It was a way for me to do art for my cousins and my family. And when I came back to the states, it was a way for me to share my culture, my tradition, and those really special moments that define who I am.”
While henna began as a family ritual for Sabreena, she evolved her practice through apprenticing under the guidance of her aunties and Pakistani community. Today, Sabreena has earned her place as one of the world’s leading henna artists and is internationally sought after for weddings, corporate events, and private celebrations. But while her art is rooted in the past, Sabreena has always looked forward to the future. She says, “Henna is this ancient art form that is practiced internationally. The art itself is temporary, but now I’m transitioning into tattooing, which is permanent.”
In the summer of 2020, she wanted to take the modernization of these rituals even further by passing on her knowledge of henna to the next generation.
She decided to create courses and DIY kits for henna, and she would sell this through the Ritual by Design website, essentially setting up a passive income stream. “I wanted something non-perishable that was a hands-on DIY way to get people excited about henna,” she explains. “I wanted it accessible for all ages and saw an opportunity in people’s search for something to occupy their time during shelter in place. I’m always looking to share and teach people about the art and traditions behind my craft so it felt very aligned.”
While Sabreena had the knowledge to create instructional materials, she needed a designer to bring her products to life. She first ran a design contest for packing design for a full henna kit that would teach buyers how to mix their own henna paste and apply the dye. After Sabreena received a standout packaging design from Top Level designer Imee008, she worked further with Luz Viera Studio on the instruction booklet and product labels. “I got to work with different designers from all over the world and come to my concrete vision,” Sabreena recalls. “The booklet is the most important part of the kit. The designer was 10 steps ahead of me and knew how to make everything flow really well.”
It was this collaboration with other creatives that gave Sabreena the support she needed to set up this new business offering. “Once things started opening up [during the pandemic], it was definitely challenging to juggle a new project while running two other service-based businesses, plus manage my regular shop orders,” Sabreena explains. “I’m really fortunate to have a beautiful community of writers, designers, and entrepreneurs that were able to support me and help me make my deadlines.”
Sabreena plans to soft-launch the product on her website later this fall, but her ambition does not end there. “I really want to see it in popular art supply stores as well as cute local boutiques,” she says. “I want it to be very accessible to anyone who has interest in henna art, and for it to inspire enthusiastic new henna artists all over the world. It’d be beautiful to team up and collaborate with multi-media artists to see how they’d make it their own—there’s so many opportunities for customization.”
In the end, Sabreena’s passive income will not just support her business—it will keep the tradition of henna alive, which is what she is most passionate about.
Watch how Sabreena made a passive income out of henna art, available on YouTube now.
6 passive income ideas for small businesses
Sabreena’s story represents just one of the ways that a small business can introduce a new product to generate an extra, passive income. In the digital age, there are more passive income opportunities than ever before, and the following are some common strategies.
1. Monetize educational content
To successfully run a small business requires a great deal of expertise, experience, and skills. With that in mind, one of the most natural ways to create a passive income is to share that knowledge with others, helping fellow small businesses succeed through educational content.
Unlike most passive income strategies, the benefits of content creation do not have to be directly financial. Even if the content is not monetized, it establishes a business’s reputation as a thought-leader and expands awareness of the brand to new audiences.
While Sabreena adopted this strategy through a physical instruction kit and booklet, there are some other avenues for sharing and monetizing educational content.
Start a blog
A blog consists of written articles on individual topics, and it can be easily hosted through a business website or a third-party blogging platform. This approach does require more of an ongoing commitment since you will need to regularly contribute to a blog for it to be successful. But that work can also be outsourced to freelance writers if you can spare the funds. Additionally, you will need to build a following before seeing any return on your investment (knowing the basics of SEO and content marketing is a must!). With enough regular traffic, you can sell advertising space, publish paid sponsored posts from other brands, and even monetize the blog directly through a subscription (as with Substack).
Film an online video course
A video course is like an online classroom: you decide on a topic, create a lesson plan, and record a series of videos presenting the material. In terms of investment, this requires a decent camera, microphone, editing software, design/motion graphics in addition to course materials and exercises. Contrary to a blog, a video course does not have to be ongoing—while you can keep producing new courses to build your following, a course is meant to be largely self-contained. Sites that provide platforms for monetizing online courses include YouTube and Skillshare (where royalties are dependent on subscriptions/viewership) and Udemy and Domestika (where courses are purchased at a flat rate).
Write a book/e-book
A book allows you to share knowledge in a way that requires less upkeep than a blog and less technically demanding than a video course. While you can go the traditional publishing route, this typically requires finding a publishing agent/house. Doing so takes the printing and marketing aspect off of your hands, but success depends on getting past these gatekeepers, who may not be as passionate about your book as you are.
Alternatively, ebook self-publishing has never been easier, with many authors using Amazon’s Kindle Direct Publishing. The investment here is largely on the front end in writing the actual writing of the book, and after that, it’s just a matter of making sure it is regularly in front of customers to earn a passive income.
2. Partner with other businesses
Partnering with other businesses allows you to earn a passive income while building your network. After all, your own audience is your biggest asset, and smaller businesses need a leg up in getting their name out there. While partnering with any business will generate some passive income, the most successful partnerships will share brand principles and values. This is why brands often partner with complimentary businesses—for example, a coffee shop might earn a commission by partnering with a local artist to decorate their walls with paintings for sale.
While there are no shortage of ways to secure partnerships online, small businesses may want to consider building relationships directly with businesses in their neighborhood. This not only gives the business more control over whose products they are featuring, it provides a way of supporting the local economy and other like-minded business-owners within the community.
If you have a physical location or a website page that receives a good deal of traffic, you turn this into advertising space. Your first task is to ensure other businesses know they purchase the ad space—consider a placeholder with your contact information. For digital spaces, Google AdSense is an automated way to sell ad space, but you do not have as much control over what ads get featured.
Another, sometimes subtler form of advertising is sponsorship—you can invite businesses to fund a social media post, a charity event, or a one-off campaign in exchange for having their name listed as a sponsor. Finally, you can join an affiliate marketing program in which you recommend another brand’s products and earn a commission whenever customers use your link to make a purchase.
3. Sell products passively online
When it comes to selling products, much of the cost and labor goes into the printing, packaging, and shipping to fulfill orders. But what if you could cut out all of those details and simply earn revenue from the sale of the product? While this might sound like wishful thinking, there are actually a few third party websites that accomplish this for businesses.
For physical products, dropshipping is the way to go. Essentially, you purchase inventory from a wholesale manufacturer and sell the products on your e-commerce website, letting the supplier worry about product storage, packaging and shipping (for a cut of the profits). This will not work for your entire product line—dropshipping offers little customization, making it hard to create a brand solely off of these types of products. But dropshipping can be a reliable way to sell additional, readymade products with low effort through sites like AliExpress.
Additionally, businesses often supplement their income by turning their branding assets into merchandise, which also requires printing, storage, and sometimes shipping. But the bigger issue is that the business owner has to invest funds into producing the merchandise before turning a profit, assuming they sell enough to do so. This is where print-on-demand is useful, eliminating both the risk and effort of spending money to produce merchandise. Through third party print-on-demand apps like Printful, businesses can simply upload their designs, and the site will handle printing and shipping when customers purchase.
4. Patent unique processes or inventions
Small businesses differentiate themselves through innovation, and as a result, you might be sitting on a unique invention that you could be earning a passive income from. While the inventions you hear the most about are of the revolutionary kind (such as the invention of the airplane), an invention can describe something small and even incidental to your business. The key is whether this can be generalized to other businesses, like a valve that makes a machine run more efficiently or a block of code that forms a handy digital tool.
The first step towards licensing an invention is to identify whether yours is truly one-of-a-kind. This will require you to research the patents that already exist in your industry and country (the Patent Office website in the US, for example). From there, a site like Invention City will assist you with licensing out and selling your invention. Beyond creating the invention and putting the patent out on the market, all that’s left to do is collect the royalties.
5. Rent out businesses assets
In crowded markets, space itself is a luxury, one that customers and other businesses will pay top dollar for. While many businesses use their physical space for actual work purposes, there are other creative ways you can turn a profit from your pad.
If your space is particularly scenic, you can utilize off-business hours to rent it out as an event venue through sites like EventUp. If you have extra storage or parking space, you can rent this out through sites like Neighbor. And if you have extra office space, you can rent out a portion of this for co-working—this last one is especially useful given the number of physical offices that have dissolved in the wake of the COVID-19 pandemic. In all of these ways, renting out space to others is the easiest way to make the most out of an asset you’re already paying for.
6. Invest in other small business
Small business owners know how much time, energy and startup capital it takes just to get a business off the ground, and too often, all of that is still not enough. But if your business has made it through the trenches and thrived, investing in other fledgling startups not only provides a way to pay it forward—it can also support a passive income.
Investment involves lending capital at interest in order to help a small business grow. While this can be as low effort as cutting a check, it does require businesses to have already earned enough funds for a comfortable safety net. That’s because with investment comes risk: if the business you invest in fails, you will take a loss as well. On the other hand, if the business succeeds, you will not only earn passive income in interest but an ongoing partner in an unpredictable market. Sites like Manivest can make it easy to dip your toe into the investment world because it features businesses that have already gone through a quality review.
Support yourself and your community with a passive income
A passive income is more than wishful thinking or a strategy available solely to the extremely wealthy. Small businesses have plenty of options for setting up their own passive income stream. And with everything that goes into just maintaining a business, a passive income can be a crucial factor in fostering growth.
While passive income does require work, it is often work that a business has already done—that of acquiring skills, an audience, a useful space, and experience. The best part of generating a passive income isn’t necessarily the extra cash—it is sharing what you have with others. Sabreena Haque used her passive income idea to pass on the tradition of henna to a new generation. Likewise, small businesses can support themselves by supporting others in their community.