If you’re like me, you think about famous pop stars when you hear the word royalties and immediately discard it as an option to gain a side income via this yourself. Since you probably aren’t a famous singer, guitar player or author, this isn’t something that would be attainable for you, right?
Turns out, royalties aren’t only for the (already) rich and famous, royalties are in fact paid to whoever creates or invents something that gets sold or used, and more often than not, that can indeed be an author of a not so famous book, or a product that is sold that was patented or an artwork that gets produced and sold en-masse.
Royalties in reality is money you get from people using your ideas, your products or something else that you came up with. After you have created, invented or put together your product in whatever way, other people market, promote and sell it, meaning they are the ones working hard to make the product succesful, but on each sale you get a small percentage of the profit. Or in the case of a franchise such as a a Starbucks franchise, they pay for the use of the logo, concepts and marketing by sending off money to Starbucks.
Let’s also quickly look at what royalties aren’t by the way. As it says above, royalties are based on other people using your products and in reality making money with them either directly (for example a publishing house selling your book – this is a direct sale) or indirectly (a radio station playing your song on the radio – this isn’t a direct sale, they just hope to attract more listeners and thereby interested advertisers or funding). If you write your own book and decide to self-publish for example, which is an option becoming more and more popular nowadays, you don’t get any royalties. In that case you are in complete control of your own marketing and sales, nobody is going to do this for you! So more work for you, but then you get to keep all the money from the sales. If you are an artist and open your own store on Etsy, you don’t get any royalties either! Nobody is selling anything for you. Again: more work, but more money usually per sale, which is your profit income. If on the other hand, you are an artist and your art gets used for a new line of greeting cards, you most likely will receive royalties on the cards that are sold by somebody else. The key is whether or not you are selling your idea or concept to somebody else in order for them to sell it, or whether you are selling your own products or ideas directly.
Getting an income from royalties isn’t exactly passive, as you need to create something first. But once it has been created, patented or whatever, it can become a passive income stream after that and as long as it sells your royalties will keep coming in. But there is probably a lot of hard work and time that needs to be invested into setting this up first which will requires skill, perseverance and a unique idea or execution first, a bit like setting up your company, which one could argue it often is. But once it is done, you might be able to get a nice side income from royalties.
Step 38 – Income stream 6: Royalties – in detail:
I hope this step has enticed you enough to at least become aware of royalties being a possible side income for not just the famous pop stars, but for anybody who can develop an idea or concept. Let’s investigate a little more to find out whether this might be something you could look into and develop. Have a look at the following questions, without judgement of whether or not this is possible in the sense of time, knowledge or money to develop this. For now just consider the options. Nobody ever got rich by saying: I don’t have time to do this, so keep an open mind.
- Do you have a book in you, be that fiction or non-fiction?
- Do you have a succesful business or can you set up a succesful business that you could franchise?
- Are you good with computers and can you find a gap in the market for a new software and patent it?
- Are you crafty or into art? Artwork royalties can be paid on items such as greeting cards, linen and towels, posters, plates and cups.
- If you are good with photographs and /or design, you can look to sell some of your work, the copyright will pay you royalties for each purchase.
- Have you got a good idea for a board game you might be able to develop?
- Think of other options you could develop or create. Is there anything you are good at and might be able to sell? There are so many options, from knitting patterns you sell to a big yarn story to re-sell, to ring tones, computer games… you name it.
Again I am not advocating that any of the above will make you rich, although others before us have obviously achieved that. Think about famous or not so famous authors, artists etc. who have made a decent living out of doing some of the above, so it is certainly doable! But this also depends on what you would like to achieve and how much time and energy you can and want to invest in any of this, particularly if you have a full-time occupation.
It is worth remembering however that you can take control of your finances by building extra (passive) side income and that again this is an income stream you might never have thought about before but might be a lucrative and interesting avenue to pursue.
Read more about my 100 steps mission to financial independence or simply decide to take control today and join us on our step-by-step quest on how to make your finances work for you, starting with step 1.