I was looking back at my company’s past performance a few weeks back, and I learned a lot of things. Mind if I share them with you?

The graph you see above is a simplified version, so you don’t see the detailed information but trust me you can learn a lot from my successes and mistakes. Notice that this graph starts in November 2005, my first month as a full-time writer and entrepreneur. The first few months were tough for me, and in February 2006 I even lost some money after my paid autosurf disaster. It took me one month to recover and from April 2006 till now my income has only been increasing.

But the real lesson is in the overall pattern I discovered by looking at my financial stats. It took me some time to learn exactly why in some moths my income grew and it other months it fell back temporarily. I also learned why in some periods my business grew by over 200% and in other months it grew very little.

The Real Measure of Online Income

If you notice the graph above I have 2 types of overall income:

1. Active Income – The income I get when I launch a new product, or actively market my products or other people’s products as an affiliate.
2. Passive Income – The income I get when I just let things run by itself and make no attempt at running a new marketing campaign

A lot of people in Internet marketing (and even MLM for that matter) hype up the idea of making money passively, when your previous efforts will continue to pay you for months or even years to come. But passive income is not all it’s cracked up to be. In fact if you stopped working on your Internet business today, you cannot expect the income level to be the same as when you’re actively working your business.

There’s a gap between these two types of income, and passive income is always lower.

In May 2006 I launched Chapter-M which was my first successful product online. That raised my active income for the particular month (period 1), but soon after the active income level dropped as most people will tend to buy your product on the launch day itself, or within the first 30 days. However, if you do things right your product will continue to sell at a lower rate for a long time afterwards, which means that you’ve now raised your passive income level.

Same thing in August 2006 when I launched WordPress Adsense System and had my first thousand dollar day. The income rose again in August but the next month it fell to the residual income level. But this is a good product, so it continued to sell and added to my passive income as I didn’t really actively market the product beyond the first month.

Slowly, both my active income and passive income started to rise, as my WordPress tutorials blog and blogging forum started getting more traffic and my mailing list started to grow. With a bigger mailing list, I could promote affiliate products and make more money. Throughout September 2006 till March 2007 (period 2) however, I created no new product of my own, barring a few simple stuff here and there, which was more of a list-building exercise than money-making quests.

But now the machine was running smoothly, so without big campaigns my income grew and I believer will continue to grow a the residual level for months to come.

In April and May 2007 (period 3) I launched Easy Blog Traffic and Internet Millionaires Club, which pushed my active income level up again to the USD10,000 mark.

How To Grow Exponentially

There’s a few lessons I learned from this:

1. Focus on creating new products – If you want to increase your income fast, you must continue to introduce new products and create new sites. If you don’t your residual income will grow slowly, but if you do you can raise the bar quickly and be earning at a different level altogether!
2. Residual income isn’t 100% hands-free – Residual income still takes some of your time. Sometimes you’ll need to update a website or product, fix bugs in your software or boost your SEO to keep up with the times. If you completely abandon them your residual stream will eventually dry up
3. Take your time to plan and create – You can decided to just write an ebook one day and hope that people will buy it, but if you want to make money from that ebook for a long time, you need to make sure you do it right. Alexis Dawes has an excellent guide at DesperateBuyersGuide.com that teaches you exactly how to create products with high value. If you take the time to plan, you always end up with a winning formula.
4. Don’t get distracted – During period 3 I got distracted with trying a lot of different things, and I started a couple of new blogs that sucked up a lot of my energy. Instead, I should have focused on creating more information products on related topics / niche markets so I can capitalize on the resources that I already have
5. Focus on constant traffic – Tie up your email list with your blog, your forum, and any other site or service you have. Make sure you get constant traffic from search engines (both free and paid) so that you’ll always have new people looking at your product or offer.
   • Doing JV promotions is great but when they hype dies out its really up to you to make a product successful by getting your own traffic..
   • If you only depend on other people to help you market your stuff, your income level will be extremely volatile, with a bigger difference between active income and passive income.
   • You don’t want to spend every month coming up with a product du jour and hoping others will promote them for you…
   • The reason I managed to increase my income during Period 3 when I had no active marketing is because I have managed to get about 30,000 visitors per month to my blog and products using many different traffic generation methods by myself..

Well, that’s about it for now although I can share a lot more from just the one graph above.

If you cannot draw a graph like that for your own business, I suggest you set aside a few days to get your financial information on track. It’s no use investing more time and money into your business if you don’t really understand the DNA and driving force behind it.