How to Develop Residual Income in a Sustainable & Scalable Business With David Perdew


David Perdew
The one thing that I’m going to promise people today is by the time they finish this segment, they will know exactly how to create a sustainable and scalable business with residual income.

First off, I’m going to use “passive” and “residual” income interchangeably here, and the reason is that there’s kind of a stigma with “passive income”.  People think that’s kind of “get rich quick”.  “Residual income” seems to be from working once and getting paid forever.  That’s what I like.  Do the work once and get paid forever.  I have experience with the big telecom companies, as a consultant, and they are basically the biggest membership sites in the world.  They know that you get a subscription every month to your phone bill, and they get a monthly contract from you, and it’s a subscription model membership site.

What they’ve done is, they’ve actually been just the masters of creating monthly, residual income.  Now, when you start residual income, you can build on it every month because you know what’s coming in automatically.  That’s the way businesses grow, every business.

The PIE Test – Passive Income Evaluation Test

You know, I was a systems guy.  I like to build systems, and that’s processes as well.  So, I developed my own little system called the PIE test.  The PIE test is the “Passive Income Evaluation” test. Click To TweetIt’s easy to remember, PIE test.  We all want a piece of that pie, right?

There are five steps to the PIE test:

  1. The first one is “lifetime database referral”.  That’s my own term for commissions that you get paid over and over.
  2. The second step is “plenty of products”.  You want to make sure that you’re working with people who have plenty of products.
  3. The third is very high-quality products. Because, it’s your reputation no matter if you own the product or not.
  4. The fourth is “great product sales funnels”.  Is it a “one-hit wonder” kind of sales funnel or is it something that gives an opportunity to buy more and more?
  5. The fifth thing, and this is the biggie that I think a lot of people will bypass, is to “know your numbers”. If you know your numbers, you have a pathway to scalability.  That’s incredibly important.

Step # 1 – Lifetime Database ReferralsReferral Programs

Step 1 is “lifetime database referrals”.  A lot of people would call that lifetime commissions.  It’s very tricky, when you’re doing online business, because in the online business world people talk about lifetime cookies.  Lifetime cookies are completely different.  Anything that is a “cookie” goes away. 

A cookie is a technical term for a little piece of code that goes on your computer when you are referred by somebody else in affiliate marketing.  Sometimes those cookies are set for 30 days, sometimes 90 days, and sometimes “lifetime”.  Everybody thinks, “Ooh, lifetime cookies!  Those are awesome!”  And, they are awesome; they are pretty good.  They’re my second choice.

My first choice is “hardcoded in the software” because if you can get hooked up with the people that are hardcoded in the software to your referral, then you’re going to get a commission on anything that they purchase in the future.  That’s what I like.

You know who I learned this from?  It was insurance agents.  Insurance agents, when they make a sale, like a life insurance policy or a medical insurance policy, they make a sale on the first policy and then they sell you additional policies.  You’re already in the system, and they get commissions on your insurance forever.  So, you know, that is real passive income, and that’s why this is such a good business model.  It’s kind of boring.  I never thought that I’d want to be an insurance agent, but man, it’s a great business model because it’s passive income and it builds cumulatively.

This isn’t just about affiliate marketing.  You can do this with your own products in your system so that other people promote you, which is what we’ve done.  Affiliate marketing is when you’re promoting someone else’s product and you get a commission for that.  It’s like commissioned sales except that it’s very simple, very easy, and it’s a fast way to make money.  In fact, I think it’s the fastest way for somebody to get started.  If they can build a list or drive traffic, they’ll know how to make money with this pretty quickly with affiliate marketing.

Now, the other part, the cookies versus the hard coding on the machine, that is, in my mind…You have to get the right software to run the system.  So, if someone tells me they are using, for example, JV Zoo, which I love JV Zoo; I sell on JV Zoo too, but JV Zoo is not a lifetime database referral program.  It’s a cookie program.  If you and I were promoting the same product, and somebody came to me and looked at the sales page through my affiliate link and decided not to buy, then they came through your link and looked at the sales page and decided to buy, because you were offering a bonus, you would get the credit for that sale.  In a hard coding situation, if they came because I introduced them to the product and they clicked on me first, or even last (sometimes), but whoever gets the sale is then hard coded for all future sales.

So, that’s the difference.  It’s that first sale that gets made, but then the future sales are yours.  One thing that you need to understand is that people can flush their cookies off of their machine.  So, even if you set a cookie on someone’s computer, they can clean the cache, they could get a new computer, etc., and your cookie is gone.  The next person that might be promoting will then set their cookie because yours is not there.  Another good example is that if I visit a site on my computer and I don’t buy, but then I go to my iPad and I decide to buy from there, it could be a completely different cookie arrangement.  It could be a different link, right?  So, I would still get a commission no matter where they purchase from.  That’s the difference there.

If you want to know if you are going to get commissions, the easiest way is to ask, but you have to be very careful because often the promoter doesn’t know.  They’ll say, “Oh yeah, we’ve got lifetime cookies set,” and you can say, “Well, is it lifetime cookie or lifetime of full?”  Then, you might have stumped them.  If they come back to you and say that it’s a lifetime cookie, then you might need to educate them.

Another way to know is by what software they are using in their system.  Is it aMember, or Zaxaa, or DAP, or Infusionsoft?  These can all be set up to be lifetime referrals.  Then you have to just ask questions about that.

passive incomeStep # 2 – Plenty of Products

I know now that someone has lifetime referrals.  The next thing I ask is, “How many products do you have in your system?”  If I’m getting lifetime referrals for one product in your system, I’ve already sold that and I’m not going to get any more money.

However, if someone has dozens and dozens of products, let’s say, you’re going to get a commission on all of those, and I would be very excited about that.  Then you’ll know that whatever you promote, you’re going to get some money out of it.  That’s what happens with lifetime referral programs.  I get a lot of people who say that they love to promote our stuff because they know when I send an email, they get money.  That’s the way that works.

I also promote things that don’t have any cookies to them because I like to have a base income, but I also like to get peaks on good stuff.  We can do that.  In the kind of business that we’re in, we can identify products that we like to promote because it fits a niche in our system, it fills a training hole for us, or because it’s just a really good product and it converts really well.

Lifetime Referral Programs

Yeah, this is really hard to find.  Like I said, anybody that has an aMember system set up is usually using that.  It takes a little bit of investigation to find those people.  So, those kinds of programs, you have to start asking around and just learn who they are.

Now, one of the other things that you want to find is tools. I like tools a lot because tools will give you lifetime referrals. For example, AWeber; you get lifetime referrals for AWeber.  Anybody that buys into that system, you get the commissions forever.  Zaxaa is one.  Zaxaa is a really good commission system.   You get people into that point system, and it’s a very good point system, and you get a lifetime commission from that.  So, those are examples.

Step # 3 – High Quality Products

The third step in my system here, in the PIE test, is very high-quality products.  Very low-quality products do not convert, and if they do, you get a lot of refunds on them. The key to knowing if you should deal with somebody is by asking them about their refund rate. Click To TweetThe refund rate, if it’s less than 5%, I’m interested.  If it’s over 10%, I’m not interested because I don’t want to deal with refunds.  It’s my reputation on the line.  You have to be very careful about that.

My definition of a great product is that it solves a real problem that isn’t going away.  I love evergreen solutions.  If a product is out there that’s more of a solution to a fad, I’m not interested.  If it’s a solution to a problem that is going to be around for a while, and a lot of people have expressed interest in it, that’s the kind of product, to me, that has legs.

Step # 4 – Great Product Sales Funnelssales funnels

The next step is to have a great product sales funnel.  That means that the front-end converts really well, but that there is something on the back-end as well.  If I’m sending someone to a $17 product, or a $27 product, or a $5 product, or whatever it is, that’s only the first step of the process of getting people into that system.  A great sales funnel is something that has upsells, downsells, cross-sales, long-term sales, automated sales, and all of those kinds of things.  So, I want to know what the sales process is with the people that I deal with, just as I want them to understand out sales processes when we put our products out there.

There’s this seven-upsell syndrome, which I think is just insane because it wears people out before they get to the end of it. B the other thing that makes people really angry about upsells, and downsells, and all of that, is that they’re not related.  If they’re not related, people are just going to think you’re stupid because, you know, you’re just trying to extract money any way you can.  If I buy a course on how to do webinars, and you try to sell me on, I don’t know, “how to create PLR,” that’s not related.  Why would I even think that you know what you’re doing?  So, it’s not a good thing.

Before we get to the next step, I want to give you a quick example.  We had somebody come into our system who loved the lifetime referral process and saw the benefit of all the products that we had, and they drove in 2,500 people into a free opt-in product, just to get them into the system.  But, then they said ROI… the short-term solution was not good enough to continue promoting.

Well, that 2,500 people, over 18 months, because of our upsells, because of our promotions, and because of our product line, turned into $14,000 in commissions for them.  So, they didn’t do anything else, 18 months, $14,000.  Not a bad deal, right?  That’s a great little income stream.  If you have the right things in place, this becomes a stream of income for people.

david-perdew-know-your-numbersStep # 5 – Know Your Numbers

The last thing is “know your numbers”.  I love numbers.  Numbers are what we do.  Once you get your products created, it’s all about numbers after that.  It’s…“How do I improve conversions?  How do I improve the size of my list?  How do I create sales copy that goes from 1% to 2% on the conversion trail?  How do I add customer value, taking it from $10 to $50?”  It’s all numbers at that point, and the only way to do that is to stay in the numbers and have tracking systems in place so that you can see your numbers on the back-end.  Luckily, almost every cart system out there these days gives you a really good tracking system.  You just have to be willing to dig into them and understand them.

Now, if you’re working with somebody else,I want numbers of those people that I’m promoting.  I want to know what those conversion numbers are.  I want to know which piece of the funnel converts best.  I’m working with a guy right now to do some product launches, and the very first time that I promoted his product, a third of my income, on a pretty good launch, came from the front end.  Sixty percent came on the back end.  That’s a good number.  I loved that.  So, knowing that there’s more money on the back-end, and being able to point out the numbers that actually give you those indicators, is good information to have.  You’ve got to ask for it.

Final Tips on Developing Residual Income

I think we’ve covered the formula.  Coming back to our promise in the beginning, if you create one stream of income, and you’ve got it working for you, you’ve tweaked it out so that your conversions are just about maxed out to what you can get for this income stream, the next thing you do is you create another income stream.  And so, it starts stacking.  I’m doing this all of the time, and a lot of the most successful marketers online are doing this.  Nobody goes back to the well every day and creates the wheel over and over.  Boy, I’ve mixed all of my metaphors up, but nobody creates the wheel over and over again every day, right?  You just don’t do it.

Connecting With David

Well, you know, I’m talking about how to create passive income streams here today, and I actually have something for you.  It’s basically our $197 program that we have called “Found Money: Creating Passive Income Streams”.  It’s a three-part, four-hour video passive income course, and it’s an in-depth look at three websites that drip passive income daily.  I mean, we went out and did some case studies with this and really took a look at some websites that are doing a good job with this.

We’ve got a checklist for adding passive income to your site, and we’ve got video presentations for all of this, we’ve got MP3 audio downloads and PDFs of the presentations.  It’s just a really robust course.  If people go to NAMS.WS/Hall they are going to get this $197 for $17.  It’s almost a four-hour course for people on how to build these streams of income.  We go through all five of these and show you which niches to look at and how to find people, and exactly which processes, which products, which platforms to focus on.


David’s Program:
Found Money: Creating Passive Income Streams

Lifetime Referral Tools:

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About the Author ()

Daniel Hall is a bestselling author, speaker, publisher, nurse, attorney and host the Real Fast Results podcast. He is also the creator of other highly popular “Real Fast” brand of training products. He left law practice 10 years ago to build his publishing business and has never looked back. Daniel is a true serial entrepreneur and his list of URLs is longer than a piece of paper, so you can check out Daniel’s hub at or the podcast right here on this site!

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