Getting to Grips with Online Business

My Online Journey:

In my first post, “Meet the Wealthy Sage”, I outlined my aim for this website, in the short term at least, is to share learning gained from my journey on the Internet to investigate ways of making money online and, in particular, to appraise folks about the pitfalls, threats and scams to be avoided when starting an online business.

I’ve found it takes considerable time and effort to establish an online business and it’s most important to research thoroughly before committing significant funds to the endeavour. Also, there’s no guarantee of success, of course, and it’s extremely difficult to gauge how quickly income will start flowing, if at all, into a new online business.

In this second blog, my objective is to inform readers about progress made to date and, in particular, to explain how I’ve been getting to grips with this online business thingy. For me, this post documents an important part of my journey.

In it, you’ll learn about some of the most popular ways of making money online, how to choose an appropriate business model to match your vision of what it is you want to do and also, as a beginner, to be aware of what schemes you ought to avoid. You’ll also learn why it’s important to seek help in climbing the learning curve for establishing your online business and how to do this by deferring the need for significant expenditure.

Different Ways of Making Money Online

Firstly, there is no single answer to the ubiquitous question of “how to make money online?” There are many ways, of course, just as in normal business, but the method you choose, and whether it’s successful or not, will depend on your individual circumstances, abilities and commitment, including how much time, effort and focus you will apply in establishing your business.

The Internet has revolutionised how we make money and that there are many benefits for aspiring entrepreneurs to work online. Also, from a personal viewpoint, I recognise we’re in a new era as a result of the growth of new technologies to an extent I feel compelled to investigate and participate in this “New Economy”. I feel this for my benefit, now I have time to do so, but also for the sake of my family so I may preserve pension fund savings for the future.

I first looked at “teleworking” (or “telecommuting” as it was called in the US) in the early 90s as part of my MBA degree course but demands from a busy professional life at that time did not permit me to pursue “home working”. However, the growth of the Internet since then has made the argument in favour of “work from home” even more interesting.

The benefits accruing from working online are well documented and, in broad terms, include:

• The Internet operates 24 hours per day, 7 days per week, 365 days per year.
• There’s no need to be location dependent anymore as conducting business online provides the small business owner with the flexibility to work from home, hotel room, or anywhere else. There is the ability to connect a laptop to the Internet.
• The need for a physical storefront, physical products, and warehousing is eliminated.
• There is a reduced need for employees as there are systems, tools and software resources that can be leveraged to perform many routine activities.
• There is improved cash flow in online business as transactions are paid for ahead of products or services being delivered.

Second, in order to find an answer on how to succeed in online business, I’ve screened through many work opportunities on the Internet on a purely qualitative basis. This created a list of 8 popular ways of doing online business that interested me, in alphabetical order, as follows:

• Affiliate Marketing
• Arbitrage Sales
• Banner Advertising
• Consultancy Services
• eCommerce (Stores for both Digital and Physical Products)
• eCommerce (major Platforms for Products and Services)
• Network Marketing
• Training and Coaching

In the next section, I’ll narrow down these 8 different approaches by grouping them together in such a way as to generate what I see are the top 4 ways (or business models) for making money online.

Top 4 Ways of Making Money Online

The top 4 ways for making money online were derived from a cost-benefit analysis carried out on the above 8 different ways of making money online business using entry barrier criteria (both cost and expertise requirements) against the prospect of earnings from each alternative.

This evaluation narrowed the list of 8 ways down to 4, reflecting what I conclude are the top 4 ways of making money online, as follows:

• Affiliate Marketing, including Arbitrage Sales and Banner Advertising.
• Consultancy Services, including Training and Coaching.
• eCommerce Stores and Platforms, including Digital and Physical Products, and a wide range of related Services.
• Network Marketing and Multi-Level Marketing (MLM) Schemes.

These top 4 ways reflect a range of online business models available to aspiring entrepreneurs setting up their business online are presented in the 2×2 diagram below, followed by an explanation of the respective online business sectors within the matrix and the rationale used to select which best aligned with my vision of what I favour doing to make money online.

Before choosing a preferred business model, however, and presenting the rationale used to draw a conclusion around the selection, I’ll first provide an overview of the information shown in the Grid Diagram and explanation of the results got from the review of the top 4 ways of making money online:

QUADRANT I – Affiliate Marketing:

This includes Arbitrage Sales and Banner Advertising. I’ve shaded it GREEN because I think it’s the best entry point for online business. Here, the cost of establishing and running an affiliate marketing online business is LOW, while the revenue earned per transaction is also LOW. As business builds up, opportunities to expand into Arbitrage Sales and Banner Ads arise with potential to increase revenues.

QUADRANT II – Consultancy Services:

This includes training and coaching and is shaded YELLOW. Here, the cost of establishing and running a consultancy business is relatively LOW, while the revenues generated by the consultant are likely to be HIGH. It’s also clear that experience and track record are barriers to entry in this sector so it’s unlikely to be attainable for newcomers to online business.

QUADRANT III – eCommerce Stores and Platforms:

This applies to digital and physical products, including related services. It’s also shaded YELLOW as it’s somewhat more demanding than affiliate marketing to get started. Here, the cost of establishing and running an eCommerce business is HIGH, while the revenues generated are also considered to be HIGH. This sector is dominated by large online business but opportunities are being seen increasingly for small business entrepreneurs to set up and operate eCommerce stores using arbitrage techniques.

QUADRANT IV – Network Marketing:

This includes Multi-Level Marketing (MLM) schemes and the quadrant is shaded RED. Here, the cost of participating in a network marketing or MLM online business is relatively HIGH, whilst the record of revenues earned by individual marketers can be very LOW, with most marketers known to lose money.

Choosing the Right Business Model

In this section, I’ll draw the evaluation of ways available to make money online to a close, present the results of the cost-benefit analysis performed of the different sectors and, most importantly, share the conclusion on what the best business model is for starting out online business.

First, QUADRANT I is the traditional affiliate marketing sector. Given that the target audience within the niche is for entry-level entrepreneurs with little or no experience in online business, I consider the most favourable entry point is via Quadrant I.  This is therefore shaded green in the 2×2 Diagram. All other options tend to be considerably more expensive or require a level of expertise and experience before getting started.

Quadrant I has also traditionally covered arbitrage sales, but this has grown into an eCommerce activity and its description is therefore covered under Quadrant III.

It’s also the case that affiliate marketing is a good training ground for all online business with low-cost training readily available on the Internet, including the important step of setting up and running your own website. Although initial returns tend to be slow for affiliate marketers, and numerous transactions are necessary to produce a reasonable income, it’s possible to scale your business as you gain experience by migrating some of your time and attention from Quadrant I into one or other of Quadrants II and III.

In my case, my aim is to move into Quadrant II as quickly as possible.

Quadrants II and III are shaded yellow in the Diagram. These are more expensive to get running but it’s also necessary to have knowledge and experience before contemplating these two business models.

The main lesson I’ve learned from my journey online is that there’s little to gain trying to take shortcuts and, if you do, it’s likely to result in delays and unnecessary expenditure. There’s a basic learning curve to go through, so it’s better to start at the beginning, have lots of discipline and patience, and don’t go it alone.

It’s especially necessary to get support climbing the learning curve and I’ll cover how you can gain the benefit of an “earn as you learn” approach in the concluding section below.

Second, QUADRANT II is shaded yellow because Consultancy is not considered an entry-level sector. Consultancy services include training and coaching, both require a high degree of knowledge and experience and, therefore, are not an option for beginners. Earnings are also expected to be higher in this quadrant.

Also, mostly, Consultants are likely to have existing online business selling their time and, as time is money, this sector is likely to hire professionals to manage their online presence and build out their websites, rather than do it themselves. Quadrant II is not a direct match to our niche and, therefore, can be discounted at this stage other than to recognise there’s scope to scale in this direction once basic knowledge and experience has been gained in affiliate marketing.

Third, QUADRANT III is a very wide sector covering eCommerce Stores and Platforms. I distinguish between these two insofar as there’s a growing number of eCommerce Stores operating on arbitrage principles as opposed to the huge eCommerce Platforms that are operated by big players, such as Amazon, Airbnb and eBay, etc.

As the set-up costs for these systems are considered high, and operations are more complex for rookie marketers, Quadrant III is also shaded yellow. However, the cost of setting up and operating arbitrage type eCommerce Stores has reduced sharply, so it’s attracting increasing attention in niches such as jewelry, T-shirts, and the like. My plan is to cover arbitrage selling in another blog at a later date, however, small business owners should be aware there are risks involved with product quality and delivery in this sector.

Finally, QUADRANT IV is the Network Marketing and Multi-level Marketing sector. It’s shaded red as I believe it should be ruled out by rookie marketers on the basis of its extremely poor record of return for many marketers, including some who have paid large sums of money in membership fees to join such schemes on the promise of high returns.

This sector, also known as High Ticket Affiliate Marketing, has gained a lot of attention from the Federal Trade Commission in the US recently with two major HTAM schemes being closed down after complaints by many members of high-pressure sales and not making any money.

Quadrant IV is therefore shaded red to draw attention to the need to do your own research and, most importantly, to warn new entrants to the online business of large risks involved with some of these schemes if going it alone.

What is Affiliate Marketing?

Given a logical choice of preferred business model has emerged from the evaluation, I’ll now address questions relating to affiliate marketing, what it is, the skills one requires, and where and how to begin?

Affiliate marketing is simply about promoting other people’s products and gaining commissions in event of any resulting sales. It’s a very simple online business model that can best be explained using a well-known example. Amazon has a website with a vast range of products for sale; you can promote any of those products and get a commission for each lead you send to Amazon that then results in a sale.

The key benefit of affiliate marketing is that it’s a great starting point for newbies owing to its simple operating model. All the rookie marketer has to do is promote and send traffic to the product owners. If you have no experience building a business or making money online, you will probably have no idea what kind of product or service to offer your target audience.

The idea is that you locate products for sale that belong to others and promote these as an affiliate. There’s no particular product expertise needed on your part, all you have to do is drive traffic to the product owners’ websites using your affiliate link.

The sale is made on the owner’s website, the commercial transaction is handled there, goods are dispatched to the customer by the product owner, and then the affiliate marketer gets paid a commission for introducing the sale.

Affiliate marketing is, therefore, a great way to start building your online business to make money online. As such, I’ll now examine the craft involved, how and where to get started.

The 7 Key Elements of Affiliate Marketing

Although Affiliate Marketing is a simple business model, there’s a great deal to learn in getting to terms with doing business online and developing a range of skills to become a competent and creative internet marketer. We can summarise 7 key elements of traditional affiliate marketing:

• Develop a mindset for business, be both consistent and persistent in the action you take to do business and forge your way to success.
• Choose a niche you feel passionate about and build your target audience.
• Design and build an easy-to-use and maintain website.
• Produce useful and meaningful content that will add value (provide solutions to needs) to the target audience within your niche.
• Gain Traffic (or visitors) within your lead capture system, traditionally on your website.
• Establish your reputation and brand within your chosen niche.
• Monetise your website, sales funnel or social media channel.

It’s easy to see from the above 7 components that, mostly, these centre around a website. This is the key resource upon which the ultimate success of the most online business was traditionally grounded. However, the situation has seen extensive change, especially over the last 3 years or so, and there’s debate playing out in the internet marketing arena whether there’s a genuine need for a website these days.

Current Trends and Developments

There’s a debate in the market place whether there is still a need for a website in your affiliate marketing online business. This is due to the growth of social media and sales funnel strategies. This debate is bound to continue. Having looked at the question, I consider the answer comes down to choice, especially for those starting out in online business.

On the one hand, the tried and tested website approach is comparatively inexpensive and has potential organic traffic benefits. It will also help boost your credibility in the market place and build brand authority.

In the short term, however, there are challenges posed by learning SEO techniques and it’s difficult to sell to “cold” traffic. Therefore, you need time and patience when setting up an online business using the traditional approach.

It’s also true that you can reduce start-up times when using organic traffic from social media to build a tribe of followers. “Warm” traffic can be generated much quicker when compared to blogging, for instance. Indeed, many successful affiliate marketers are making sales within their tribes using this approach. Thus, there’s a case in favour of the social media approach for start-ups. It’s attractive to new affiliate marketers as they can “earn as they learn”.

Marketers are therefore adopting social media channels increasingly to get organic traffic to get started in online business in the knowledge that they may progress later to website SEO and/or sales funnel methods, or use email marketing in conjunction with paid traffic, to scale their online business.

Thus, I believe aspiring entrepreneurs will defer building traditional website lead capture, email marketing, and sales funnel systems. Instead, they will accumulate basic skills in sales and marketing on social media platforms. The good news is that they also have the potential to make money from affiliate commissions flowing from warm social media traffic.

It’s a neat approach because newbies can postpone paying for more sophisticated and traditional systems.

Even if you have an established website business, you should also know about these current developments. In the long term, however, the attraction of your website and the value it offers to communicate with your customer base is unlikely to diminish.

It therefore makes sense to keep abreast of the disruptive effects of sales funnels and other technological trends. The impact on business operations could be severe if business owners cannot keep pace with these current developments and upgrade their websites.

Concluding Remarks

Achieving success in online business should not be taken for granted. As in all endeavours, there are learning curves to go through and it takes considerable time to become competent in all aspects of online business. There are also many pitfalls and scams to be avoided, so it is important not to go it alone.

I have presented many of the lessons learned on my journey to investigate the New Economy of the Internet in another post and, in particular, have concluded it is likely to take most aspiring marketers anything between 3 to 5 years to learn the range of skills necessary to assure success online. However, it is possible to shortcut the process by franchising an existing proven brand to make money online. In such an arrangement, you will will be trained to do your job, and everything will be provided to you, including all the work setting up your website, creating initial content, and training materials.

These arrangements provide a sense of community, where members support members, including all help and support needs. The concept is that of an existing success story, or online brand (the franchise), will help build your business for you. It is affordable and you do not need to be making money online to get started and ultimately succeed.

This is an amalgam between affiliate and network marketing. You will be trained to refer people to the existing brand, and your leads and prospects will then be sent back to sign up to your team through your affiliate link. You can subscribe for further details on one such franchise arrangement here. This is one of the simplest plans I know and is specifically designed for the newcomer to online business.

Finally, readers are encouraged to engage with the blog articles. Please raise your comments, suggestions or questions in the comments section below and I’ll respond as quickly as I can.

All the very best,

WILL