These simple business models can help you get started, whether you want to create a Web site for your existing company or start from scratch with a new e-business.
Going online can be a great adventure--and a lot of fun--for any small business. But if you want your Web site to be more than a hobby, you need to put some thought into how to make it profitable. No matter what your business is, you should always be thinking about ways to diversify your revenue streams to boost your profits.
So to get you thinking about new strategies, I've put together a list of the seven ways you can earn income on the Web, and then I've explained how you can incorporate all of these methods to create success.
Online Profit Steams
Whether you're just beginning to develop your business model or simply analyzing an existing business, your chief focus should be on how you're going to generate income. There are seven ways to generate revenue on the Web:
• Sell your own products
• Sell your own services
• Drop ship products
• Recommend affiliate products
• Sell ad space
• Create a joint venture with like-minded businesses
• Start an affiliate program
Let me explain each of these a little further:
1. Sell your own products. The main advantage to selling your own products is that you ultimately control how much profit you make on every sale and you therefore have the potential for the biggest profit margin. You know exactly what each product costs, and you can try out different price points to see what works the best. People appreciate good value, and removing the middleman is a great way to provide your customers with competitive prices that keep them coming back for more.
2. Sell your own services. Whether you're a small-town dentist, a high-priced online legal consultant, a real estate agent, a tutor, a landscaper, a bed and breakfast owner, an auto-mechanic, a caterer, a fitness trainer or anything in between, you can profit from selling your service online. It's easy to get started selling a service online, but your revenue potential, in most cases, is limited. That's because, unlike someone selling a physical product that can be stored and shipped on demand, you can only provide as many services as your time allows.
When you sell a service, you're essentially selling a relationship with yourself. And this requires that you spend more time and effort establishing your credibility and developing rapport with your visitors than is typically required on a site selling a physical product. You not only need to establish the benefits of the service you're offering, you also need to establish the value of you providing this service.
3. Drop ship products. If you want to sell products without the hassles of tracking your inventory, setting up warehouse space and maintaining a confusing shipping/receiving infrastructure, drop-shipping may be the choice for you. Drop shipping lets you sell quality, brand-name products on your site for a hefty profit, while the drop shipper takes care of fulfilling the order. They warehouse the stock, pack the orders and ship them out to your customers.
4. Recommend affiliate products. Recommending affiliate products creates a "no-risk" partnership that allows you to promote another company's products or services on your site to earn a percentage of their sales. As one of the company's "affiliates" or promotion partners, you earn a commission each time someone you've referred to their site makes a purchase. To advertise their wares, you might post a banner on your site that links to the affiliate program's site, or you might publish an article about the company and their products in your newsletter.
5. Sell ad space. Once your site has lots of highly targeted traffic, or a large, targeted opt-in list, you may be able to sell advertising. Advertisers are willing to buy ads when they're being directed at large numbers of their target market. Nowadays, though, advertising revenues are a lot less than they used to be, so I don't recommend you plan on making this your sole source of income. Selling ad space can be a great additional profit stream, but it's unlikely to keep your business afloat on its own.
6. Create a joint venture with like-minded businesses. Joint ventures are all about related businesses teaming up and combining skills, products, services and resources to create new streams of income and profit. One great way to profit through joint ventures is to seek out products or services that would benefit your visitors, and then approach the companies that provide those products or services. Ask them if you can recommend their product or service on your site for a portion of the profits. Most companies will gladly agree to this arrangement--after all, there's no risk for them since they only pay you when you refer a paying customer.
7. Start an affiliate program. With your own affiliate program, you can recruit an army of people (your affiliates) who will recommend your product on their web site for a percentage of any sale they refer. You have the power to exponentially increase your income as more and more affiliates sign up and you continue to teach your existing affiliates how to increase their commission checks (and your income).
It's one of the most powerful forms of online advertising I know. It allows you to grow your profits while keeping your business small, since you don't have to go out and spend money on salespeople and advertising. Your affiliates do the advertising for you, and you only pay them when they make a sale.
There's no reason why you can't incorporate several of these different income opportunities into your business model. The key is to focus on one, maximize revenue from it and then move on to the next.
Of course, this choice should be made with extra consideration to your budget. If, like most small-business people, you have a limited budget, you'll want to focus on revenue streams (like selling products or recommending affiliate products) that will produce results quickly. A good place for you to start might be:
The Sales Model
When most people think about taking a small business online, they go straight to the sales model. That's because it's fairly straight-forward and your source of income is obvious. You function as an online merchant, and every time you make a sale, you earn a profit. The more sales you make, the bigger your profits grow.
But the really great thing about the sales model is that once you have your main revenue stream running smoothly, you can add every single other profit stream I mentioned above in order to diversify your income and explode your profits! For example, let's say you run a small business that manufactures garden tools. When you set up your sales site, you can sell your own product (garden tools), earning the largest profit margin.
This should be your main source of income, so make sure you focus on this first.
You could also sell a service that complements your products or that your customers might need before or after using your product. Your garden tools sales site, for example, could offer landscaping consultations with professional landscapers. Next, you could find products available to drop ship that complement your main product. Maybe your new garden tool owners will need other items for their garden. Find a drop shipper that offers bird feeders or garden gloves, and arrange to offer those products for sale on your site.
Why not recommend affiliate products that your customers will be interested in? You could set up a "Gardening Resources" page on your site and use it to promote affiliate products related to gardening, such as books or magazines about gardening, packets of seeds, flower bulbs, plant pots or just about anything else gardeners would be interested in. (Remember, though, keep your focus and avoid turning this page into a general flea market or you'll end up losing traffic.)
Try selling ad space to advertisers who are interested in your target market. A site that sells rain gear, for example, might be interested in advertising to gardeners since they spend a lot of time outside. Another option would be to create a joint venture with other businesses. Maybe you know a great local landscaper who has never considered offering his service online. You could set up an arrangement where you earn a portion of the profits on any sales you send his way. Then, write a quick e-mail promotion about his service and send it to all of your customers who live in his area.
Finally, start an affiliate program to promote your site. You could do all your selling yourself . . . but why would you? Think about it--you boost your visibility when your affiliates start publicizing your site, you gain credibility with your affiliates' customers, and you simply make more sales! And in a sales model site, that's your ultimate goal.
The Click & Mortar Model
In the click & mortar model, you combine your offline business with an online presence to increase exposure and expand your market. What you do with your Web site will depend on the type of offline business you've already established. Your online venture could be anything from a site that mainly functions as a marketing tool for your offline business to a fully e-commerce- enabled electronic store. Here are some of the profit streams you should consider when taking your existing small business online:
If your offline business involves selling products, you should consider online sales. Your two channels (online and offline) can share resources, including marketing dollars, fulfillment systems, and inventory. Adding the online channel allows you to expand your geographic and product market, while keeping your business small.
If you sell an offline service, think about ways you could promote your service online. This can be effective no matter what service you offer. Whether you're a real estate agent, a doctor, a dentist, a lawyer, a landscaper or a hairdresser, you can use your Web site to sell your service. For example, you could take appointments through your site or create a promotional campaign online that directs visitors to your physical location.
You could sell ad space to other local businesses. For example, let's say you're a real estate agent. You could sell ad space to a cleaning company since people might be interested in having their homes professionally cleaned before moving in.
You could create a joint venture with other local businesses. For your real estate business, you could create a "Welcome to the Neighborhood" package filled with helpful information and coupons for local businesses, including a pizza place, a video rental store, a plumber, a electrician and a beauty shop. Then make joint venture arrangements with all these businesses so that you profit every time one of your coupons is used. Offer this package both online and offline to increase your profits.
And, as usual, I suggest you start an affiliate program. Think about it--your affiliates could send visitors to your site, where you promote your offline service. Or you could provide your affiliates with a printable coupon campaign that they could use to send people to your physical location.
Remember that both of these business models are most effective when you combine profit streams to maximize revenue. For example, if you wanted to work with your sales model site to diversify your profit streams, you could sell your own product, while also recommending affiliate or joint venture products that would appeal to your audience and complement your offer. You could investigate drop-shipping options to even further diversify your product line. Then you could create a service that your product users would need, and send them an offer in a follow-up e-mail promotion. Plus, you can make more sales on all of these fronts by enlisting an army of affiliates to sell for you.
Diversification gives you all kinds of options when it comes to back-end and follow-up offers. And remember, if you have great offers, the customers who have bought from you once are likely to buy from you again.
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