Viability of a Business Model

[Guest mrclean0325]

There is a lot of people posting about different programs and scams on the forum lately.

I believe this comes down, in part, to an education problem. People just don’t understand what a viable business model truly is. They also don’t understand what is truly a scam and what is not.

The Internet as changed a lot of how things are done; but, not what a viable business model consists of. Business has been working the same way for centuries, even on the Internet. Not knowing how to identify a true business model as opposed to an unsustainable idea.

The premise of any business is selling a product or service for a fee greater than the cost of producing and distributing the product or service. There has to be a profit or the business cannot survive. There are many costs associated with running a business - even an online business.

The costs for an online business are far less than an offline business. There are still monetary costs associated with running any online business. Hosting, autoresponders, and advertising for minimum to run your business.

As an affiliate of a product or service, there are many free options for these. Being an affiliate is not what is considered a business model since you are not creating, distributing, or have any control over the product or service. You are not an employee or owner but a subcontractor.

An affiliate also has to create a profit or what is the point? As an affiliate you are solely responsible for your results. You create the traffic and sales for your own personal income. You are also just getting a percentage of the sale of a product or service. The vendor goes out of business and you are out of income.

So even as an affiliate it is prudent to understand if the company you are working your butt off to sell their product or service will last so your effort won’t have to be recreated in another company.

Most of the people on this site are affiliates for one program or another. As an affiliate, your source of income is selling the product or service. You are making the product or service owner money and doing a lot of the leg work for them.

You are also responsible for what not only the company says about their product or service but what you also say. This means the ads need to be factual. A trip over to the FTC website will give you an idea of what you legally can and cannot put in your advertising. What ever you say or promise in your ads - you have to provide the “proof” listed on the FTC website.

When you are an affiliate you are a subcontractor as listed above. This doesn’t mean you have nothing to worry about. There are certain forms you must fill out if you live in the USA stating you are a subcontractor. It usually absolves the company of any actions you may take that are not “kosher”. If you believe that no affiliates lie on an ad to make a commission - I have some great ocean front property in Arizona you would love.

Without these forms, any affiliate that tells a fib could bring the company down for the false advertising. Then there goes your income. There are also tax considerations too. Making over $600 a year requires you to claim it on taxes if you live in the US. There is a form you must fill out so the company doesn’t have to collect taxes and social security out of your commissions.

If you don’t think these are important, do some searching on the IRS website. I have worked for brick and mortar businesses that were closed down for tax issues. No business = no income.

 

One last thing about being an affiliate, don't ever pay someone to sell their products. There are a lot of them you see too. Why would you pay anyone to be their affiliate and bear all of the advertising and traffic expenses too? Some want quite a bit too, so are they making money with their product or recruiting affiliates? if it is recruiting affiliates - it is a scam.

So going with what a proper business model consist of totally eliminates the following type of companies from being a long term viable business. Sure they may work in the short term, so if you want to take the risks....

100% Commission - If the company is paying you 100% for the sale of their product or service, how do they get the money to run the business? How do they pay for hosting, support, payment processors, and all of the other sundry fees a business has to pay? Even if they are hosting on a server in their basement - they have to pay for the electricity and Internet.

Unless there are paid ads of other source of revenue on the site, there is no way the business can survive. If they have things you pay for on the site which is to cover the expenses, then you are not making “100%” since you are paying something to be an affiliate of the program. If the owner is "fronting" the money from another business to keep it going, it usually doesn't end well either.

 

A separate business entity has to be able to stand on its own or it isn't a real business. Just like trying to claim a home business which hasn't ever made a profit. Many who talk about their online "business" have never made a profit (or ever will), so are they just a time and money intensive hobby?

If money somehow filters up to the business owner from your effort, it can be a pyramid. When there is a true pyramid - they go out of their way to tell you it is not with a lot of graphics and such. Grandpa always said if it smells like a wet dog - it is usually a wet dog.

Dirt cheap “Lifetime” programs - For a business to survive there has to be income like mentioned above. Servers aren’t cheap and none of the programs you see online can run off off cheap shared hosting. A blog or something can be; not a TE, safelist, or other such high traffic program. Server are not cheap and neither is a good Internet connection.

Many complain a program went away when it was doomed from the start. If everyone coming into the program bought the $10 lifetime account - where does the money come from for running the business in 6 months come from? If they continue to sell lifetime accounts to keep the business running, it never works out. Sooner or later there will be less and less new members to keep it going. This is the same reason a ponzi dies. Same type principle.

Revenue share or ponzi? - There are some true revenue sharing programs online. Most share revenue from ads sold on the site or other means that is not associated with payments from members. If the only way to get a revenue share is to purchase it and there is no “real” product or service associated - then it is a ponzi. You need to understand the differences and how the company makes money. A trip over to the SEC website can shed light on these things.

Stocks are a “Revenue Sharing” system. They can only be sold by licensed brokers like anything that is labelled an “investment” or guarantees any percentage of return. There is no stock on Wall Street that will guarantee a percentage of return. So if they are promising a percentage or return and are not licensed brokers - hmmm, could it be viable?

There are a LOT of programs that are not quite “legal” advertised on the TEs and safelists, most are thinly veiled “chain letters” or just a way to transfer money from one person to another.

Pre-made downlines - There are programs that promise “pre-made” downlines. The SEC has issues with this and has closed down several for such promises. Some that are advertised now are under investigation.

Read the TOS - Every program online has very specific language in them as to how you can use their sites. Most of the “get rich quick” with eBay, Amazon, Google, Kindle, Fiverr and many others tell you to totally violate the TOS of the site. You break the rules - they shut you down. Then you run crying to your momma or post trash about them what a scam they were...

This is a rundown of the largest offenders I have seen online.

Since you are seeing more IM products found in WSOs, JVZoo, and other affiliate sites, you need to be aware of some things. Sometimes they tell you of a way to use a “loophole’ or such thing to make a mint. Yes, reading the TOS can be like peeling off your own toenails, but no pain, no gain. It is better to know right up front you may get shut down than it come out of the blue because you trusted the program to be honest.

Along the same lines are crap programs everyone complains about. You buy course or ebook to learn how to do something and it turns out to be a steaming pile of crud. No way you can even begin to make it work even though the ad copy says “newbie friendly”. Unfortunately this is a very viable business model. Even if they have an 80% refund rate it still means they made 20% profits. A very good return for a bunch of crap huh?

Every online business has to have a way to get paid and pay out. This is where the payment processors come in. All of the payment processors have a TOS. Lately everyone is complaining about PayPal dropping sites left and right. This doesn’t mean the site is a bad site or a scam. PayPal was just too lazy and greedy previously and allowed businesses whose structure was not in line with their own TOS to use them.

PayPal TOS does not allow a multi-tiered payment program or MLM pay structure, never has. They are now enforcing it since they were the payment processor for Traffic Monsoon and may be in trouble because of it. If you get involved with a business that doesn’t fall into line with what a payment processor has in their TOS - don’t be surprised when they drop them and you don’t get paid.

Yes, Virginia, you have to use your head a bit and take all of these things into consideration when deciding on what to spend your time making money online. You pick a bad program and oh, well they went under and they are in trouble with the law. Not quite anymore though. Many state Attorney Generals realize these businesses wouldn’t exist without users to use them.

So just like other crimes, they are going after everyone involved to curb or eliminate the problem. This means if the law takes down a bad business, they may be coming after you too if you are a member.

The ultimate problem with all of this is there has to be demand from the consumer for them to even exist. There is usually money involved and sometimes a lot of money or the promise of “easy money”. We are the ultimate problem because if in our greed and laziness we keep buying into them - they will continue to exist and flourish. Scams will never go away as long as there are people willing to join them to make a quick profit.

Most of this should be common sense since a lot of what is done online in the IM venue you just don’t see anywhere else in reality. There are many legit and viable business models for making money online. Common sense should tell you if you can’t stumble into a way to make “$10K a month in 30 days” in the real world - it won’t happen online either.

There were ads for such things in comic books and magazines long before the Internet was even thought of and they work the same way they do now. They usually don’t.

Reality can be a bummer and we don’t want to realize we need to work to make money online just like in “real” life. There is no magic button, secret sauce, loophole, or shortcut to make a lot of money online quickly just as you can't do it legally in real life. It takes starting a real viable business and doing what is required to make a profit with it.

 

The unfortunate fact is we have done such a poor job of policing our own back yard the government is taking aim to do it for us. What you are seeing now happening with PayPal and other programs being closed down could very well be the tip of the iceberg or a glimpse of things to come.

[mistracy39]

 Success is not an accident!  Many people look at their doctor, their realtor, their lawyer, the internet guru and say "he's so lucky". or "He's so smart, I wish I could have done that", etc...

     It's not about Luck, Ideas, or Intelligence.  It's about Action! WHAT YOU DO is infinitely more important that WHAT YOU KNOW.  Action is always the key.

     IT'S A FACT: 

SUCCESSFUL people are those who are willing to actually do the things that UNSUCCESSFUL people are unwilling to do.

     Are good ideas important?  Of course.  Are opportunities important?  Of course.  But without action they are useless.  If you don't try... You Can't Succeed.  

     The ASN business has everything that any entrepreneur could want or need.  As a way to make money, it doesn't get better or easier. No company provides more ways to earn, easier marketing methods, all FREE.  But like any other business... You have to, at least, try.  You have everything to gain... and because we never ask you for a dime, you have absolutely nothing to lose.  

Edited October 19, 2016 by Darren Olander
link removed

[rpsmith]

I have also noted that even sound business models can be labeled scams if they are not run properly.

[Glen Palo]

I wrote an article awhile back about business models and home businesses. Here is a chart from the Harvard Business Review I used:

 

[rpsmith]

I think a good example of product to service is Software as a service. I think it is a very lucrative idea.

[weblord]

i like the freemium business model it's a good way for starters and advance members alike

I wrote an article awhile back about business models and home businesses. Here is a chart from the Harvard Business Review I used: