Traditional commercial finance is, quite simply, in the dark ages compared to modern digital methods for funding business growth. For five years, I helped hundreds of small-business owners raise finance to help them grow their businesses. I have to be honest: I was initially shocked at how difficult it is for the average entrepreneur to get access to funding at the phases when they most need it.
On the one hand, banks really only want to lend to small businesses when there is security (property, equipment, invoices, or other valuable assets). On the other hand, angel investors and venture capitalists are looking for investment opportunities with as little risk as possible and want to have as much control as possible over the businesses they back.
Fortunately, today there are many other options for the budding entrepreneur to experiment with in order to grow their businesses.
What if you could recruit an army of salespeople without having to pay their salaries, without having to train them, and without paying for recruitment fees?
What if they could provide you with unlimited leads and those leads converted into long-term customers? What impact could that have on your business?
That’s exactly what affiliate financing can provide.
I’ve coined the term affiliate financing because between 40–60% of entrepreneurs who say they want to grow their businesses explain their number-one target for growth is resources for sales and marketing. But what if you could attract the traffic, prospects, and customers you need for growth without having to borrow the money in the first place?
So, what is affiliate financing?
Approximately 15% of online revenue today is driven by affiliate marketing. This form of marketing is performance based, which means it only becomes a cost when a result is delivered. Therefore, we have access to a method of marketing that in principle can fund the delivery of customers and revenue without having to pay for them!
If I offered to provide you a large number of customers for life, provided you accepted that you may not make any profit on the first transaction, would that benefit your business? Unless the majority of your customers purchase from you only once, my guess is that would be quite attractive. Well, that’s what affiliate marketing provides, and it’s effectively free, because the marketers get paid out of the profits generated from the initial transactions you make. They spend their time and money marketing to prospects for you, then they encourage them to purchase your products. In return, you pay them a commission for their efforts, but you keep the customer for life!
Of course, it’s not completely free because you either need to invest in some software that manages the activity of your affiliates, or you pay a fee to an affiliate marketing network instead. Either you attract your own affiliates and manage them with the software which sits on your website, or the network does all that for you.
To take full advantage of this strategy, you need to have some idea of the lifetime value of your customer, so that you can optimise the amount of profit margin you can make available to affiliates. The reason for this is the more incentive you can offer them, the more motivated they will be to invest in sending you leads and/or converting those leads into customers.