“The art of good business is being a good middle man.”
This quote is as true today as it was 15 years ago when Layer Cake first came out. Although the character to utter it into existence is unsavory by any decent moral standard, his business acumen is undeniably on point.
How do these words of wisdom apply in 2019? Well, it’s easier than ever to sell online, but still difficult to create the actual products to sell. The proliferation of marketing and automation tools have made it easy for entrepreneurs to launch online businesses, assuming they actually have something to market.
From dropshipping physical products to selling online traffic, there are numerous ways for skilled marketers to make some serious cash without having to create anything themselves. In other words, being a middle man (or woman!) is still a very viable business plan.
There are three main ways to go about this type of business model: affiliate marketing, reselling, and white labeling. Let’s dive into each of them, discuss how they’re similar, where they differ, and which model works best for which type of business and entrepreneur.
Affiliate marketing
In a nutshell:
Affiliate marketers send traffic to merchants’ sites.
Risk: High
Reward: High
How you get paid:
There are a few variations of affiliate compensation models, but they roughly break down as follows:
- CPL: you get paid per user sent to the merchant’s site, regardless of whether or not the user converts into a paying customer.
- CPA: you get paid per user that converts into a paying customer on a merchant’s site.
- Set fee: you get paid a predetermined amount to include a link to the merchant’s site and push traffic there. Although there is no performance-based compensation for this model, merchants will still expect their investment in you to be ROI-positive.
Pros:
- Low development cost – all you need to start is a few landing pages which you can build yourself
- Much of the work has already been done by the big brands you will be promoting
- The potential to grow can be huge
- Requires minimal sales or business development efforts as the brands themselves will be handling the sales funnel
Cons:
- You will need a significant marketing budget to show results
- You rely on the merchants’ ability to convert your traffic
- You will be competing directly against other affiliates, the merchants themselves, and other competing brands
Bottom line:
Experienced marketing professionals that identify potential in a specific niche can be very successful at affiliate marketing. If you have the budget and background to market like a pro, go forth and prosper!
Reselling
In a nutshell:
Resellers are third-party vendors of products created by separate companies.
Risk: Low
Reward: Low
How you get paid:
Resellers are essentially transparent middle men: you market and sell products of another company and make money on the slim margin between your wholesale purchase price and the final sale price you offer customers. In order to create competitive offers, resellers often bundle products together or offer other types of discounted packages, which cuts into the margin.
Common reseller products include physical goods such as clothing, apparel, and accessories, as well as less-tangible products such as software licenses, memberships, and subscriptions.
Pros:
- The ability to start a business with a small investment and no expenses on employees and development
- Good opportunity for people that excel at sales and finding business opportunities
- You promote and sell a proven product and can give your clients guarantees (such as support and security) that the larger company offers
Cons:
- Finding the right opportunities can be hard
- The profit margin is small
- The competition is hard and your advantages are minor
Bottom line:
If your main skill set is business development and sales, and you have connections that will enable you to find both cheap products and potential clients, reselling could be a steady source of income without the need to hire employees or develop a product of your own.
White labeling
In a nutshell:
White label means that you buy a fully-developed product and apply your own branding to it, hence the name: you buy a product with a white label and put your label over it.
Risk: Low
Reward: High
How you get paid:
There are many levels of white labeling a product, from simply slapping your sticker on an existing product and using the same prices, funnels, and content as the original brand, to modifying the product completely and using an entirely different business model to generate revenues.
Entrepreneurs that know a little bit of everything, have a modest initial budget, and identify a market need are able to create white label businesses so successful, you’d never even know they weren’t the developer of the product they sell.
Pros:
- Complete control of the entire funnel
- Fastest way to build a brand that is your own without developing your own product
- Flexibility in choosing the business model that suits your needs
Cons:
- You rely on a product built by a company you don’t control
- You will need an initial investment to license the product
- A lot of hands-on work in branding, marketing, sales and support
Bottom line:
If you are an online professional that has the whole package of required skills and want to build your own brand without investing in developing your own product, you can start your own business and manage everything from acquisition to customer success and retention.
