Planning Future Growth by Chris Trayhorn, Publisher of mThink Blue Book, January 1, 2005 Matt Ranta has not been an affiliate for very long. In fact, his Web page still has some kinks in it. He says he gets about two or three pages coded on weekends. In his off hours he is a musician, so he sells musical instruments on his affiliate site. He’s not unlike a lot of affiliates out there – passionate about what he sells and hungry for commissions. The main difference is that Ranta was affiliate manager for two and a half years for Vanns.com Inc., an online seller of electronics. He knows he is going to succeed, not because he has managed affiliates but because he has a business plan. “Any time a business has goals written down, you will always be more successful,” he says. And even though he has eight years at Vanns.com, headquartered in Missoula, Mont., and recently became marketing manager, he had never been an affiliate until now. He says he wants to see it from the troop level – he can’t possibly know what to expect from affiliates if he’s never been one. What he’s finding is, it’s challenging. Ranta knows that some affiliates expect to toss up some links, sit back and let the cash come in. And for a few, that’s exactly what happens. But without a concrete plan for what to do with those commissions, some affiliates opt for personal bling-bling, invest in the wrong software upgrades or hire help during the slow season. A business plan can map out when the high season is and how much time and effort you’ll need to spend in the busy times versus the slow times. A plan can tell you what other similar sites are bringing in and how you compare. A plan can lay out how to make your site visible so the sales don’t go to the other guy. “Like anything else,” says affiliate guru Rosalind Gardner, “if you fail to plan, you plan to fail.” She is author of The Super Affiliate Handbook: How I Made $436,797 Last Year Selling Other People’s Stuff Online. In addition to telling you how much she makes, she will also tell you how she started selling dating service memberships online as an affiliate with no business background, no plan and no long-term goal. “Nowadays, you have to write it down,” she says. A good business plan is the same as a good recipe, and affiliates should follow it or risk unappetizing returns. “Whether you are generating $100 in monthly earnings or $100,000, a business plan enables you to not only sustain revenue, but grow it,” says Kerri Pollard, director of publisher development for Commission Junction, an Internet affiliate aggregator based in Santa Barbara, Calif. “It forces you to take a critical look at your efforts, identify future opportunities and the associated strategies, and assign a realistic timeline to the established tactics.” The most important step to take before starting a business plan, says Ranta, is to realize that it is not a complicated thing. Sure, some people work for a year or more on a business plan before opening up shop, but Ranta says there are some core elements you must have: a mission statement, a marketing plan and revenue goals. The mission statement can be as simple as a single sentence, a description of what you do: I sell sneakers online. You can refer to this statement if someone wants you to sell shoe polish, replacement heels, shoelaces or other after-market shoe doodads. If you decide there is great monetary promise in the shoe accessories, then you can rewrite your mission statement: I sell sneakers and associated accessories online. With that done, coming up with a marketing plan would be next. This sounds intimidating, but shouldn’t be if you know where to get help. Ranta says he gladly assists wannabe affiliates who call asking for help drawing up a plan. He even seeks out Vanns.com affiliates who have potential and offers to help them get sales. If he spots a site with a lot of click-throughs but few sales, Ranta will suggest products that might get better responses. With a plan, affiliates can connect the dots before the merchant has to tell them what they need to do. Kathy Hermanowski, affiliate program manager at cable TV’s A&E and the History Channel, does the same thing. “For affiliates with great potential, we do contact them,” she says. “We look at affiliates who work well with the brand and who have customers in our demographic base and who have really good traffic.” Then she goes the extra mile to help them make the sales. She handles a few thousand affiliates who sell more than 5,500 products such as DVDs, videos and books of A&E and History Channel programs. “A lot of the little guys [become affiliates] for fun and extra income,” says Hermanowski. “It would be smart to have a business plan to help focus on what sells the best.” About 20 percent of her affiliates bring in the most sales, she says, and assumes they all have business plans. “I don’t have a formal outline of what makes a good plan,” she says, “but they should set goals and be realistic about what they can accomplish.” Pamela Metivier, co-author of Affiliate Selling: Building Revenue on the Web, says the degree of business planning really depends on a few things. It depends on the goals of the affiliate: Does the affiliate want to add some affiliate links just to generate enough commissions to cover the cost of hosting the site? If so, they really don’t need a business plan per se, she says. But a high-traffic site should have a detailed business and marketing plan. “The reason it becomes important is that they’ll want to compare the amount of revenue that they generate via affiliate commissions to other revenue.” Also, Metivier says, it depends on whether the affiliate is an individual or a business that needs to communicate the plan to an entire team. Companies that plan to count on “affiliate relationships” as a source of revenue need to map out the “how” and the “how much.” She says that affiliates who have high-traffic Web sites may have no choice but to write down new business goals, with the primary goal being “make profits.” Unlike buying into a franchise, becoming an affiliate doesn’t come with a one-stop resource of information. You have to go to several sources, such as Gardner’s book or others on affiliate marketing. “Wouldn’t it be great if they handed you a binder like they do when you open up a McDonald’s franchise?” asks Andy Rodriguez, named 2002 Affiliate Manager of the Year by ABestWeb.com, an international affiliate marketing online forum. He’s been an affiliate for five years and says that before you make a plan, settle on what you are. Are you a coupon site or a search site? The search site will require more attention. Add that to the plan. Rodriguez says you can base your plan on what others have done before in the same space. Most important, a successful affiliate needs to “get close to the merchants themselves,” Rodriquez says. “The closer you get to the merchant, the more they will think of you for promotions and other things.” He uses instant messaging to stay in touch with his merchants. He has about 400 contacts on his list. As far as revenue goals, Ranta says he will not tell one affiliate what another affiliate is making, but will guide them with ballpark figures and facilitate creating benchmarks. He says putting a time limit on all the goals is important: set your first year’s revenue goal. When you meet it, set the next year’s higher and so on. “I can help you define what is realistic,” Ranta says. Conversely, Gardner says if you are a mom-and-pop operation, you probably don’t need to write anything down. Your goals should be simple and obvious. She says finishing one site before starting another is a good objective you won’t need to write down. Some affiliates, she says, spread themselves too thin too fast. “If affiliate marketing is just a little hobby … instead of worrying about a business plan, I reckon your time would be spent more efficiently doing research, creating a Web site and earning your first affiliate commissions,” says Allan Gardyne, who runs AssociatePrograms .com, an online resource for affiliat es based in Australia. Industry experts make the point that failure may not be so catastrophic. Lacking a plan early on may not be so bad. Since startup costs are minimal, having your affiliate business fail probably means very little cash out of pocket. But affiliates who want to carve out their own destiny need to cross all the T’s. The only way to do that – to turn your mom-and-pop business into commissions you can live off of – is to move beyond the three core elements outlined above and add more detail. Here’s a business plan checklist commonly used by people in the industry. First, decide on the market or the item within a given market you want to sell. Then, set up house, such as a way to receive payments and how to keep track of your income and site numbers. You’ll need a domain name (e.g., sellitall.com or everythingelectronicgadgets.com), a place to host it, Web page-building software and a way to check for any trademark or copyright conflicts. Make sure your site is designed attractively and that all the right content, links and graphics show up and work correctly. Join an affiliate organization, find merchants to partner with and shop around thoroughly for the right networks and programs before committing. That all sounds basic, but it should be in your business plan. Treat it like a to-do list. Ranta says that once you have a first-year plan, you can break it down into mini-goals, such as what you will do this month, this week, today. Next would be a list of how to get noticed and how to get business. Try to get reciprocal links with everyone and anyone. Research how your site can get the highest results from search engines and find the best places to get your site listed. Start a newsletter. Rewrite your email signature to promote your site. Consider advertising offline. Once you are up and running, the work doesn’t stop. You should list in your business plan what site maintenance is necessary. For example, read up on the new kinds of spyware and adware. Know the rules about spamming. Have a monetary threshold to denote when you should invest more money to get your name out there and when to fold up tent. Get to know your industry by receiving newsletters and alerts. Meet people in your industry when you can. Publicize your awards and milestones. Only after doing all the above can you chart out your future. Explain how you are going to reinvest in your site. Map what you are going to do with every cent of your income. Be aware of all possible tax implications. Rodriguez suggests that there are merchants who could use a good business plan. Some, he says, will sign affiliates and expect the money to come in overnight. “The merchant and the affiliate expect instant results, and that’s not the way it is.” That’s why Ranta decided to become an affiliate. “You need to realize that a plan is not set in stone either, and must change with the market. Change the goals as you meet goals that push you into the next level.” With your T’s all crossed, you are now ready to make a true leap of faith. Gardyne says anyone who’s contemplating a business plan needs to not just create a business, but “Create a lifestyle. Figure out what you want and what you’ll enjoy doing and the steps you need to take to get there.” ERIC REYES lives in the San Francisco Bay Area and writes about technology and business. His work has appeared in Business 2.0 and Worth magazine. He has directed and contributed to Web sites such as Amazon.com and Excite.com. Filed under: Revenue Tagged under: 05 - Winter 2005, affiliate marketing, Business Models, Features, Lifestyle, mtadmin About the Author Chris Trayhorn, Publisher of mThink Blue Book Chris Trayhorn is the Chairman of the Performance Marketing Industry Blue Ribbon Panel and the CEO of mThink.com, a leading online and content marketing agency. He has founded four successful marketing companies in London and San Francisco in the last 15 years, and is currently the founder and publisher of Revenue+Performance magazine, the magazine of the performance marketing industry since 2002.