So you want to make money from an online business? Join the club.
Making money online has come a long way since author Tim Ferriss released his pivotal book The Four Hour Work Week and convinced readers that they could escape the 9-5 by following their passions, teaching others through a website, and capitalizing on some international arbitrage by hiring a remote assistant to do your dirty work for a low price.
Online business models have continued to explode in popularity, and just as one method becomes saturated with aspiring millionaires, another pops up in its place.
If you want to get involved in this space, you may have realized that it seems like everyone out there is making money online. This is what you see in the blogs you read, and especially the annoying YouTube ads that you get served.
So how do you know what to believe, and which models are best suited for you?
This is the question that we will answer in this article. Read on to discover where your skills are best suited – and how you can leverage online resources best to grow your business over time!
A Word on Methodology
We stacked these business models against each other based on metrics that we consider important for an aspiring “solopreneur.”
Here they are:
- Startup costs
- Startup difficulty
- Time to results
- Ownership
- Profile
The reason chose to break them down this way was because many articles about this topic make loose statements saying that you “could” give their model a try, but few go into detail about whether or not you “should.” This is especially true when it comes to the potential roadblocks or pitfalls in the model.
We think that when someone is getting involved in an endeavor like online business, they should be aware of exactly what kind of an undertaking it can be – not just the potential rewards!
Startup Costs and Startup Difficulty are important metrics to consider. This is the stage where most people quit their online businesses, so it’s best to know how much time and money it will take to begin, and how long it will be until they see their first stable income (Time to Results).
Costs and difficulty are based on averages from what people report online, so be prepared to do more research do determine if your niche actually fits these numbers.
Ownership is a bit of a difficult thing to quantify, but it is essentially a measure of security and how much control you have over your business.
We boil these down into a Profile of who we think is best suited for the method.
So let’s get to our favorite online business models.
1) Affiliate Marketing
We might as well start with the online business model that keeps BrandBuilders running: Affiliate Marketing.
Before we get carried away talking about this topic, we recommend reading our Affiliate Marketing for Beginners article if you are still unsure about what this model is, or the basics of how it works.
If you are familiar with the concept, then great! Read on as we explain why we think it is one of the best models out there.
Affiliate Marketing Models
There are many ways to make money through affiliate marketing. In some ways, it can be considered the gateway drug of online business – but it all starts from the core model for promoting products and services with a blog.
An affiliate owns a website in a specific niche and strikes a deal with a merchant to promote their product through their site. When a site visitor/customer wants to make a purchase, they click through a link on the affiliate’s site and make the purchase on the merchant’s site. The affiliate receives a percentage of this purchase.
Of course, we would be remiss if we did not mention that there are other ways to make money as an affiliate without a site (we wrote an article about that too). This model can be done in several different ways.
But how does it compare to other models?
Tale of the Tape
Affiliate marketing is a great business model that is so popular online because of ownership, earnings potential, and compatibility with other business models.
First of all, ownership is important for ensuring income stability in the long run. With affiliate marketing, you own your website, the content on it and (to an extent) the loyal visitors who come back to your site when they want to solve a problem.
If one of your high-performing affiliate partners decides to kick you out of their program, you can still reach out to a different business with a similar product to recoup these losses. This is something that affiliates should be prepared for, as it does happen often!
In fact, Amazon Associates (one of the largest programs on the internet) made headlines by slashing their affiliate rates in April of 2020.
The earnings potential for this online business model is limited by the amount of traffic that you can drive to your site, the quality of your content, and your overall conversion rate (ie whether or not site visitors trust you enough to take your advice when making purchasing decisions). These are factors that are within your control, even if they can take time and expertise to execute.
Last but not least, a successful affiliate website can be utilized to make money in several ways.
As an example, a mature site in the hiking equipment niche can make money through display ads, selling exclusive content like holiday gear guides, and selling your own product like branded apparel.
Most successful affiliate marketers – like Spencer Haws from Niche Pursuits – post extensively about how their model is meant to include these other income methods, as it adds diversification and security to their monthly payouts.
Be Prepared to Fail
With all this in mind, we can’t lead you down the affiliate rabbit hole without some disclaimers.
- This will take time. Most first-time affiliates report first seeing consistent revenues after six months or longer.
- Prepare for a steep learning curve. You’ll need a great deal of hands-on learning about WordPress, SEO, content marketing, and your niche. If you aren’t a self-motivated learner, this may not be the right online business model for you.
- You will fail. It’s inevitable that you’ll encounter hurdles and face stiff competition from competing sites.
Sorry, not sorry. We had to say it! Affiliate marketing is tough, but it also can be incredibly rewarding!
Our recommendation is to use the sources we mention under the Amazon FBA section to find accurate information, and to find a mentor in the field if possible. This is the best way to ensure that you can learn from the mistakes of others and follow a predefined plan as you grow your site.
Who is Affiliate Marketing Best For?
Affiliate marketing faces a bit of an identity crisis at times.
It often gets lumped in with other online business models that do not require as much work or rely on a much narrower set of skills. Most importantly, it should not be considered a passive income model because of how much work goes into continually growing your model.
However, it is a combination of all of these things that make it so much more rewarding when things go right.
We recommend this business model for aspiring online business owners who:
- Have an understanding of how to drive traffic to a site from multiple sources (social media, paid advertising, organic traffic).
- Are able to identify good content online, and find ways to emulate it.
- Have a willingness to keep up with the constantly changing world of SEO.
We hope this doesn’t seem like a tall order. Of course, we also support affiliate marketers who are actively learning about these concepts as they grow their site. Just because you aren’t a master of all of these concepts doesn’t mean that you shouldn’t start – but you should always be willing to learn.
Final Verdict
Business Startup Costs – $2,000 (Website startup & hosting, content sourcing, SEO research)
Business Startup Difficulty – 8/10
Time to Results – 6 months
Ownership – Medium
Profile – Self-motivated jack-of-all-trades. Possesses a eye for good content. Excellent delegator.
2) Amazon FBA
This is an online business model that really came into vogue in the past few years. With anything that reaches a certain level of popularity online, we want you to keep a few things in mind before you get started.
Whenever an online business model becomes super popular, you have to deal with these two factors:
- A lot of competition, imitation, and just plain copying of good niches or strategies
- A lot of bad or unhelpful information is often used to sell informational products, like courses that are “guaranteed” to help you drive traffic and make more money.
The first point we make here isn’t the issue. Competition is a given with methods like affiliate marketing and FBA, which is why we recommend tools that you can use to find the most promising niches that you can monetize.
Finding the Right Information
The tough thing is the constant flow of unhelpful information out there online about these topics. The main reason that a lot of these how-to guides and courses aren’t great is because they are being created purely for SEO value, or purely as a lead magnet to convince you to buy something from the same author.
So, what can be done about this? Our best advice is not to get dismayed if you have difficulty getting started with Amazon FBA, or have a tough time getting your questions answered.
Instead, keep a list of trusted sites to review for content that can help you along your journey. Here are our favorite sources for Amazon FBA and all things online business.
- Niche Pursuits
- Authority Website Income
- Authority Hacker
- BrandBuilders (shameless plug!)
And now back to the main event: filling you in about Amazon FBA!
Fulfilled by Amazon, Sold by You
First of all, FBA stands for Fulfillment by Amazon.
Your responsibility with FBA is to sell a physical product online. From here, you can choose to utilize Amazon’s extensive empire of distribution centers to store the inventory of the product and package and ship it to your customer’s address once it is sold.
This is a solution that Amazon has created to take care of the most tiresome part of e-commerce: getting your product to the customer. Amazon takes a fee for providing this service, which is relatively small and leaves plenty of room for you to make a decent amount from the sale.
Here’s what you need to get started with your Amazon FBA business:
- A product idea in a profitable and uncompetitive niche
- Startup funds to build inventory, start a sellers account and buy your FBA membership
How FBA Works for You
Choosing the correct product(s) is essential to being able to make money using Amazon FBA. This isn’t a business model where you can sell something because you use it yourself and think you can do a good enough job of selling it to others.
Usually, with Amazon FBA, there is some element of arbitrage (defined as taking advantage of a price difference between two markets).
Some ways that Amazon FBA sellers have had success in the past includes:
Retail Arbitrage
- This might be the most common FBA tactic. You can buy large amounts of low-priced items and then sell your products at a marked up “retail price.” Often, this is done by buying products from overseas, or from the clearance section of retailers like Walmart.
Wholesale
- Much like retail arbitrage, this involves buying low-priced goods. However, you will need to buy large amounts of these goods to qualify for the bulk (wholesale) price.
Amazon FBA is relatively beginner-friendly because it doesn’t depend on you having to create a website.
Also, when FBA performs well, it gets very close to achieving the “pie-in-the-sky” goal of online passive income. Many FBA business owners only have to put in a few hours per week to ensure that they have good stock in their product, and that ensures that traffic is being driven to the site.
However, the drawbacks are that your success depends on your supplier. This is an issue of ownership, where your money-earning method is not actually in your hands and can disappear due to events out of your control.
Suppliers are businesses too, and it is common to see them change their policies and cut into your profit margins, or go out of business themselves.
In addition, you are completely at the mercy of Amazon, and whether their policies result in your product being ranked well on their site.
Verdict
Business Startup Costs – $1,000 (Startup fees, inventory, marketing costs)
Business Startup Difficulty – 5/10
Time to Results – 3 months
Ownership – Low
Profile – “Numbers-driven” person who can find small price advantages to make money. Skilled at negotiation. Comfortable with uncertainty and risk; happy to move on from a business idea that becomes unfeasible due to outsider factors.
3) Starting an E-commerce Store
The World is Shopping Online
E-commerce was already on quite the roll when the COVID-19 pandemic struck the world, and since then it has accelerated the global shift away from physical stores by 5 years. This is a big cause for concern for brick and mortar retailers who have a subpar online retail presence.
