Rather than go into a lot of details about specific skills you need or techniques you can leverage to build your affiliate business, I thought I’d make a slightly different comparison.
So, in this post I’m going to compare the financials involved with running an affiliate business to those you’d need for a “traditional” brick and mortar shop.
If you’re looking to learn how to do affiliate marketing, read this post instead.
The Motivation Behind This Post
There are a couple of reasons that I want to draw this comparison.
Firstly, too many people come to affiliate marketing as a “quick cash route to millions.” They think there’s some magic formula to earn hundreds of thousands of dollars a month, with no investment, in just a few weeks.
That couldn’t be further from the truth. By grounding the reality of a web business with a brick and mortar business, I want to point out that there is huge upside to running an internet company as opposed to a local shop.
I also want to demonstrate that websites need to be treated just like any other business. You’re going to make money from your investment overtime, not overnight.
That said, let’s dive in.
How Many Tires Do You Need To Sell To Be Profitable?
To make this comparison, let’s look a simple question. How many tired do you need to sell to be profitable?
I’ll boil down some of the nitty gritty details, but here’s what you might expect.
Costs of Brick and Mortar
$1,000-3,000 a month to lease a storefront
$10-20 an hour per employee (will usually need minimum 2 employees working)
$100-300 a month for electric, internet, water, etc
Upfront cash for inventory (not a fixed cost but important to consider)
Total: $20,000-30,000 a year, plus upfront inventory costs.
Costs of a Website
$10-15 a year for a domain
$50-60 a year for hosting
optional: a few hundred for educational materials.
Total: Call it $100 a year.
I think you see where this is going.
Let’s assume that your average tire sells for $100 and your store has a 50% net margin. That means you earn $50 for every tire sold.
For an affiliate, your net margin (aka: commission) is going to be lower, perhaps 8-10%. So, to keep the math simple, let’s say you earn $10 per tire sold.
How many tires do you need to sell to break even?
Brick and mortar: 4,000-6,000 tires a year.
Website: 10 tires a year.
Which business would you rather be in?