- Jan 25, 2010
- 1,544
- 983
Six Figure LeadGen Part IV: Business Models
First of all, if you have not already I suggest starting with reading Part I, Part II and Part III of my LeadGen series. They were
meant (loosely) to be read in order to fully understand the model and system.
[FONT=&]Part I: http://www.blackhatworld.com/blackha...selection.html[/FONT]
[FONT=&]Part II: http://www.blackhatworld.com/blackha...giveaways.html[/FONT]
[FONT=&]Part III: http://www.blackhatworld.com/blackhat-seo/making-money/490417-part-iii-6-figure-lead-gen-biz-even-more-lead-gen-methods-examples.html[/FONT]
Now, onto the business models. These vary highly in complexity and income potential. I do have my preference but which is right
for you will depend highly on your personal skill sets, legal and regulatory restrictions where you reside, and income goals.
1. Run of the Mill Lead Sales:
The simplest of models. You own your own sites, landers, PPC/CPV and media campaigns outright. Leads generated through your
marketing techniques are sold to individual companies/agents for a flat rate that is typically based on the following:
- Niche
- GEO
- Age of lead
- Data fields included
- Exclusive, Semi-exclusive, or Non-Exclusive
The Good:
- Get paid in advance for campaigns
- You are solely in control of the business and own your own data
- Depending on contracts, data collected can be used by you for backend promotions
The Bad:
- Dealing with multiple clients
- Client invoicing and tracking (collection in some cases)
- Limited income potential per lead
2. Rev Share Deals
You build your own sites, retain ownership of all proprietary data and assets. Leads are provided up front at no cost to agents/companies.
Payment for leads is contingent upon a lead ?closing? and a sale being made. Typically you would want to negotiate a tiered system and
a performance chart detailing payment per item sold and also an increasing commission structure as volume of sales reaches certain benchmarks.
The Good:
- Potential for recurring/residual income deals
- Better opportunity for increased value per lead
- Can kill lead flow and traffic for non paying clients
- Large deals may warrant branding of sites/landers to customize marketing campaigns thus resulting in a higher ?close rate?
and conversion of visitor to lead.
The Bad:
- Relies on performance of the agent or sales team
- Payments are more sporadic and revenue can go up and down
- Payments are NOT in advance and you front initial costs
- Trust factor and tracking leads to close
- Legalities/regulations may be a limiting factor
3. Hybrid Model
Ok, this model is really only worth it when one or more of 3 things happen:
a. You have large lead volume and quality in a niche where you would bank HARD if it were not for regulations
restricting you from ?rev share.?
b. You have an existing contract with a killer sales team in a niche and want a bigger piece of the pie.
c. You want to upgrade from a local deal to a district, regional or national deal in a highly regulated niche where ?creative? contracts
might not be the best route if you plan on expanding and specializing.
If any of the above apply to your situation you may want to get licensed as a broker in a given industry. Take real estate for example.
You can get your brokers license (not agent but brokers) in xx months and for minimal cost. This often allows you (depending on the industry)
to structure any kind of a rev share deal you want, hire your own sales teams or agents ?in-house? OR develop a real ?partnership? with an existing
agency as an ?in house? marketing team for a percent of the profits. You also may option to form a wholly new company in which you handle
marketing and the broker handles the rest of the business as they were before you came along.
*I did this in the insurance industry (life and health) years back
The Good:
- Astronomically higher conversion rates
- Highest revenue potential
- Greater control
- Possible tax benefits
- Specialization typically leads to cost reduction and better efficiency
The Bad:
- Higher risk (payroll, industry swings, liability, insurance, etc)
- Jointly owning property (intellectual and real)
- Cash flow and profitability can fluctuate
- Often limited geographically
- An ?Exit Strategy? may be harder to execute
Where to start?
My suggestion is to take inventory of your abilities, skill set and aspirations as well as any compliance and regulatory restrictions in
your given industry. For most if usually makes sense to start with model #1 and work your way up from there. It?s the least risky, and less
financially intensive to start with.
The Million Dollar End Game:
The aforementioned business models are simply a means to an end. In all business ventures I look for a few key things:
a. ROI (can I get good enough margins)
b. Liquidity/Demand (can I sell the item/service thru multiple channels and to multiple people/entities)
c. Ability to Automate (software or by hiring it out)
d. End Game (Sell out, License for a royalty, etc)
YOUR GOAL IS TO BUILD AN ASSET THAT CAN BE SOLD!!!
Let?s take a look at what I?m talking about?..Markets that I suggested people target in my earlier threads (Part I-III) outline
industries that are sales driven, lead hungry, and know the value of each lead as well as the lifetime value of each closed sale/client.
Think: Real Estate, mortgages, investment, insurance, law, business solutions, etc
We are talking about niches where individual businesses are spending 5 figures or more per day in Adwords for a ?click? not even a lead.
Go see how much a click goes for in those niches. Now how many clicks does it take to get a lead? Start doing the math and you?ll
begin to realize the value of the model.
Real World Example:
A recent client of mine is a gold investment broker. His average cost per click on Adwords is $8-$14 per CLICK depending on his keyword.
Let?s be conservative and say he gets clicks for $9.00. Let?s also PRESUME he gets a 5% close rate to an actual lead form submission.
100 clicks = $900.00 and 5 leads
His close rate is 15% on new leads, with each deal brining in $4000 minimum (up to $15k+)
If I bring him even 30 leads a month
30 x 15% = 4.5 sales
4.5 x $4000 commission = $18,000
This means my marketing campaign + landers + sites etc is worth on average $18,000 per month being CONSERVATIVE.
This little 30 lead per month setup is worth: $216,000/yr
My goal then is to SELL this asset for x-xx month?s worth to the client. I might even place a contingency that I be hired on after
purchase to ?maintain? the system for an extra kickback of 5% of net commissions for example.
The point is, in these niches dropping that kind of money for an ?in house? lead gen system is chump change and the right buyers won?t even flinch.
Now, I don?t mean to paint this as a ?easy? scenario. You?ll need good leads, consistent sources plus some backups for market fluctuations
(even if you have to have other lead brokers as a last resort to buy from), and making these kinds of deals is not a cakewalk. But if you provide
quality, consistency and have a legit track record these things become easier and easier.
Start small, fail, learn, reinvest in yourself and the biz?..and keep the end game in mind as the destination.
Advice on Preparing for the End Game:
*Keeping in mind the goal is to sell the assets
a. Focus on making transfer to a new owner simple
- Godaddy (I know we hate them but transferring is easy as pie)
- New autoresponder acct for each set of campaigns
- New G-analytics or other analytic acct for each set of campaigns
b. Maintain whitehat practices (SEO and otherwise)
c. Consistent color schemes and branding as well as clean and professional site designs.
d. Wordpress or custom CMS are favorable
- Reduces ongoing costs and headache for non-tech savvy buyers
e. Always use contracts, always have them attorney reviewed/drafted, and ALWAYS use Escrow or another form of protection
before blindly transferring assets.
First of all, if you have not already I suggest starting with reading Part I, Part II and Part III of my LeadGen series. They were
meant (loosely) to be read in order to fully understand the model and system.
[FONT=&]Part I: http://www.blackhatworld.com/blackha...selection.html[/FONT]
[FONT=&]Part II: http://www.blackhatworld.com/blackha...giveaways.html[/FONT]
[FONT=&]Part III: http://www.blackhatworld.com/blackhat-seo/making-money/490417-part-iii-6-figure-lead-gen-biz-even-more-lead-gen-methods-examples.html[/FONT]
Now, onto the business models. These vary highly in complexity and income potential. I do have my preference but which is right
for you will depend highly on your personal skill sets, legal and regulatory restrictions where you reside, and income goals.
1. Run of the Mill Lead Sales:
The simplest of models. You own your own sites, landers, PPC/CPV and media campaigns outright. Leads generated through your
marketing techniques are sold to individual companies/agents for a flat rate that is typically based on the following:
- Niche
- GEO
- Age of lead
- Data fields included
- Exclusive, Semi-exclusive, or Non-Exclusive
The Good:
- Get paid in advance for campaigns
- You are solely in control of the business and own your own data
- Depending on contracts, data collected can be used by you for backend promotions
The Bad:
- Dealing with multiple clients
- Client invoicing and tracking (collection in some cases)
- Limited income potential per lead
2. Rev Share Deals
You build your own sites, retain ownership of all proprietary data and assets. Leads are provided up front at no cost to agents/companies.
Payment for leads is contingent upon a lead ?closing? and a sale being made. Typically you would want to negotiate a tiered system and
a performance chart detailing payment per item sold and also an increasing commission structure as volume of sales reaches certain benchmarks.
The Good:
- Potential for recurring/residual income deals
- Better opportunity for increased value per lead
- Can kill lead flow and traffic for non paying clients
- Large deals may warrant branding of sites/landers to customize marketing campaigns thus resulting in a higher ?close rate?
and conversion of visitor to lead.
The Bad:
- Relies on performance of the agent or sales team
- Payments are more sporadic and revenue can go up and down
- Payments are NOT in advance and you front initial costs
- Trust factor and tracking leads to close
- Legalities/regulations may be a limiting factor
3. Hybrid Model
Ok, this model is really only worth it when one or more of 3 things happen:
a. You have large lead volume and quality in a niche where you would bank HARD if it were not for regulations
restricting you from ?rev share.?
b. You have an existing contract with a killer sales team in a niche and want a bigger piece of the pie.
c. You want to upgrade from a local deal to a district, regional or national deal in a highly regulated niche where ?creative? contracts
might not be the best route if you plan on expanding and specializing.
If any of the above apply to your situation you may want to get licensed as a broker in a given industry. Take real estate for example.
You can get your brokers license (not agent but brokers) in xx months and for minimal cost. This often allows you (depending on the industry)
to structure any kind of a rev share deal you want, hire your own sales teams or agents ?in-house? OR develop a real ?partnership? with an existing
agency as an ?in house? marketing team for a percent of the profits. You also may option to form a wholly new company in which you handle
marketing and the broker handles the rest of the business as they were before you came along.
*I did this in the insurance industry (life and health) years back
The Good:
- Astronomically higher conversion rates
- Highest revenue potential
- Greater control
- Possible tax benefits
- Specialization typically leads to cost reduction and better efficiency
The Bad:
- Higher risk (payroll, industry swings, liability, insurance, etc)
- Jointly owning property (intellectual and real)
- Cash flow and profitability can fluctuate
- Often limited geographically
- An ?Exit Strategy? may be harder to execute
Where to start?
My suggestion is to take inventory of your abilities, skill set and aspirations as well as any compliance and regulatory restrictions in
your given industry. For most if usually makes sense to start with model #1 and work your way up from there. It?s the least risky, and less
financially intensive to start with.
The Million Dollar End Game:
The aforementioned business models are simply a means to an end. In all business ventures I look for a few key things:
a. ROI (can I get good enough margins)
b. Liquidity/Demand (can I sell the item/service thru multiple channels and to multiple people/entities)
c. Ability to Automate (software or by hiring it out)
d. End Game (Sell out, License for a royalty, etc)
YOUR GOAL IS TO BUILD AN ASSET THAT CAN BE SOLD!!!
Let?s take a look at what I?m talking about?..Markets that I suggested people target in my earlier threads (Part I-III) outline
industries that are sales driven, lead hungry, and know the value of each lead as well as the lifetime value of each closed sale/client.
Think: Real Estate, mortgages, investment, insurance, law, business solutions, etc
We are talking about niches where individual businesses are spending 5 figures or more per day in Adwords for a ?click? not even a lead.
Go see how much a click goes for in those niches. Now how many clicks does it take to get a lead? Start doing the math and you?ll
begin to realize the value of the model.
Real World Example:
A recent client of mine is a gold investment broker. His average cost per click on Adwords is $8-$14 per CLICK depending on his keyword.
Let?s be conservative and say he gets clicks for $9.00. Let?s also PRESUME he gets a 5% close rate to an actual lead form submission.
100 clicks = $900.00 and 5 leads
His close rate is 15% on new leads, with each deal brining in $4000 minimum (up to $15k+)
If I bring him even 30 leads a month
30 x 15% = 4.5 sales
4.5 x $4000 commission = $18,000
This means my marketing campaign + landers + sites etc is worth on average $18,000 per month being CONSERVATIVE.
This little 30 lead per month setup is worth: $216,000/yr
My goal then is to SELL this asset for x-xx month?s worth to the client. I might even place a contingency that I be hired on after
purchase to ?maintain? the system for an extra kickback of 5% of net commissions for example.
The point is, in these niches dropping that kind of money for an ?in house? lead gen system is chump change and the right buyers won?t even flinch.
Now, I don?t mean to paint this as a ?easy? scenario. You?ll need good leads, consistent sources plus some backups for market fluctuations
(even if you have to have other lead brokers as a last resort to buy from), and making these kinds of deals is not a cakewalk. But if you provide
quality, consistency and have a legit track record these things become easier and easier.
Start small, fail, learn, reinvest in yourself and the biz?..and keep the end game in mind as the destination.
Advice on Preparing for the End Game:
*Keeping in mind the goal is to sell the assets
a. Focus on making transfer to a new owner simple
- Godaddy (I know we hate them but transferring is easy as pie)
- New autoresponder acct for each set of campaigns
- New G-analytics or other analytic acct for each set of campaigns
b. Maintain whitehat practices (SEO and otherwise)
c. Consistent color schemes and branding as well as clean and professional site designs.
d. Wordpress or custom CMS are favorable
- Reduces ongoing costs and headache for non-tech savvy buyers
e. Always use contracts, always have them attorney reviewed/drafted, and ALWAYS use Escrow or another form of protection
before blindly transferring assets.
