Transition to high volume/high spend (16)
Hey guys just a quick question for anyone who is running high volume or high ad spend. How did you make the transition cash-flow wise? Was it more of a deal where you just ran smaller volume until you had enough cash on hand and fast enough payouts to afford $100k+ (or whatever) a month in ad spend? Or did you incorporate and get business credit? Something else?
I'm really interested in running high volume for a number of reasons, and am looking at the smartest way to go about it.
When I got started back in 2009, the margins were so juicy that you could run small volume and quickly double your money once, twice, three times...
These days, with lower margins (in general), you have to be smart about where and how you run your traffic.
Focus on 1 or 2 trustworthy networks. Make sure you're getting paid weekly and sacrifice profitable campaigns where necessary to ensure maximum capital is going towards the campaigns with the healthiest margins.
You could take out lines of credit, but in an industry of few guarantees, that is always going to be a risk. You shouldn't take it lightly.
Either way, you'll definitely want to incorporate.
Originally Posted by Finch
I can't speak about new affiliates but when I started and doing PPV it wasn't unusual to spend $50 and make $300-$400 back.
That combined with weekly payments helped me reach a point where cash flow wasn't an issue anymore.
These days I suggest you start with a decent budget and focus on high margin campaigns but maybe low volume.
Build your cashflow and expand from there. I think debt is a very bad idea, especially knowing how unstable affiliate marketing can be.
If you are doing affiliate marketing, financing it through loans is generally a bad idea. The revenue and cash flow is just too volatile and unpredictable to finance operations through debt.
This even applies for credit cards as well. Credit cards should not actually be used for obtaining credit. That is probably one of the most foolish things you can do. They should be used almost as you would use a debit card, namely to spend cash you ALREADY have, and not to get a short term loan. This doesn't matter if the credit card is reward card/frequent flyer card. No amount of free stays at the Gritti Palace is worth taking up debt at 29 percent interest.
The best way is to prove yourself to someone that's already successful and form a JV with them.
I have a great partnership structured with someone I trust where I work on campaigns using his credit cards and he receives all wire transfers from networks. Afterwards he sends me my percentage.
I structured it this way to reduce risk on his end. If he backstabs me and keeps my share, he loses out on a profitable partner and long-term relationship. If I screw him over, he's never lost cash out of the deal.
What if you are already on weeklies and have a very profitable campaign on your hands. Is it THAT foolish to use credit cards to scale just for a week or so? (after your cash reserve is gone)
Originally Posted by ims2014
Of course not.... Keyword being ALREADY PROFITABLE...
Originally Posted by ims2014
But if you do see a risk in NOT being able to do so, you need to be fully aware that credit card debt is a very expensive source of financing. If you can't pay it off, your "enormously profitable campaign" can quickly turn into the most expensive campaign you have ever run.
Incurring 39% interest on a $150K credit bill means that in 2 years, you will owe almost $300,000. If you were the CEO of a company, and you ever took on company debt at 39%, you would be fired immediately by your board and sued to oblivion by your shareholders.
Credit card companies (when run properly) are enormously profitable ventures, partly because so many financially unsophisticated people think that it is just easy play money.
There is a reason why Mastercard's stock chart looks like this.
On a related note, even if you know absolutely NOTHING about finance, the one thing you should learn is the rule of 72.
The Rule of 72 is a very easy way to estimate in your head how long it will take to for your debt to double based on a given fixed interest rate, assuming the interest is annually compounded. Simply divide the number 72 by the percentage rate you are paying on your debt, and the answer will give a good approximation of the number of years it will take for that debt to double.
CM, can you write a book of just lessons and worldly advice? You've got my $25.99 ($14.99 for kindle version)
seriously cmdeal is bomb!
Thanks for the replies guys and yes credit is something that I have always been wary of in this industry. Back in 2009-2010 when I was first working with Adwords I considered it for a time to alleviate some of the cashflow issues I had but ended up passing. I have much the same opinion today, in fact I have never carried a balance on either of my personal cards haha.
Also super high ROIs have never been a real priority for me, to be honest if I get to the 20%~30% range I consider that a winner if I have the ability to scale. Of course you always want to be improving, but as long as I can throw more clicks at it I will let it run and work the advertiser for a better backend.
Right now I have some other business partners who are always looking for more avenues of expansion so I think going the JV route makes the most sense at this point. What percentage of your profits do you guys typically roll back into the business and how much do you keep?
Originally Posted by t0mmy
What is much more important is your sustainable risk adjusted profit and sustainable risk adjusted profit growth.
I would much rather have 10% ROI on a sustainable, low risk profit of $1000 a day growing at 20% per year, than one campaign that generates 99,999% ROI but a profit of just $100 on a very risky campaign and no forward visibility.
almost all networks have me on 48 hour payments (wire). Amp up your volume, I dont see why anyone wouldnt give you this..
This is very simple. Partner with the right network. We pay people as fast as dailies if the quality and volume is there. The networks have the ability to cash flow the whole thing and that's one of the value of working with them. They can help with both cash flow and risk.
We have even had affiliates that have introduced us to their advertisers to carry the float so they could scale.
If you work with a good network/networks they should take care of you.
My first profitable campaign was with a company with really strict payouts (45 days... traffic I earned in December got paid out in mid February). It wasn't one of the standard affiliate companies, it was an Australian one that absolutely did not do early payments.
I'm not going to lie, I took the risk. I applied for like six credit cards, got approved for three and maxed them all out, then maxed out every single on of my husband's credit cards, and when I got that first payment for $20k I paid them all off and had enough left over to cover my cash flow until the next few months of payments came in.
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