I’ve seen a lot of guys who are crushing campaigns, flying high, raking in stacks of cash, and dreaming of neon Lambos.
Their Instagram feed is blowing up with pictures of them lounging on beaches and sipping Mai Tais.
But a lot of affiliate marketing businesses are built on a house of cards. One thing goes wrong and their entire business is suddenly falling apart faster than Ja Rule’s Fyre Festival.
What kinds of things can go wrong?
- An account gets banned on a key traffic source.
- A clutch employee leaves
- They get slammed by a huge, unanticipated tax bill.
- An affiliate network doesn’t pay them, leaving them scrambling and screwed.
I’ve seen guys get completely WRECKED by this kind of stuff. They go from being the Wolf of Wall Street to that dude panhandling on the corner.
But, it’s possible to avoid this. You can learn the key lessons without getting royally screwed.
If you’re going to make it as a big affiliate, you WILL face all these obstacles, and you need to learn how to deal with them. If you don’t, your house of cards will come tumbling down.
Here are 4 risks you’ll face and how to minimize them.
Risk #1: Concentration Risk
In Talladega Nights: The Legend Of Ricky Bobby, Ricky says:
“I sent in my application to The Real World, so I’m hoping to hear back from that. I’m putting a lot of my eggs into that basket, the MTV basket. I’m also thinking about getting a gun, and dealing crack. Being a crack dealer. Not, like, a mean crack dealer, but like… like a nice one.”
It’s a hilarious clip but it makes for terrible affiliate marketing advice. Too many eggs in a basket usually results in catastrophe.
Imagine you’re a YouTuber and your channel gets banned. Suddenly your only source of income dries up and you have to figure out a new way to get cash.
Or imagine that you run an Amazon store and Amazon themselves suddenly begins copying you (which is really happening by the way).
When this kind of thing happens, you’re screwed, and it can happen in affiliate marketing as well.
- You go all in on one traffic sources then that source makes a change or bans you.
- You go all in on a single cpa network, then the network doesn’t pay you.
I know what you’re thinking.
“But Charles, most affiliates say that you need to focus!”
Yeah, that’s true. At the beginning. In order to achieve your breakthrough you need to focus.
But once you hit that breakthrough point, you need to start diversifying your risks. Utilize multiple affiliate-friendly traffic sources so that if one gets shut down, you can tap into others. Work with multiple affiliate networks so that if one hangs you out to dry, you don’t lose all your income.
You need to begin building a team and a system that will allow you to start spreading out the risk.
Imagine if you have one team focused on Facebook, and another team focused on mobile. If something happens to either team, then the other can keep your company afloat.
Learn to spread your risk so you don’t get an abrupt kick in the balls.
Risk #2: Legal Risks
A list of things that I wouldn’t wish on my worse enemies:
- Being forced to watch Nicolas Cage movies on repeat
- Getting tricked into going to a Nickelback concert
- Being sued
The first two things can usually be avoided, but if you don’t know the laws, there’s a good chance you may get sued.
Getting sued sucks.
I’ve seen countless affiliates sued for copyright infringement, not disclosing proper terms, using advertising techniques that are banned, and a bunch of other reasons.
You may be young and not know the laws, but if you get sued it’s your own fault.
And what’s the point of making money if you’re going to lose it all in a lawsuit?
So how do you minimize this risk?
It’s not that complicated.
First, know the laws. Know what’s legal when it comes to paid testimonials, promoting in other countries, fake reports, rebilling, and more. Don’t just hope things are okay. Make sure of it.
Second, hire a lawyer that specializes in internet marketing laws. If someone comes after you, you need someone in your corner who can also throw some punches.
If that lawsuit comes…the judge doesn’t care if “you didn’t know.”
Risk #3: Employee Risks
In the beginning, you’ll probably be a one-man shop, handling all the tasks yourself. But as you grow, you’ll probably need employees to help you scale effectively and maximize your profit.
However, more employees means more risks.
Do you have any KEY employees? People who keep things running like a machine?
What happens when they leave?
Suddenly you’ll be stumbling more than Shaq at a spelling bee.
As much as possible, you need to minimize your employee risks. How?
Build systems that can be replicated. Record videos and document process so that key knowledge doesn’t reside in a single person.
Have your key employee train a “junior” employee. This junior employee should understand, at least a basic level, how to do the job of your key employee in case they leave.
Always be scouting for talent. Constantly keep an eye out for people who might be able to step into your company and add value. If someone leaves, you’ll have ideas regarding replacements.
The worst mistake you can make is thinking…”Oh, John would never leave… he loves it here.”
Maybe they do love it here but someone offers them 25% more pay. Or maybe they just wanna do their own thing. Or maybe they wanna say screw it and move to Thailand.
Always be prepared.
Risk #4: Financial Risks
Remember that scene in Jerry Maguire when Tom Cruise is going crazy and screaming, “Show me the money?”
I think affiliates need someone to scream that at them on a regular basis.
I’ve seen too many affiliates who are completely in the dark when it comes to their numbers. Then when tax season comes around, they’re completely screwed because they have no clue how to pay their taxes.
They either have to pay an enormous amount to the IRS or they get audited by the IRS.
Both of which are a TON of fun.
What’s the solution?
Know. Your. Numbers.
Inside and out. Review them on a weekly basis. Hire an accountant to help you keep things straight. Use Xero.com.
For you advanced guys out there, consider doing cashflow forecasting. You can use a spreadsheet or an app that help you predict how much cash you’ll have in the bank in the upcoming months / years.
If you don’t do this, you WILL get screwed at tax time.
Affiliate Marketing Risk Vs. Reward
There is a lot of really stupid advice out there about taking risks. About going all in regardless of what could happen. About going balls to the wall, consequences be damned.
And, of course, there are always going to be some risks, both in life and affiliate marketing. But taking risks just to feel good about yourself doesn’t usually end well.
Chris Hadfield said, “Just taking risks for risk’s sake, that doesn’t do it for me.”
Thinking in terms of expected value can help you to keep your decision making skills in check.
Taking risks that are worth it and making sure you survive. That’s the key. Minimizing risk where possible so you can make the most money over the longest time.
Remember…making money is easy. Keeping is harder. If you wanna keep your money then learn how to minimize your risks.
That’s the Ngo key to success.
Featured Image by TunedIn61