RECOMMENDED: Find the perfect business for you with our Business Ideas Tool.
Affiliate marketing is the art of turning fame into a business. People who have managed to attract an audience are paid to endorse related products or services on their public platform. For example, if a popular nutritionist blogger endorses a new line of supplements.
Who is this business right for?
Affiliate marketing is excellent for a passionate person who enjoys being in the public spotlight. They should be good at promoting brands without coming across as a salesperson. They’ll need to be good at handling questions and potential criticisms from both their fans and the media.
What happens during a typical day at an affiliate marketing business?
Affiliate marketers make their name based on a specific talent or niche, so the majority of their time will be spent concentrating on the skills that have initially attracted their audience (e.g., blogging, YouTube videos, etc.). However affiliate marketing may also include the following:
- Blending product names into their content
- Updating social media for affiliate purposes
- Negotiating payment with business partners
- Finding new affiliate companies to work with
- Ensuring legal compliance of all posts
What is the target market?
Companies with a primarily consumer audience are the biggest market for affiliates, but they're certainly not the only option. Political candidates or other celebrity figures may turn to affiliates for endorsement, as will commercial or private entities that may want to boost their reputation to the public.
How does an affiliate marketing business make money?
The most traditional way an affiliate makes money is by receiving a certain commission or fee each time their partner receives a click or sale. For example, if a blogger mentions Product X’s company in a post, and Product X receives 1,000 click-throughs from the blogger's site to theirs, then the blogger will make a certain amount of money off each click. The amount the blogger will make is based on their following and perceived credibility in their niche. However, some affiliate marketers will choose to be paid a flat rate for dropping the name into the post.
What is the growth potential for an affiliate marketing business?
It may be difficult at first to work your name or cause into the public eye. There are a lot of people (both online and off), who are trying to become public personalities in practically every given industry. However, there are also a number of people who eventually drop out of the public eye or move onto more straightforward endorsement deals. This leaves a vacuum for up-and-comers to edge their way in.
What are some skills and experiences that will help you build a successful affiliate marketing business?
People become successful in affiliate marketing by approaching the problem from a number of different angles. For example, some are great writers while others are comedians or pundits. Some give relatively uncontroversial advice to people via video or blog. Others take a hard stance against a hot button issue in the media to build up their audience.
No matter what, you have to establish trust with their audience before becoming successful at affiliate marketing. The key is to be consistent about your point of view, and to speak to your following without trying to control them.
What are the costs involved in opening an affiliate marketing business?
Costs are relatively low to get started in affiliate marketing, depending on what a person hopes to do. A blog or social media platform are excellent places to get started, and they don’t cost a thing.
What are the steps to start an affiliate marketing business?
Once you're ready to start your affiliate marketing business, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your affiliate marketing business is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your affiliate marketing business keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I find a business mentor?
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting an affiliate marketing business?
Hopeful affiliates may want to try paid advertising if they’re hoping to speed up their influence. While organic content is always better — because you’re building up an audience based purely on your words and talent alone — it will take longer to do. Facebook and Google ads can be expensive, but they’re typically the fastest way to get a new venture off the ground.
Affiliates should utilize cross-channels as a way to build up their audience. For example, having a website following as well as an active email list. People who choose this career path must be relentless about creating content that is unique and eye-catching. But they'll have to do it such a way that doesn't overwhelm or frustrate their audience.
Affiliates should also be careful about who they endorse and why. This is especially true at the beginning when it will seem like the right move to say ‘yes’ to any potential partner. But selling or endorsing a problem just for money will may cause your audience to lose respect for you. The same could be said for selling too many products, or for endorsing a product that has a tarnished reputation.
There are also strict federal rules affiliates must follow regarding disclosure, so you will need to understand the most current FTC regulations to avoid repercussions.
How to promote & market an affiliate marketing business
Most brands will find you as opposed to the other way around. The best way to market this business is by increasing your followers whenever and wherever possible. The more word-of-mouth you generate, the more likely it is that affiliates will start contacting you to sign-off on their products.
You may also want to include a ‘Contact Me’ section of your website that specifically states you’re open to potential endorsements. However, this may send a message to your fans that you’re more interested in making money than you are about them.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Business partners are looking to generate either positive interest or sales. Affiliate marketers will need to develop a style of when and how to mention certain brands in order to maximize their audience's response.
How and when to build a team
Affiliate marketers typically won’t need a team unless they’re extremely popular and juggling several major endorsement deals. In this case, you’ll need to hire assistants who can ensure all legal and business obligations are being met.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate an affiliate marketing business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Maintain Personal Asset Protection
Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
Two of the simplest steps that will protect your business, and yourself, are to:
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
How much can you charge customers?
Kim Kardashian can charge brands $250,000 or more for a single post on Instagram, so it’s clear that companies are willing to pay for affiliate marketing. When you’re first getting started, you can negotiate either a flat fee, a cost-per-click arrangement, or a commission fee. For example, you’ll receive 10% on every sale generated from your posts.
What are the ongoing expenses for an affiliate marketing business?
Most affiliates won’t increase their expenses much as they start to take off in popularity. You may choose to invest in more professional equipment, or to hire people to help manage your business affairs.
How much profit can an affiliate marketing business make?
There are some affiliate marketers pulling in $2 million a year, so it’s clear that affiliates can turn their popularity into a business. However, realistically speaking, most affiliates will make a modest supplementary income until they can fully build up their client base. The biggest income bracket for affiliate marketers in $20,000 or less a year.
How can you make your business more profitable?
Affiliate marketers need to be in the public eye as much as possible. You may want to consider public engagements, speeches, or a larger website presence to accomplish this goal. You can also consider developing your own line of products to generate additional profits for yourself.