Business Venture Advice Article:
The Magic of Float
If you've ever received a service today and paid for it in 30 days you've experienced the concept of "float" - the time difference between when you receive a service and when you paid for it. In most cases this time period is a convenience to you as a customer, but in the world of business marketing it can absolutely transform your business. In the last 18 months we've grown our marketing budget at Swapalease.com (the company that owns me) by more than 1000% by simply leveraging the concept of float.
The reason we can grow our marketing budget so actively is because of a whole new breed of on-line marketing tools that allow us to actually make money faster than we spend it. And we're not the only ones. Thousands of companies are taking advantage of new on-line advertising models that are driving millions of qualified buyers to their respective sites on a shoestring budget. Let me explain the models and then we'll get back to leveraging the float.
Google rocks
Yes, they have a $50 billion market cap, but that's not why Google rocks. It's how they got there. Google helped pioneer a concept called "cost per click" (CPC) advertising. Google displays a handful of ads on each of its search results pages. Advertisers only pay for those ads when someone actually clicks on their ad (hence cost per click, get it?). Companies of all sizes have jumped on this incredibly targeted and efficient ad model to drive millions of visitors to their sites, and turn those visitors into cash.
The beauty of cost per click is that you can start small (a Google campaign can start at only $5) and grow your budget over time. More importantly, you can use your credit card to pay for the service. At Swapalease we get thousands of qualified visitors per month that we turn into cash. Then we get a bill at the end of the month which we have 30 days to pay. The time period between when we got a paying customer (and collected our fees) and when we actually paid to acquire the customer is our float, and it makes all the difference.
Google isn't the only company that provides such a great opportunity. Overture, Kanoodle, and FindWhat have nearly identical services that can drive even more traffic to your site and employ the same model. I would recommend that you leverage all of them. Collectively they can drive a massive amount of business to your Web site virtually overnight.
Marketing Shangi-La
Cost per click is just one example of the "buy now, pay later" model. An even better example is "cost per acquisition" (CPA). CPA is the panacea of marketing. Instead of paying publishers for the click, you get the click for free. Only when someone actually makes a purchase do you pay the publisher a commission for that sale. Smart marketers will sign up for this business every day of the week.
Companies like Commission Junction and Dark Blue serve as proxies to connect interested advertisers to publishers looking to make commission revenues. Once again you have the ability to pay your fees by credit card and create a small float between the time you earn cash and the time you write a check.
Your mileage may vary
Each of these models, while wonderful, will only work if you have a business model that can turn site traffic into customers in short order. At Swapalease.com we collect fees immediately when customers visit our site and sign up for our service. This allows us to put money into our bank account faster than we pay it out. Ultimately we have the ability to roll the increased profits into each additional month to aggressively grow our marketing budget. Every business model is different and your mileage may vary.
Grow baby, Grow
You can profitably sustain your business by leveraging these and other on-line models to make money. But just sustaining your business is boring. To really grow your business you'll need to continuously re-invest a portion of the profits each month into your next month's marketing budget. The process works best when you allocate the additional cash into your next month incrementally, reserving a portion of the additional profits for potential mistakes.
Beware, though, there is some risk in doing this. Spending too aggressively before you truly understand what works and what doesn't can absolutely sink you. The best approach is to start small, understand what works, and scale accordingly. The good news is there is enough traffic out there to keep you busy for a long time to come. Now just sit back and watch the checks roll in (boy that would be nice, wouldn't it?)
- Wil
Wil Schroter is a serial entrepreneur, author, and public speaker. Wil has been recognized as U.S. Small Business Person of the Year, twice as the Ernst and Young Entrepreneur of the Year (1999 & 2004), and is a member of the Business First Top 40 under forty. Connect directly with Wil at wschroter@yahoo.com. Visit http://www.goBIGnetwork.com.
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