You Think Too Big And It Is Hurting Your Business: Why Gary Vaynerchuk Was Wrong

If you never had the chance yet to read Gary V's crush it book, I definitely recommend it. In fact, if you ask me privately I have tons of copies of it and I am willing to give you one for free.

Gary took his father's liquor store and turned it from a $4 million dollar business into a $50 million dollar business.

The biggest lesson I got out of his very quick read was this: When you are a self-employed entrepreneur you are going to work harder and you are going to work more hours than someone who has a day job.  It doesn't matter, if you are going to be doing something that is fun that excites you to get out of bed in the morning.

Gary talks a lot about getting noticed by the big media companies on social media like twitter, facebook and you-tube.  I think a lot of marketers take that advice too far, especially when pursuing the getting bought out model.

In case you weren't paying attention during the first dot com boom of the late 90's and early 2000's.  The idea is that you mass tons and tons of users get tons of market penetration while breaking even or even losing money, in the hopes that some big company will buy you out for $100 million dollars.

You-tube lost money for years even after they were bought out by Google, until recently.  Facebook lost money until it partnered with Microsoft and started displaying ads.  MySpace lost money until it was bought out by Rupert Murdock, and the list goes on.

Chances Are: You Won't Get Bought Out By Someone Else!

You can't count on that payday. If you are already making millions of dollars a year and can afford to lose money for years and years, that's fine.  Ignore my advice.

If you are trying to make a living, and build a business you need to make some kind of profit.  It is NOT evil to make money! Although people like Gary V. have enough money to think big, you are still starting out and you need to think small.

When you pay $20 dollars for advertising, just try to get $20 dollars back.  On a regular basis, I will post form offers or create pay per click campaigns for load to your products to make some of the money back, and to attract affiliates, and to get a few extra leads.

If I spend $20 dollars to promote a free offer, and I get 20 opt ins out of that promotion, I know I have made my money back.  I know I get more than $1 dollar per subscriber on my list.

When I find affiliates, I have no problem giving them bulk of my profits. I pay 60% commission to my affiliates with lifetime tagging.

I know a lot of people who offer 100% commission on the front end, and 0% on the back end.  What does this mean? It means that you might have a report selling for $20 dollars that up-sells people to a certain course for $100 dollars.  You have a $20 dollar front end, $100 dollar back end.

When an affiliate promotes that $20 dollar product, if it makes a sale they get all the $20 dollars and none of the $100 dollars.  What I do instead is give 60% of both.  That means if they make a sale at $20 dollars, I will give them 60% or $12 dollars of the $20.  When somebody then buys the $100 dollar product, I will give the affiliate $60 dollars of that as well.

Again, I don't mind giving away that high commission because I would not have made that sale without that affiliate.

Affiliate Sales Are Just "Extra!"

Even if you do want to get yourself bought out some day, you need to show some kind of earnings potential.  You-tube, and facebook, and twitter can easily sell because they've massed  millions of users.  Just in case you don't make it to the millions of users, try to monetize the few number of people you have.  That way you will find it easier to devote the time to a site that is making money versus a site that might make money sometime in the future.

I do agree with most of what Gary says. I don't want you to repeat the same mistakes made during the dot com bust, which was losing money for years in exchange for users.  You don't have to give away everything for free.  Your knowledge and your services are worth something.  You are just going to have to trust me on this.

Do you agree or disagree with what I had to say today? Leave me a comment below right now giving me your quick and honest opinions.

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Comments (10)

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  1. I think you are so very right, again.
    Spoiling affiliates makes them even more motivated to make a greater effort in providing you with more customers. Money talks, and that is a sure way to keep people interested with partnering with you.

    So of course we agree.

  2. Dave Doolin says:

    To Gary’s credit, he adamant that following one’s passion may not make someone super rich, but he claims that it should be possible to build a business that provides a comfortable income, e.g., $50k+/yr if I recall correctly. That’s one reason I’m a fan.

    Didn’t know you passed through affiliate percentages. Cool. Currently recommending your stuff to clients.

  3. HelenRappy says:

    I loved the crush it book and found some great insights. I think there is a balance between thinking big and thinking small. I am inspired by a big vision and then I look at the small goals that will get me there. Every now and then I like to add an outrageous goal just to keep it exciting and to keep my vision moving forward.

    I agree it is great to take care of your affiliates. There is a lot of competition out there and your affiliates have choices about who they want to represent and who they want to promote. I certainly will not go out of my way for somebody who makes it difficult to become an affiliate, or doesn’t acknowledge the effort with green thank you’s!!

    Thank you for your ideas!

  4. Andrew says:

    I don’t have much to add here apart from: Until you have a product or service that people will pay money for you are wasting your time building a list IMO and recruiting affiliates.

    The biggest problem for people reading this blog is “What is my product”?

    Outside of the IM niche, their product will be based on their area of expertise such as how to groom a dog to win prizes in a competition, or how to profit from mowing lawns, how to survive a plane crash etc.

  5. remco says:

    The problem is though, how do you get that 1st affiliate ??

  6. I haven’t read crush it – yet. I agree it is not a smart strategy to build a business with the hopes of getting bought out. The few successes get all the press. The failures go unnoticed because no one noticed. It is a very risky proposition. And consider this – what would their payday have been if they were making money?

  7. Especially if you’re starting out small, Return on Investment is the name of the game. I like your take on how you view your affiliates and what they contribute to customer acquisition. And not all product owners who offer an affiliate program feel that way! You’re the first person I’ve met who offers 60% in commissions and that’s because you have a knack for seeing the bigger picture and, obviously, see the value affiliates can add to your business.


  8. Gavin Allinson says:

    I agree forget about the getting bought out model

    offer a real service to real clients to begin with

  9. Thomas says:

    Didn’t even know of Gary’s Book Crush It! Thank you for the heads up about a good business Book.
    Every business that I have started (over the years)took more hours than were available in the day and every woman that I was with told me that I was nuts and that it is not worth spending so much time on. I disagree as the rewards far out weigh the time spent. Personal opinion that is.
    The commission structure that you follow is one that most people are unaware of and is common place in corporate America. Just one of the products that I sold years ago at the largest (at that time) flea markets in the USA, was Christmas Cards which I bought from the manufacture for 60% off and then 50% off of that. The down side was that I didn’t get anything if the customer went to the source to get their cards. You are offering a straight 60% life time, that is GOLD, in them thar sales.
    And the idea that someone would buy out one of my sites, well let’s say, hmmmmm just maybe. That would be sometime down the road.

  10. Britt Malka says:

    I agree with you, but except for some minor sites, I wouldn’t even want to get bought out.

    I also agree with your affiliate structure. I use 50%/50%, but that’s because of the system, I use (RAP), and it’s easier to give the affiliate his money directly to his PayPal account.

    Too many companies are too stingy and offer 5%-30% to affiliates. They have not realized that it’s better to get 40-50 percent of something than 95% of nothing.

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