In a previous blog post entitled There are only 3 ways to grow your business, I listed the 3 types of business-growth strategies that entrepreneurs can consider, and within each of those strategies I listed specific methods to follow through on that business growth strategy.
The first business growth strategy is to replicate your sales funnel. I wrote: “This can be achieved by (1) hiring employees and managing them, (2) franchising your business, or (3) creating an affiliate program. Financial and real estate businesses may find that the first choice (hiring people to help support your practice) is the easiest and clearest option. The other two choices aren’t unheard of in financial and real estate businesses but can be a little more complicated in these highly regulated industries.”
When you build a business, you create a sales funnel. At first, it’s just you doing all the marketing and sales. Over time, though, you can get other people to do some (or all) of that work for you. It just comes down to who you want to get to do the work, what you’ll get them to do, and how the “structure” of your relationship functions.
WHO DOES THE WORK
You can hire employees to do the work for you, you can sell your business model to others, or you can pay a small portion of all sales to the affiliates who referred customers to you.
WHAT YOU’LL GET THEM TO DO
You can piece out all or parts of your sales funnel, depending on the relationship. An employee might be hired because they specialize in a specific aspect of the sales funnel – administration, marketing, sales, whatever. In a franchise model, you pretty much sell your entire sales funnel concept to someone else. And in an affiliate model, they (generally) do the marketing and you (generally) do the sales. (Of course, there are some unique exceptions to these models but I’m speaking in broad terms here).
HOW THE STRUCTURE OF YOUR RELATIONSHIP FUNCTIONS
Each of these methods are structured differently:
- With the employee method, you’re probably going to work closely with them, perhaps holding their hand earlier in the process and (preferably) giving them more responsibility while minimizing your oversight. You pay them an ongoing, pre-specified amount of money and you can expect to get a certain amount of effort or hours in return.
- With a franchise method, you hand over your sales funnel and best practices and receive payment. In some cases, you might also receive ongoing royalties in exchange for providing ongoing support (including marketing and administration support). Depending on the franchise agreement, there is a fair amount of autonomy and unless the franchisee really screws up and bashes your brand, they can do whatever they want.
- With an affiliate method, you can set the parameters of how much you want to pay and what you will allow the affiliate to do. Some affiliates will just drive traffic with a link; others will post their own advertisement or sales page that drives traffic directly to your checkout. You decide what you want to do and what you’ll allow (or disallow).
THE BENEFITS AND DRAWBACKS OF EACH METHOD
Each method comes with its own positive and negative aspects.
- Employee method: This is a good method because it allows you to retain control of the entire process. However, it’s very hands-on (especially in the beginning) and you do incur some additional responsibilities like payroll expenses and management headaches, although you can mitigate some of those concerns through outsourcing.
- Franchise method: This is a good method because it usually means an up-front cash-infusion and you can decide how much continuing focus you need to give to franchisees. However, there is quite a bit of autonomy here so (depending on what you sell) a franchisee can do considerable damage to your brand and reputation.
- Affiliate method: This is a good method because it requires the least amount of up-front work from you and (with the right affiliate) can bring in a considerable amount of revenue. However, you need to spell out very early what your affiliate is and is not allowed to do in order to maintain control over the sale and not disappoint customers. As well, there is a lot of competition for the most effective affiliates so you may end up eating into your profit quite considerably (but some is better than none!).
HOW TO GROW YOUR FINANCIAL OR REAL ESTATE BUSINESS WITH THIS MODEL
A lot of financial and real estate professionals use the employee method and the affiliate method to grow their practices:
- Employee method: Financial advisors and real estate agents will hire an administrative assistant to help them manage the administration of their sales funnel. Later, they may hire a marketing assistant (or outsource their marketing to someone like me). They might also get junior associates to work with them to do some of the legwork, such as research, due diligence, initial customer set-ups, and more.
- Affiliate method: I see this a lot in the real estate industry and I see it used sparingly in the financial industry. Real estate agents will offer some kind of incentive to someone when they refer a customer to them. And, real estate investors use “bird dogs” to find potential investments – and a bird dog is usually an affiliate-style relationship where the bird dog is paid per investment referral. It’s used occasionally in the financial industry among financial advisors (at least in the circle I run in).
The franchise method is also used sometimes, especially at a business level where a brokerage house “franchises” its sales funnel and brand name to individual agents.
STEP-BY-STEP TO GET STARTED
The first thing you need to do is solidify your sales funnel. Regardless of which of the three ways of growing your business with this sales-funnel-replication strategy, you need to have your sales funnel well-defined and nailed down. Doing this will help you to “piece it out” to the employee/franchisee/affiliate. If you don’t nail it down effectively, your employees won’t know what to do, your franchisee will feel like they’ve been ripped off, and your affiliate won’t know how to sell effectively. There are a number of tools on my blog to help you nail down your sales funnel effectively. You might want to start by reading some sales funnel blog posts and downloading my Sales Funnel Quick Reference Guide and Sales Funnel Worksheet.
The next thing you need to do is decide which of the three types of sales-funnel-replication methods you want to choose. Each one has its own opportunities and challenges (which I’ve briefly discussed, above). Deciding which one really comes down to one question: How much return do you want to derive from this effort compared to how much time/attention/energy do you have to give. (There are other considerations, of course, but I think they tend to all feed into this particular question). Obviously, regulatory considerations might be a factor, too.
Start small. You don’t have to jump in with both feet right away. Start small.
- If you are going to use the franchise method, partner up with someone who is interested in getting started in the biz and wants to try it out. Let them know that your goal is to franchise and work with them to figure out what works and what doesn’t. In a sense, they’re getting in on the ground floor of your franchising effort by providing feedback and a testing ground instead of initial payment.
- If you are going to use the affiliate method, set up a referral reward system and let your customers know about it. Test out a few different ideas and see what works. Then go talk to your peers in related industries about the reward of referrals. (For example if you are an investment advisor, go talk to accountants and estate lawyers). Later, you can investigate software that can help you offer affiliate rewards on a larger, automated scale.
If you are going to use the employee method, you don’t have to start by hiring an employee. Test the waters by outsourcing. Go talk to my friends at ContemporaryVA to outsource your administrative assistance or get in touch with me to outsource your marketing. Start small and, if it works and you want to bring it in-house, you can. But by then you have some idea of what works and what doesn’t.
Lastly, test and refine, test and refine, test and refine, test and refine.