Choosing your internet business. What are the traps?

How do you pick a worthwhile online business? There are plenty of legitimate work at home internet business opportunities you can choose from. Many are great earning opportunities. But others are not so good. So how do you decide which ones to promote?

Why not just use a shot-gun approach?

A natural tendency is to promote anything and everything you can find that looks promising. The hope (usually a vain one), is that one or more of them is bound to work for you.

The main problem with blasting at everything in sight is that all the other people who don't have a plan are doing exactly the same. You see, if something looks good to you, a lot of other people probably think so too.

So you face a lot of competition... which means your sign-up rate will likely be slow... so you get discouraged because you are not getting results... so you try yet another hot biz-op. Sound familiar?

You need rules and filters!

You can learn a lot from what large corporations do in the real world. They have all sorts of filters that a  business they are interested in acquiring has to pass through before they decide to purchase it. As we know, that doesn't guarantee success, but it hopefully reduces the chances of doing something really dumb.

Our approach is a fairly simple one, but we think our principles are sound. That makes our choices of biz-ops tend towards the conservative. The questions to ask include:

	Is the product or service truly useful and is it fairly priced?
	Is it a recurring type business eg. an autoresponder service with a monthly fee, or a one-off reseller product such as an ebook or software?
	Can you use the product or service yourself? That can be a win-win situation. It sometimes makes good business sense to pay for tools that improve what you doing. If you can also be a reseller or an affiliate that helps offset your own costs. Often only two or three sales or sign-ups and you are well on the way to recovering your own costs and heading towards profit.
	Is this a popular opportunity, run by a well-known company? If its popular that means more competition from other promoters, so your own results may be slow in coming. But popularity does increase the likelihood that the business will be around for a while. A swarm of promoters will be helping build and grow the business, ensuring its longer term survival. That's in your long-term interest too.
	There is nothing wrong with taking calculated risks from time to time. But that's only if the potential rewards seem worth it and the probability of success looks reasonable. It also adds a bit of fun to life. If it doesn't work out, learn from the experience and just move on.

Read on to find out some things about risk and rewards you may not know...

Risk versus reward

Most people understand that as rewards increase, so do the risks involved. What they don't always appreciate is that the extra reward you get for the extra risk does not, in most cases, keep up. So they get involved with a potentially high return but risky internet business, and because they don't understand the full extent of the business risks involved they lose money. 

In other words, three times the risk does NOT mean you will get three times the reward. You might only get 2 times the reward, or perhaps just 1.5 times,  but your chances of losing money could be 5 times greater.

To put this a little differently - the incremental or extra return you get diminishes as you move higher and higher up the risk scale.

There are all sorts of reason why this is the case and every situation differs so there is no general rule you can apply. That's why insurance companies employ actuaries. 

If you love mathematics or run your own investment portfolio, do a search in your favourite engine on 'risk return relationships' if you want to know more.

High return business opportunities have been the favourite hunting ground of con artists and fraudsters for centuries. The internet enables them to go electronic and potentially reach millions. So thats another risk factor to take into account whenever you see internet businesses that promise high returns.

 Specialize or diversify. Which is best?

We think its better in the long run to diversify the types of businesses you promote rather than stake everything on just one or two particular categories.

You'll notice we said types of businesses. If you are promoting four natural health websites as an affiliate, and that's the only category of business you are involved in, very little diversification is really achieved. It would be 'safer' to promote four different types eg. bookstore, natural health, self improvement, website submission service. These are just examples by the way, we are not suggesting they are categories for you to adopt.

This is where downline builders can play a useful role. By promoting a number of biz-ops under a single umbrella you get some benefits from focusing your promotion efforts towards just the downline website. This gives you one of the advantages of specialization.

At the same time you gain some risk reduction because your efforts also involve a number of different businesses. That's a major benefit from diversifying.

That's the theory.

What is sometimes overlooked is that using a downline builder approach introduces a new risk. You become dependent on the abilities of the downline website owners and operators.

Read more about using downline builders to grow your online business.

 

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