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I created my blog, I Will Teach You to Be Rich, in my Stanford dorm room.
It started as a way to get my lazy friends to stop overspending and getting hit with overdraft fees every month. It was nothing more than a fun side project.
Then, I grew to selling a few products. First, a $4.95 ebook that made some sales — enough to give me some extra spending money each month.
Now, I have over 18 products and systems set up so that my website continues to make money around the clock. I can be on vacation, out to lunch with friends, or even sleeping and money will be coming into my inbox.
This gives me total freedom.
Yes, I still work. It just doesn’t feel like “work” because I’ve built my business around things I enjoy and am good at. And you can do the same thing.
Lots of options here. Should you start a drop-shipping company? Software? Etsy? Online courses?
How do you know which is best?
Your 6 options for starting an online business: Software (including apps), physical products, ads, affiliate marketing, coaching, and online courses.
Some give you huge profit margins, take minimal time, and scale easily. Others require a lot of time, overhead costs, and are difficult to grow.
I’ve tested them all, so let’s walk through them real quick. Then you can decide which model is right for you.
What do you notice about this illustration?
Using this simple framework, you see at a glance if an online business model is attractive or unattractive (most people never do this).
Let me walk you through each one.
The most common online business model is ads. Almost all of us have seen these. They’re little advertisements — usually Google AdSense — on the sidebars of a website.
Here’s how they work: as you get traffic, some people will click those ads. When they do, you get a few cents, or even a few dollars per click.
I tried this for IWillTeachYouToBeRich.com. But I quickly realized ads don’t make that much money. In fact, what I learned was that you need a huge amount of visitors, like 50 million visitors — or more — per month, to make a good income from ads. That’s a lot of traffic.
Back when I started in 2004, I decided, “If I can’t cover my rent with ads, why bother?” They’re ugly and distracting. Plus, I’ll end up spending more time optimizing the click-through rate on the ads than actually writing great content. So after trying that experiment for a little while, I checked the box and said I wasn’t interested in that business model.
If you have the skills to create new software, then this can be a tempting option. The media loves to tell us stories about hot new Silicon Valley startups and the founders of tech companies who cashed out for millions after their company went public. So we think starting an online business means doing something similar.
And yes, you could quit your job, seek venture funding, and spend the next few years trying to build the next Instagram.
But let’s face it, for most of us, this isn’t a viable option. We’re not programmers. We can’t code. And we’d rather stab ourselves with an ice pick than try to learn any of that technical stuff (at least I would).
And even if you can code, do you really want to deal with the never-ending challenge of patching and upgrading your app?
Luckily, there are other options out there. You don’t need to create the next Candy Crush to have a successful online business. You don’t even need any technical or computer skills for the other online business models I’m about to show you.
I’m wary of this business model because the profit margins are terrifyingly low.
Just to give you an example, we have a notepad that our designers created internally for I Will Teach staff. We would have had to price it at around $50 — for a teeny little notepad — just to break even if we wanted to sell it. And after we shipped it to people, our profit margin would have disappeared.
I know there’s some money to be made in this space. But I prefer the profit margins offered by online products.
With online products, the costs are lower, the profit margin is higher, and it’s much easier to scale. Physical products just introduce so many variables and costs that I’m not interested in them.
Here’s an example of how affiliates work: A blogger will write a review of “My favorite credit cards,” and at the bottom they’ll say, “You can sign up for the card here — NOTE: this is an affiliate link.”
If you click that link and sign up, the credit card company is going to pay that blogger an affiliate commission. Sometimes it’ll be $50 or $75.
Over time, that can add up to a lot of money. And there are affiliate programs for everything — from audiobooks to weight loss products.
For a long time, I avoided affiliates because I didn’t want people to think I was recommending stuff just to make money. I only wanted to recommend the best products.
But eventually I realized that my readers trusted me, they were already going to sign up for the accounts I was recommending anyways. So I decided to try putting an affiliate link in with one of my recommendations.
When I did — virtually overnight — I became ING Direct’s number one affiliate in the world. I was making more than $10,000 a month — just by putting a link on my site.
But I soon learned this wasn’t a great long-term plan. My click-through rates tailed off and I ended up having to spend all this time dealing with advertisers.
In the end, I realized it wasn’t worth the time, so I stopped.
Now, my favorite online business model: selling something you create. Typically, these are information products, like a video course.
You can create a video or written course that sells for $49 fairly quickly. But more expensive, high-end ones take a lot longer. For example, when we built Dream Job, we spent months on research, outlines, testing, creation, and design.
Online courses are low-risk, high-reward, and scale very well. You can use them to reach thousands of people all over the world. It’s become the crux of our business and now we generate over 95% of our revenue through our own products. I can’t recommend it enough.
One of the fastest ways to start earning money from your online business is to offer coaching.
This comes as a surprise to a lot of my students. They join my program looking to create an online information product. But as they build their email list, people message them saying: “Hey, I love what you do. Do you offer coaching?”
There are a few great reasons to take them up on this offer:
You don’t have to build anything or have a big audience to get started with coaching, and you can earn money quickly, while online courses let you earn revenue automatically and impact a broad audience.
If you can’t choose, do both.
You don’t have to quit your job and raise millions in venture capital funding (which I’ve done as well…and I can tell you I love GrowthLab way more).
Here are some examples of how an online business might look:
There are tons of new business ideas surrounding you every day. In fact, you might be surprised when you see how many people will pay for the oddball skills and interests you already have.
I’ll prove it.
Here are 3 unique (yet successful) business ideas that you can use for inspiration to launch an online business of your own.
(Yes, he actually makes money online with this strange and ridiculously specific idea.)
About the business: The name pretty much sums up the business: This guy, Steve Gadlin, hand draws pictures of cats (fat, small, wearing hats, tap-dancing, etc.), posts them online, and then sells them to people all over the world. He came up with this idea just for fun. But what started as a hobby quickly turned into a real business with real revenues, almost overnight.
Results: drawing cats = getting paid
He sold more than 18,794 of these simple drawings in 5 years, before closing the site down to start other wacky businesses. Just before he closed up shop, his cat drawings were selling for as much as $29.50 each. Turns out, those “silly” drawings generated some pretty serious revenues with hundreds of thousands of dollars in sales. He also managed to get a $25,000 investment out of billionaire Mark Cuban on “Shark Tank.” All that from taking his vague idea for a fun business and seeing if anyone would pay him for it.
The takeaway: You can use the skills you already have (as weird as they may be) to start a new business.
A brief history of language “hacking”
Benny Lewis spent years struggling to learn a second language, and it was really frustrating for him. Despite taking language courses and trying to learn on his own, nothing seemed to stick.
Then, one day he came up with a strategy that helped him learn Spanish in 6 months. At first he thought it was a fluke, but then he did the same thing, only faster, with Italian, French, German, Portuguese, Esperanto, Mandarin Chinese, Dutch, and Irish.
Now he teaches people how to do the same through his online courses and workshops.
Results: an entirely new world with new opportunities
Even though he’s not a credentialed expert, Benny has become a thought leader in the language learning space. His site and advice have been featured in The New York Times, National Geographic, The 4-Hour Workweek, Business Insider, and Forbes. He was even invited to give a TEDx talk on language hacking.
Remember, he started as someone who couldn’t even speak a second language. But now, he’s built a platform to make an amazing impact all over the world.
The takeaway: You don’t need any advanced degrees or “credentials” to start an online business. You just need to deliver results.
Think about it. If you’re in the market for a personal trainer, do you walk around saying, “I really need someone who’s NASM and CPT certified”? Of course not!
You want someone who can help you lose those last 10 pounds or get back into your high school jeans. In other words, you want someone with proven results over the credentialed expert.
From vague idea to real online business
Felicia always had a passion for communications, sales, client work, and writing, but she didn’t know how to combine these vague passions into a real business.
She started by working with women on their communication skills and writing, but quickly realized she had a knack for coaching. She eventually started teaching those skills online, and it turned out to be a really good way to make an income for her.
Results: earning more money, while working less
Felicia isn’t an “expert” in her field, she simply teaches people social skills and charisma from what she’s learned through years of personal trial and error. But she now earns up to $10,000 a month with her online business, while working only 30 hours a week.
The takeaway: You’re already good at something, you just have to find what it is.
It would have been easy for Felicia to give up because she didn’t know how to turn the things she really enjoyed and the things she was good at into a real business.
But she kept digging to find 1) what she LOVED to do and 2) what people would pay her for. You can do that too with any skills you have. See more on how she built her business here.
I’ve got 30 more examples of successful online businesses in this free guide. You’ll quickly see that no matter how weird or “niche” your skills are, you can turn them into a successful online business today.