To be able to do any valid (robust) analysis or profit planning, you need to identify all of the different income streams (income sources) your business will generate and work out how those income streams will be generated.
Once you have identified the streams and isolated the drivers you should be able to generate estimates for total income at a variety of activity levels (sales volume).
So what are your income sources likely to be?
It will depend on the type on online business you are planning to build. The income generated by an affiliate business is going to behave differently to the income generated by an online store or a network marketing online business.
A site that relies on passive income (like Google Adsense) will have a radically different income profile than a site that is selling services. And there will always be variations even between sites operating in the same niche and using the same income generating sources.
Different Types of Online Income
Each online home business is unique, and just like an offline business, there are no guarantees that your business will generate the same level of income as the top sites in your niche. When you are in the startup phase of a new online business it is better to be conservative when you are estimating your income.
Generally, unless you are prepared to spend money (and a lot of it) buying traffic, it is going to take time for your new online business to gain any traction. And it will take even longer for your visitor base to feel comfortable enough with you or your business to pull out their credit cards.
Passive Income Sources
Passive income streams are kind of, set and forget income streams. The focus for the business is generally to build a site that is seen as a valuable source of information in a particular niche and building a relationship with the visitors. Admittedly the relationship is long distance, and as intimate or as close as the relationship you might have with your friends or your neighbours.
But you do want your visitors to like you and what you have to offer. You want them to believe what you are saying, that you are actually knowledgeable about the site topic, and that they can trust you not to point them in the wrong direction.
If you can do that, your visitors will click on those links.
Advertising on Content Rich Sites
The advertising broker that is the most well known is Google Adsense.
Basically business owners purchase advertisements for their businesses using the tools provided by Google Adwords and those adverts are served up on Googles search results and on the content sites of of approved publishers. So Google operates as the middle man.
Content site owners who hold approved accounts with Google Adsense can create ad units (or widgets for lack of a better word) for their sites. They can customise the colours, shapes and sizes of the adverts and they are able to block certain advert topics (I block religion, get rich quick and gambling adverts on my sites) but other than that Google determines advert content.
Once the ad units have been styled, you can grab the code and put it up on your site. Then if any of your visitors click on the advert, they are taken through to the advert purchasers site, and you get paid for the click. How much you get paid depends on how much the purchaser paid for clicks on the advert. The amount will vary from one niche to another and you (as the publisher) and Google split the income.
Other advertising brokers include:
Not all of these networks will accept publishers in all jurisdictions. If you are looking for an advertising network for you content site, click through to each one and read their terms and conditions. I can't tell you which ones will work for you because I don't know what your site topic is or where you are located.
Affiliate Marketing on a Site
These sites work in a similar way to Adsense in that they work as a middle man or a broker between the advertiser and the publisher. The big difference is the relationship between the two (advertisers and publishers), the way the publisher gets paid and way the links and banners are promoted on the publishers site.
The basic ideal is that you search through there network for companies that have affiliate programs for products that are a good fit for your site. Once you have found one that you would like to promote, you apply to be accepted as an affiliate through the affiliate networks site. As soon as the vendor accepts your application, you can download code for banners or text links that you can add to your site.
Some of the Affiliate Networks I have used include:
There are many others but I do not have any personal experience with them. You can check here for more information on some of the other popular affiliate networks.
Not all companies that offer affiliate programs are members of an affiliate network. If you know of or use a product or service that you believe would be good for the visitors to your site, check out the vendors site. If they offer an affiliate program you are likely to find a link in the footer area of their site. If you can't find a link, send them an email through their contact page and ask them if they do have a program.
If they don't, suggest it to them - what do you have to lose?
Active Income Sources
Passive income sources are basically set and forget, but as with a lot of other things in life, the more effort you put into something, the more you are going to get out of it. So if you have the time and you want to generate a higher level of income from your online home business, you might want to consider implementing one or more of these active income streams.
Affiliate Marketing Without a Site
The initial process is the same (as outlined above) you find the products and services you want to promote, apply to become an affiliate and grab your affiliate links. You can sprinkle them throughout the pages of your site, but rather than just hope that your visitors click on your links, you get out there and actively promote the products.
You can promote affiliate offerings via email, by building a list and sending out promotional information to each person on the list but bear in mind that anyone who gives you their contact details will be expecting to get more than just an invitation to spend money. You have to give them something of value in exchange for their contact information and then keeping offering value if you want the to remain on your list.
Another way to promote affiliate products is through social media. You build a following by creating valuable content, either on your social media account or on your website or blog and shared to the account, if you have one. You can also promote offline by talking to people, handing out leaflets, doing letterbox drops or sending out direct mail.
Educational Webinar Income
Another way to generate an active income on line is to produce and promote educational webinars online. If you have knowledge that others are looking for, and you are good at communicating with others, this can be a very lucrative online business.
Multi-level or Network Marketing Online
With multi-level or network marketing online, you can build your own website or use your social media accounts to build a following. There are a couple of ways you make money online with network marketing.
One is to link your own online presence with the online store front provided by your network marketing company and promote the link to people who are interested in buying the products. Usually you will earn a commission on personal sales (the way commissions are set up and the percentages vary from one company to another) so you get paid by the company your cut for any sales through your replica shopping cart.
The other way to make money is to build a network below you. You introduce new people to the company and they join the network underneath you in the network structure. Once both you and they qualify (again there are differing rules with each company) you will be paid a commission for your own personal sales, plus a percentage of the sales made by your team members.
This is a good option is you believe in the products and if you would prefer not to have to handle the payment site of the business. You do the pre-selling and answer any questions your prospects have and then send them to the network marketing companies shopping cart. The Network Marketing Company deals with taking their money, and packing and shipping out the goods. They will generally also deal with any faults in the products, shipping issues or product returns.
If you have products that you can sell you might like to consider setting up an online store. You can either build one that you host yourself - like the store I built for Knitting Naturally - or you can join a site that allows you to become a member and sell your products on through a store on their site.
Related articles you may be interested in reading: