Why You Must Build A "Third Way" Business
My wife and I were at a dinner party when a businessman about 15 years older than me struck up a conversation.
He told me a bit about his business, I told him about mine.
He wasn't familiar with digital business, so he was curious and asked a lot of questions. Most of them were "the usual."
But then he asked me something no one had ever asked before:
"How many customers do you have?"
I explained that I actually didn't have "customers" per se because my business was an affiliate marketing business…
…That I sold products on a commission basis for other business owners, which meant I was able to make money without having to deal with customer support, fulfillment, inventory, employees, or any of the other "headaches" of a normal business.
Now, normally when I said this to people, they would be visibly impressed.
Not this guy.
He had a pained, pitying expression, like he was sorry for me… like I was some clueless schmuck who didn't know the first thing about business.
That's when it hit me:
I suddenly connected the dots… suddenly realized that all the financial chaos I'd been experiencing had nothing to do with my skill as a marketer, or with finding the right keywords or offers and EVERYTHING to do with my business model…
…That in my obsession with traffic and transactions I had completely overlooked the CUSTOMER RELATIONSHIP… and that this neglect was THE root cause of my failure.
Getting that "first sale"… turning a complete stranger into a buyer… that's one of the HARDEST parts of business.
Selling to EXISTING customers… to people who already know and like you… that's the easiest sale you'll ever make.
For YEARS, I'd been focusing ALL my efforts on traffic and conversion: the hardest part of the business equation…
I had driven millions of dollars of economic activity… but because of my blindspot, I didn't have a SINGLE REAL CUSTOMER to show for it… and it is CUSTOMERS, not transactions, that are the lifeblood of a real business.
But here's the thing… my obsession with traffic was HALF RIGHT:
I'd just failed to close the loop… was only working HALF of what I've come to see as the essential two-part equation.
Because many "customer focused" businesses get it dead-wrong, too.
As with masculinity, there is a FIRST, SECOND, and THIRD WAY of doing business:
FIRST WAY businesses are focused on LEAD FLOW, to the neglect of all else.
As a result, First Way businesses emphasize…
* Cash over customers
* Marketing over product
* Income over impact
The result? They may own the LEAD FLOW, which gives them scale, but because they do not own the customer relationship, they are typically weak when it comes to profitability, predictability, and longevity.
SECOND WAY businesses are focused on CUSTOMER RELATIONSHIP, to the neglect of all else.
As a result, the priorities of Second Way businesses are the exact opposite:
* Customers over cash
* Product over marketing
* Impact over income
As a result, they may own the customer relationship, which gives them good profit margins, but because they do not own the lead flow, they are typically weak when it comes to volume, scale, and momentum.
(Maybe you've tried a Second Way approach like blogging or podcasting where, without controlling lead flow, you found yourself waiting weeks, months, or even YEARS for the sales to come in…)
Thankfully, there is a THIRD WAY that combines the best of both approaches.
The THIRD WAY:
Lead Flow + Customer Relationship = The Perfect Digital Business
In other words, when you take the scalability of paid advertising and pair it with the profitability of repeat business from ongoing customer relationship… that is the best of both worlds:
* Customers AND cash
* Product AND marketing
* Impact AND income
When you're trying to decide what kind of business to start, in addition to the 12 points I gave you earlier, make sure you're setting yourself up for success by only considering true Third Way businesses.
There are two clarifying questions that cut through the BS:
1. Who owns the customer relationship?
2. Who owns the lead flow?
If anyone but you owns the customer relationship (where almost ALL the profits are made), then you are stuck in a First Way business, and setting yourself up for a world of pain, as my personal experience will attest.
(Most affiliate marketing, MLM's, and "business in a box" type businesses fall into this category)
If anyone but you owns the lead flow (the gas pedal of your business' growth), then you are stuck in a Second Way business, with your growth held hostage by the whims of others.
(Most blogging, podcasting, and YouTube-based businesses fall into this category)
Once you own the lead flow AND the customer relationship… THEN you have the makings of a real business…
…A business that is scalable AND reliable, with predictable and increasing cashflow.
When I finally got this combination right, my income rose dramatically.
I was finally able to dig myself out of debt…
…and went on to cofound an online health business that has done over $100M of lifetime revenue to date and landed a spot on the Inc. 500 list of the fastest-growing private companies in America…
…ALL because we control both the lead flow (paid advertising) AND the customer relationship (subscriptions and backend promotions).
If I had to start all over again and build a brand new business from scratch, the ONLY business I would consider would be one that followed this same Third Way formula.
Now it's your turn.
What if you could start a digital business that completely side-stepped the pitfalls inherent in the First and Second way?
What if you could leverage the scalability of paid advertising in a way that "engineered" risk out of the equation?
What if you could enjoy the high profit margins and longevity of a customer-focused business without having to wait for the traffic gods to smile down on you?
After the brutal brutal experience of getting this two-part equation wrong all those years…
…I became OBSESSED with engineering as much of the risk OUT of starting new digital businesses as possible…
…which led me to create a simple system for vetting, launching, and scaling digital businesses that gives you maximum chance of success while slashing the risks and costs dramatically.
I'll tell you all about it on the next page.
