As you may already know, affiliate marketing is simply promoting other people’s products or services and getting commissions in return. There are strong attractions for opting for affiliate marketing as a means of making money online:
One, the product has already been made. So you don’t have to spend money or lots of time creating a product to sell. All you need to do is to find a product that has good demand, promote it and earn commission up to 75% of it price.
Two, the sales page has been professionally designed to ensure sales, much better than if you were to do it yourself (assuming you are a newbie to affiliate marketing).
Three, a system for taking orders, delivering the product to buyers, and attending to customers concerns, is also already in place. You don’t need to worry yourself about all issues relating to both sales and after sales matters. Again, all you have to do to make money on the product is to promote it.
However, to successfully promote an affiliate product, you will have to drive traffic to the product’s sales page – this is the critical point about making money with affiliate marketing. The more targeted traffic you direct to the product, the greater the chances of making sales.
On the contrary, if you don’t expose the product to potential buyers, even if the product has a great demand with killer sales page, there will still be no way you can make sales or succeed in marketing it.
So, it is clear that driving traffic to your affiliate product is the dividing line between making money in affiliate marketing and making no money.
There are two broad ways of directing traffic to your affiliate product:
1. By buying traffic e.g using Pay Per Click, PPC, advertising platform, a very good example is the Google AdWord. AdWords are the little text adverts you will usually see on your right-hand side of the page that comes up when you do a search for something on the search engines, such as Google. You will see it assigned the title “Google Sponsored Ads” on the Google search engine.
To use AdWords to direct traffic to your affiliate product, you have to sign up AdWord with Google or a similar service of such from Yahoo, depending on which one you want to use, though Google is more popular; then fund your account and set up your Ads. When your target buyers click on your ad, your AdWord account with Google will be charged. That is, you will pay Google a couple of cents (depending on what you have set when setting up your campaign) for each click on your Ad. That is why it is called Pay Per Click.
The person is then taken to a page (the landing page) where the product can be exposed to him or her. There are two ways you can do this, I will explain.
One is to direct the potential buyer who clicks on your ad straight to the sales page of the product, where they will get the details of the product and be enticed to order it.
Applying this method makes things very easy for you. You wouldn’t need to set up a web page, full website or blog to promote the product, as you only need to find a high selling product, pick good keywords that will most likely lead to purchase, set your bidding right, write a compelling ad, run it, and drive traffic directly to the sales page of the product, through your affiliate link of course.
But this method has two problems.
One is that, some affiliate centers, such as commission junction do not allow their affiliates to send traffic from AdWords directly to the sales page of the products registered with them. Therefore, if your preference is to go with this method, you will have to leave out Commission Junction and go for ClickBank and other centers that don’t bother about directing traffic straight to the sales pages of the products you are promoting.
The other problem with this method affects your ability to make money. It takes more than one exposure for people, including yourself, to buy something (if I’m wrong please send me a comment through my website)
By sending someone directly to the sales page of the product you are promoting only exposes them to the product once. If they didn’t buy then, it means you have lost the chance of selling it to that person for good.
This does not mean it is not possible to make sales and even make profit at the end of the day with this method, sure, out of two hundred clicks or thereabout, you may have at least one sale depending on how hot the product is and how compelling its sales page is also.
But the fact is that the chance of making sales with this method is slim and it is even slimmer now with the global economic melt down currently ravaging the world. Although this method used to work very well before, now a lot of people are keeping their wallets a hundred meters away from them.
2. That brings us to the second way by which you can send traffic from your AdWord campaign to your product. This is a highly effective method and it is what produces the results of tens and hundreds of thousands of Dollars sales you hear other people are making in affiliate marketing.
Instead of directing someone who clicks on your ad straight to the sales page of the product, using this method you will direct that person to a page you have setup to get free report or e-book relevant to what he or she is looking for. For instance, if you are marketing an anti aging food supplement, you can prepare a report or e-book on a topic such as “How to Live up to 100 Years”.
Together with a good copy to compel people to want the report hungrily, you will put a form on the page that anyone who desires the report should fill to be able to download it. With this form you will capture their e-mails (this is your passport to making the money).
In the report or e-book, you will carefully introduce the product to the prospective buyer as the ready solution to the problem they want to fix. I hope you appreciate that this information I’m freely sharing with you is a strongly guided secret that the internet marketing gurus sell for hundreds of Dollars online. And that’s because this affiliate marketing strategy spins cool money over and over again.
Even if your prospect didn’t immediately buy the product or fill a required form that will ensure you making a commission (that’s if you are promoting a CPA), you still have their e-mails list to use to follow them up. Better still, you can later market related different products that you think they will like e.g., aging control program, again and again to them and continue to make money from the list.
The second way to drive traffic to your affiliate product is the free method, which involves using a blog or website.
By having a blog or website with valuable content for your visitors, you will over time establish yourself as an expert on the subject of your blog or website. Then it will be easy for you to refer products to your e-mail list and have thousands happily buying them through your affiliate link.
This is how top internet marketers make six to seven figure incomes yearly. A blog, especially enables you to build a strong relationship with your readers who over time come to trust you and regard your words highly. So, whenever you find a resource that they will find useful and helpful, you can refer it to them, and many will usually buy.
For this method to work well, you will have to gradually build your blog or website, and optimize it strongly for the search engines (search engines still remains the largest source of free traffic). You can also hunt for free traffic from other sources, and you must put in place an e-mail capturing system to secure your visitor’s contacts.
Although the first method of promoting your affiliate products, which involves buying traffic, is faster to producing result, the second method, which involves building blogs or websites, produces more consistent sales on the long run as more people read and enjoy your blog or website.
Therefore, if you are able to build such blogs or websites in any profitable niche of your interest (not necessarily in the make money online niche), you are assured continual huge income from your site.
The End All Guide To Affiliate Marketing And Making Money Online For Future Clickbank Webmasters
Firstly, know that this article is not a comprehensive "welcome to affiliate marketing" guide. I will not spend much time going over the basics, but will spotlight the actual methods you need to make money – with a bit of pertinent background to help you understand the reasons behind these methods. You beginners will find this information invaluable and stimulating. You practiced marketers will find this information accurate and refreshing, while also discovering some astonishing new ideas to employ in your everyday endeavors. So, let's continue.
Almost everyone that makes money on the internet (even the millionaires) do so through affiliate marketing. Affiliate marketing is a means of promoting web businesses in which an affiliate is rewarded for every visitor, subscriber, customer, and / or sale provided through his / her efforts. Compensation or commission may be made based on a certain value for each Impression (CPM), click (Pay-per-click), registrant or new customer (Pay-per-lead) or (Cost-per-Acquisition / CPA), sale (usually a percentage, Pay per sale or revenue share), or any combination of them.
In very short English; There are literally hundreds of thousands of affiliate programs on the web featuring tens of millions of products ranging from magazine subscriptions to life insurance and every conceivable thing in between. An affiliate is essentially a salesperson whose job is to send people to a merchant's website. When a predetermined "action" or sale is made, the affiliate is paid a commission. It's the same as being a salesperson in retail, only online. I will teach you more about the actual application of affiliate marketing later in this chapter.
Another important attribute of an affiliate program is its' compensation model. This may have an impact on which advertisers you decide to join and how you go about promoting them. It will surely have an impact on how much money you will make. Here is a breakdown of the various compensation models that affiliate advertisers utilize.
Pay-per-impression (PPI) / Cost-per-thousand (CPM)
Cost-per-mil (mil / mille / M = Latin / Roman numeral for thousand) impressions. Publisher gets from Advertiser $ x.xx amount of money for every 1000 impressions (page views / displays) of the ad. The Ad can be text, rich media, but in most cases, the ad is a banner running across the top, or down the side of a website.
Pay-per-click (PPC) / Cost-per-click (CPC)
Cost-per-click. Advertiser pays publisher $ X.XX amount of money, every time a visitor (potential prospect) clicks on the advertiser's ad; it is irrelevant (for the compensation) how often an Ad is displayed. Commission is only due when the Ad is clicked. The PPC model is used by Google AdWords, Miva and other providers. These are the ads that you see running along-side search results and many web-pages out there.
Pay-per-lead (PPL) / Cost-per-action / acquisition (CPA) / Cost-per-lead CPL)
Cost-per-action (CPA). Cost-per-Lead (CPL). Advertiser pays publisher $ X.XX in commission for every visitor that was referred by the publisher to the advertiser (web site) and performs a desired action, such as filling out a form, creating an account or signing up for a newsletter. This compensation model is very popular with online services from internet service providers, cell phone providers, banks (loans, mortgages, credit cards) and subscription services.
Pay-per-sale (PPS) / Cost-per-sale (CPS)
Cost-per-sale (CPS). Advertiser pays the publisher a percentage (%) of the order amount (sale) that was created by a customer who was referred by the publisher. This model is by far the most common compensation model used by online retailers that have an affiliate program. This form of compensation is also referred to as Revenue sharing.
Pay-per-call (no abbreviation exists yet)
This is a new compensation model. No official abbreviation exists yet. Advertiser pays publisher a $ X.XX commission for phone calls received from potential prospects as response to a specific publishers' ad. Recently developed call-tracking technology allows to create a bridge between online and offline advertising. Pay-per-call advertising is still new and in its infancy.
Choosing a Model:
As you can see, there are advantages and disadvantages to the various compensation models. This can (and should) be decisive in your selection of which affiliate program to join, but depends largely on what you are promoting and how you decide to go about promoting it. For example, the paid surveys program Survey Adventure, pays out an extremely high $ 4.50 per double opt-in lead (CPA). The action; signing up with the company is free, so obviously, the program converts very well, but you must provide many leads in order to make a substantial amount of money. The real money is in pay per sale programs (PPS). If you have a good product and a sound marketing plan, the money will come.
Affiliate Marketing & You
There are many other aspects, facts, advice and information that I could share with you on the subject of affiliate marketing, but we don't want to get too far into it. So I will briefly cover a couple of subjects quickly that apply to what I feel you will actually need to know and what you will be employing in your money-making endeavors.
The rise of blogging, interactive online communities, article directories, simple web sites and other new technologies and are forming the new Web 2.0. These new technologies have impacted the affiliate marketing world in a very big way. Creating a presence online used to take months as well as a number of trained professionals. Nowadays, it is quite possible for newcomers to (by themselves) "set up shop" literally overnight and with very little experience. Also, this new media allows merchants to get closer to their affiliates and improved communication between each other. What this means to you, is that you can be on your way to become a super affiliate master as soon as you finish this guide!
Trademark Bidding / SEO
Affiliates were among the earliest to adopt Pay-per-click advertising when the first PPC search engines. In 2000 Google launched their PPC service AdWords which is responsible for the wide spread use and acceptance of PPC as an advertising channel. Since then, a large number of advertisers have adjusted their affiliate program terms to prohibit their affiliates from bidding on those types of keywords. Though we will not go into PPC Marketing, you must understand that some trademarks, such as the term "eBay" are heavily restricted because of this.
One area that has not been hit by new restrictions is SEO or "Search Engine Optimization". Later, I will be teaching you how to create profiles that will trick Google and other search engines into indexing them as relevant websites and list them in top search results. Sign up for AdWords and Miva. I will show how to use these later in the guide.
Why Affiliate Marketing
Affiliate Marketing is driven by entrepreneurs who are working at the forefront of internet marketing. Affiliates are the first to take advantage of new emerging trends and technologies where established advertisers do not dare to be active. Affiliates take risks and "trial and error" is probably the best way to describe how affiliate marketers are operating. This is also one of the reasons why most affiliates fail and give up before they "make it" and become "super affiliates" who generate $ 10,000 and more in commission (not sales) per month.
You will not earn the right to call yourself an affiliate marketer overnight. You will have to work (relatively) hard and innovatively to make the kind of money that you want, but know that if you do, the rewards are very large and there for your taking. Never give up!
Very few publishers handle their affiliate programs in house. Most affiliate programs are set up and managed by large affiliate networks. Most of my affiliate programs are set up and maintained by the affiliate network ClickBank, which is the largest affiliate network on the web. Some networks do not have qualification criteria, but most do.
The majority of this online guide will focus on marketing strategies for ClickBank affiliates, but here is a short list of the top affiliate networks that all of the professionals belong to and you should apply to.
The "Big 4" Affiliate Networks
ClickBank connects over a hundred thousand affiliates with thousands of information product vendors offering a huge array of downloadable products, mainly eBooks. Because it is cheap and easy for merchants to join, the quality of the products provided can vary. ClickBank is also a great place to search for unexploited niches.
Commission Junction (or "CJ") is another very popular affiliate network. CJ brings together affiliates and product vendors, but also offers physical products for its affiliates to promote. CJ has many large brand names on its site, and is very well established. It is free to sign up, but most vendors are selective of who represents them.
LinkShare features more than 600 merchants. You'll find mostly big name and well established companies, such as Wal-Mart, Foot Locker, and Apple iTunes. Merchants are selective in representation!
Performics is a highly professional site with very well known brands. Performics' clients include: Orchard Bank, Office Max, Activa Sports, Barnes & Noble, Fossil, and more than 200 other big name, big business advertisers. Performics is owned by DoubleClick. Armatures need not apply, but may try.
Getting Paid By The Networks
Most affiliate networks require that you reach a "payment threshold" before they will release your first payment. While the amount usually varies from network to network, exactly how they pay you is pretty much your choice. Your three choices that you have are Check via mail, Direct Deposit and PayPal. I do not like to wait for checks so I set most of my accounts to direct deposit on payday. You may set your affiliate accounts to deposit your earnings directly to the card. This saves you the week of delivery time on the checks and the two week waits for the out of state checks to clear.
PayPal is also a great option, but not all affiliate networks offer payment via PayPal. It works exactly like direct deposit. Just check your account on payday to find the money there. You may also set up a merchant (business) account like I did so that you can get a PayPal Debit card. Again, it works just like a bank. Oddly enough, when I applied for my card the interest that I was (and still do to this day) earning on my money was higher than any bank I have ever heard of. Almost up there with CDs, but that's another story.
I like to set up my finances this way so that I always have affiliate separate earnings from the other earnings that I associate with my normal bank accounts. Also, when Uncle Sam asks me about my income at the end of the year, I don't have to worry about gathering paystubs or the like. I can just print out my account history for two accounts. Really, how you get paid is up to you, but as far as I know, fast and free is always better.
ClickBank & CJ
ClickBank connects over a hundred thousand affiliates with thousands of information product vendors offering a huge array of downloadable products, mainly informational eBooks. Because it is cheap and easy for merchants to join, the quality of the products provided can vary. ClickBank is also a great place to search for unexploited niches.
If you are wondering what an "information product" is, you have one in your hands (or at your fingertips) right now. Information products include e-books, video tutorials, audio teleconferences, software, etc. – fundamentally anything that comes in a digital form.
To keep it simple; the first thing that you will do is sign up with ClickBank, get a free affiliate account and look for products you want to promote. Whenever you get a sale, your account is credited with your affiliate commission and checks are mailed out every two weeks (once you break the small minimum sale threshold).
The reason that ClickBank is so popular is the large commissions. Since ClickBank specializes in information products, the product vendor's costs are minuscule and large commissions are passed on to affiliates – often as much as 50-75%. In most cases, it is far easier to make a lot of money online earning 50% of a sale than 5% of one (which is what you will get with many products on other networks such as Commission Junction and LinkShare). For these reasons, the majority of this guide will be focused on strategies for ClickBank affiliates.
One section of ClickBank that you will be visiting frequently during your time as a marketer is the ClickBank Marketplace. The ClickBank marketplace lists the products that are currently being sold by publishers. Once you have found a product that you would like to promote, you simply enter your ClickBank name to receive your hop-link. This will track your sales.
When looking for a product to promote, you are going to base your decision on results of your target market criteria. You may for example, click on "money and employment" and search for "Make Money Online", in which you will find too many results to count, but of course you can narrow that down to your target market by being more specific. Search for something like "Affiliate Marketing Beginners". Once you have a list of potential products you will be searching for products by the following important factors:
$ / Sale: The amount of money (minus refunds) that network affiliates have earned per sale in the past.
% / Sale: The percentage of profit that is paid to affiliates per sale. Most product vendors at ClickBank pay 25% to 50%. Most vendors looking to sell a lot of their products pay 75%, regardless of quality or other factors.
% Referred: The percentage of product sales that were generated by affiliates rather than the vendors own promotions.
Gravity: Gravity in short represents the popularity of a product – (the amount of affiliate sales have been made recently). Just because a product may be more popular than the other does not necessarily mean that the product is making more money for its affiliates.
The products are arranged by their popularity. You may review the above factors as well, so you can click on the product title to have a look at the "pitch page". You may find something you like and decide to promote it as an affiliate.
What To Sell
There are a many "gurus" out there that will all tell you how to promote the most popular products on ClickBank, but the truth is that not too many of them have anything great to share. They will tell you about AdWords, article writing and scamming people into buying the highest priced products you can find, all of which will cost you quite a bit of money to get started. AdWords alone these days costs a fortune to "play" in.
Here is what I say you need to do. Don't try to go onto ClickBank and find the highest selling products to promote. Find something that appeal to your target market. Believe me when I tell you, that you can find products on ClickBank related to anything and everything, all offering affiliates great commissions.
A great example would be the World of Warcraft player's niche. This game has got to be the most massively multiplayer game in the world and one of the most popular. Personally; I think that it is for geeks, but many of my college friends enjoy playing it, ahem, "living it".
When you search ClickBank for "Warcraft", you will find quite a few good products and about four that I would consider "great". (Update: What was a "few" products are now a few pages of them. These things must be selling.) When you search Google for "Warcraft", you get 10,610,000 results. On the popular social network Myspace, there are more than 3124 Warcraft groups, with the top group featuring 40,000 members.
This goes to show that with a minimal amount of research into a niche with ClickBank, you cannot go wrong. I was quite literally going to save this niche for myself and use a different example for this, but then I started to feel greedy and I want this method of marketing to work for you. So, if you are the first one reading this guide, you already have a head start, but don't be surprised to find this niche swamped soon after.
Commission Junction (or "CJ") is another very popular affiliate network. CJ brings together affiliates and product vendors, but also offers services and physical products for its affiliates to promote. CJ has many large brand names on its site, and is extremely well established. It is free to sign up with the network, but most vendors are selective of who represents them. Most often, a website with substantial targeted traffic is a requirement of vendors.
Instead of a "marketplace", Commission Junction arranges its advertisers in its "Advertiser List" and you may only promote advertisers once you have been approved to be one of their "publishers" which is what CJ calls its affiliates. Below is a list of the paid survey advertisers that I work with. Notice how there is a "date accepted" column? This goes to show that I grew my business relationships over time.
Network Earnings: which is like ClickBank's $ / sale feature and represents the amount of money (minus refunds) that network affiliates have earned per sale in the past.
$ / Action: Like ClickBank, many products on CJ offer a percentage or dollar amount that you earn per sale of a product, but with CJ you may also sort by the amount earned in lead and click (CPC and CPA).
EPC: Commission Junction also has a few different ways of representing the popularity of an advertiser. The most important of these is done by showing the "EPC" or "earnings per click" ratio which is represented by how much money is earned on average per 100 clicks. So a 7 day EPC of 24.69 which is the case of Greenfield Online means that in the last 7 days of 8.9 of the last 100 visitors to the site, have signed up with Greenfield and the referring affiliates have made money. That may not sound "great", but in the world of affiliate marketing, it's ok.
What To Sell
Just about all of the advertisers that I work with via Commission Junction employ the CPA compensation model. One of the most popular markets both on Commission Junction and among web-surfers right now is paid surveys. Because CJ offers the option of CPA, a great number of survey companies have signed up with them.
Commission Junction has some of the best converting free to join CPA programs on the net such as the paid surveys program Survey Adventure. It pays out an extremely high $ 4.50 per lead (CPA). Once again, this is a high converting program because sign up with the company is free. It may seem that $ 4.50 is not a very high payout. That's true to an extent. You may have to send a good amount of traffic to this company to see great results. With CPA the desired action that you want your visitors to complete is free for them, so the profits should come quickly.
But Remember Your Target Market
At first glance, it may look like the Network Earnings should be the deciding factor in what you will promote, but I assure you, it is not. Your target market should always be the deciding factor in what you decide to promote. Because paid surveys are so popular among college students, such programs convert very well.
Once again, you really need to do just a bit of research to find out what will appeal most to your target market.
For Newbies: The Easy Way To Get Into Affiliate Marketing
I am not going to get into this on an in-depth level. I am just going to say it; and you had better remember it. The best way to make money selling ANY product or service of someone else's is to pre-sell it and the best way to do this on the web is by creating a simple website that may consist of no more than a presales page. It is probably the simplest and most effective one webpage in any webmasters arsenal. Often in a "product review" format which has become wildly popular ever since the release of a number of short and sweet eBooks. The presales page can often take on many other formats such as customer testimonial, anti-scam and programs database page just to name a few. In the end, all of these are simply teasers of a product or products that are so effective, a visitor cannot wait to purchase the product (s) that you are promoting. I am not claiming this to be the only method of selling, just the most effective for you.
Now a great many "gurus" would like to take credit for the key components of an effective sales-page, but the methods and theories of pre-selling have been around longer than computers. It's just a matter of bringing them to the attention of potential webmasters while teaching how to easily implement them, so, here they are, the key components of an effective website:
The Attributes of A Successful Website
Give Visitors Hope: Every single day, people buy things. If what they buy is not meant to simply keep them alive, such as food, the product that they buy is meant to improve their life in some way. They hope that buying "the next best thing" will lead them to "the next best stage" in their lives. Take you for example. You are reading this in the hopes that you may apply the methods I am showing you to make money on the internet; and this money would undoubtedly improve your life. Here's a shocker: Why do you think I wrote it? Because I want to make money and build a name for myself by helping others make money online, thus, improving my life.
I have found "how to make money" informational products to be the best selling on the web, but there are many products that this can apply to. Even in a not so life altering sense. I recently saw a offer where users can "download a vast array of media and games ready to be played on the iPhone" and it was selling like crazy. I don't care for the "locked" iPhone or Apple for that matter, but the thing insanely popular among the techies and status seekers. Anyway, these people are hoping that this product will give them an entertainment on the go, thus improving their commutes or whatever, and in some small way, their lives. When you create your presales page you will feed on this need for hope. If you decide to take the product review approach, tell visitors how "your" product is so much better than the others. If you go with the customer testimonial format; (which I suggest if you decide to market ProfilesToProfits), tell them how this product has changed your life and how it will do the very same for them.
Create Urgency: In my experience, both personal and professional, the average web browser has the attention span of a goldfish. To combat this problem, a great presales page must create a sense of urgency in the visitor. Let it be known that for whatever reason, the visitor must continue to stay on your page, read the entire thing and when they finish, they must buy your product because if they don't than they are missing out on the one thing that could have changed their life forever. Did you see that? I just tied in this urgency with the first component of a successful presales page and in doing so; I have both created more hope and a more effective sense of urgency.
Many people try to do this by putting discount deadlines on their products. "Buy in the next ten minutes and blah blah …." this coming from the supposed "pros" and "gurus". Click the back button, and then the forward button to see the same deadline. People see right through this these days. It is content that creates urgency. It is the manner in which you present your product and how you play on the many factors of an effective presales page. Once again, you must create the impression that they must buy your product because if they don't than they are missing out on the one thing that could have changed their life forever.
Be an Authority: Appearance is everything. Whether you know anything about your product or not, you must appear to the visitor as the most informed, educated and trustworthy person regarding this product on the face of the earth. You will NEVER sell a product using the presales page format if the user feels that you do not know what you are talking about. Study up on your product, use this product yourself. Turn yourself into the one person to talk to regarding this product. If that is too much work, find somebody who knows what you ought to and pay them to help you appear as an expert. I cannot stress this enough. This may be the most important piece of the presales page puzzle. If the visitor thinks that you are and idiot or that you don't know what you are talking about, they will not buy from you, unless of course, they are an idiot!
The first three components of an effective sales page / website are not optional. If you decide to build a website and you do not factor these components in, you will not make it online. You will fail. Below are a few optional components that you can add to your website. Sometimes these components will work for you, other times they will not, so think hard on whether or not implementing them will ultimately benefit your cause, or hurt it.
Appear Unbiased: This is the most effective way of gaining a visitor's trust second only to your being an authority on the given topic. Most of the time, appearing unbiased is a tactic used by database sites. I recall a site that I went to when I first became interested in affiliate marketing (I was 16). It was a database of products to sell online. At the time, it just looked like a database. I later found that just about all of the programs listed were multi-level-marketing schemes, which means that if I signed up with one of the programs that was on this site and made a sale, the owner of the site would make money as well. No, there is nothing wrong with this. MLM is far from a scam as many like to slander. The ones who give it a bad name just suck at it.
Back to the point; If a visitor comes to your site and becomes under the impression that you "just want to help", they are far more likely to buy from you than if have a sales pitch at every turn. Review a product or products. Set up a product database. Help people avoid internet scams (you will read more on that next). Do whatever you must to make it look like you are their helpful friend. They don't have to know that you will be making a commission from a purchase that they make.
Strike Fear: This is another tactic that has gone mainstream since the release of "The Rich Jerk" and works best when used to promote products that belong to a saturated market, such as the "how to make money in real estate" eBook market and I have found it to be terribly overdone lately, especially by users of Google AdWords and other pay-per-click methods of promotion.
The idea here is that you are out to convince people that there will be tribulation down the road for them if they decide to go with any product besides yours. Most people who endeavor this plan have simple anti-scam websites that consist of no more than a page or two describing the horrors of a particular market. They tell visitors that there are so many scams out there that they should not sign up for any program, unless of course, the visitor signs up for the one (s) that they are promoting (which pay the largest commissions).
Cost Segregation Gives Apartment Owners Tax Relief
Apartment owners can face staggering expenses to maintain apartment communities. The upkeep of even a modest community could involve groundskeeping, unit renovation, and replacements, such as parking lot asphalt and fencing. Another steep expense is federal income tax – and in some areas an additional state tax on income – but through an innovative study known as cost segregation, the depreciation of property components can be used to help lower federal taxes.
Today, more apartment investors, especially those whose occupancy rates are challenged by the nation’s single-family housing, are taking a close look at every possible avenue to lower costs. That’s a frustrating task in the apartment business. One historically underused technique for saving money, in this case saving taxes, is to ensure that all depreciable items are reflected accurately on tax returns.
Those items are not limited to copiers, automobiles and heavy equipment. The list extends to a wide range of buildings and improvements. In fact, the IRS recognizes 130 items that depreciate over much shorter time periods than the standard depreciation of 27.5 years for an apartment community. Many of those items, such as parking surfaces, landscaping and even certain wall coverings, are present in large proportions on typical apartment communities.
A cost segregation analysis, when reflected on deprecation schedules, reduces taxable income now and also defers taxes on capital gain amounts until the community is sold. At that time, the recapture of taxes on the extra depreciation taken can occur at a much lower rate than the 35 percent max tax rate that was avoided with the extra losses.
Don’t forget the time value of money by deferring that inevitable tax by a few years. In light of the 130 IRS-identified “short life” items, this conservative tax-planning tool can help apartment owners allocate more costs to five-year, seven-year, 15-year and 27.5-year improvements versus the land value on apartment communities.
Apartment communities, according to IRS rules, depreciate over the course of 27.5 years. This is 10 years less than the depreciation estimated for office, retail and industrial properties, which equal quicker savings for apartment community owners. Items that are found in every apartment, such as carpet, linoleum, window treatments and appliances, are categorized as five-year items, meaning that they are typically replaced after five years of use.
Wide Range of Applications
Whether the community was recently purchased, has been owned for a while or is on the market to be sold, a cost segregation analysis can help at any stage of ownership by reducing federal income taxes and showing future depreciation. The optimum time to do this is preferably as soon as ownership is taken, whether the property was bought or built. Any commercial property built after Dec. 31, 1986, is eligible, and there are “catch-up provisions” to accommodate higher savings in the first year when a cost segregation study is completed for communities that have been owned for several years.
Communities of all sizes can benefit, from small communities of fewer than 10 apartments to communities that span several city blocks. If the property has an assessed value of at least $200,000, the cost segregation evaluation can almost always produce substantial federal income tax savings.
Preparing for a Study
A small amount of an owner’s time is required when working with a consulting firm that specializes in cost segregation. And it is advisable for the owner’s CPA or tax accountant to collaborate with the consultant, ensuring the most advantageous application for that owner’s particular financial circumstances.
The original purchase price of the apartment community is the cost basis, so owners receive savings on their initial investment, as well as on improvements. With research that is both quantitative (square footage of asphalt, pavement, etc., or quantities of wall or window coverings, etc.) and qualitative (judgment of remaining life) a specialized analysis and calculation is conducted before a report is issued. This report becomes the backup documentation for federal income tax returns.
Business Plan Writing For An Angel Investor
If you are looking for advice regarding business plan writing, you may be overwhelmed by the large amount of overly detailed information you are finding. The Internet provides you with a substantial number of resources you can further understand how to receive outside investment as it relates to producing a business plan as well as finding funding sources.
If you have a private placement memorandum drafted then you can use to a PPM broker to sell your securities third-party if you are seeking equity capital or debt capital from private investors. We will continue to touch on this matter as it relates to soliciting investment from an individual.
Almost all private individual investors are considered to be accredited by the Securities and Exchange Commission as it pertains to their safe harbor rules. The experience of angel investors can be more valuable than their capital in many instances if you are starting a new business It is always best to meet your potential investor face to face rather than conducting business over the phone or internet as you will be able to know whether or not they are a legitimate investor for your potential business. Your CPA can assist you with calculating the anticipated ROI for your business as this will need to be seen by a potential funding source. An entrepreneur can save resources by fine tuning their product or a service before it has been launched, which is important if you are seeking outside investment. You should always work very closely with your accountant when negotiating a deal with an outside funding source especially if you are working with a venture capital firm.
If your business plan does meet the basic criteria of the angel investment group, it will then go before a selection committee. Venture capital firms tend to invest $5 million to $10 million per business. Never give up too much equity in your business to a third party. In some instances, you may be required to provide ongoing charitable to nations as it relates to your business and the angel investor that you’re working with on an ongoing basis. One of the main services sought from the SBA is financial assistance. An attorney should be closely to inform you of the specific laws that are related to raising capital from a private source.
If you are contemplating working with a private funding source then you should first start with writing a business plan in order to determine if you actually need capital in order to launch your business operations. This is something that we will continue to touch on as we continue to discuss capital investment from outside funding sources.
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