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Deep-Dive: The 7 Best Online Microbusiness Models

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This post is part of a series called Kickstarting Your Online Microbusiness.
A Fluid Business Plan Template for Your Microbusiness

You know that you want the lifestyle and autonomy that a successful microbusiness can provide, but which type of online microbusiness is right for you?

In this article, we deep-dive into each of the seven main types of online microbusinesses and help you identify which is the best match for your skills, resources and appetite for risk. We cover: online retail, self-publishing, blogging, online training, web apps, niche sites, and affiliate sites.

Learn about the pros and cons of each online microbusiness model, along with examples of those that are killing it with that type of business. Grab the professional tips you'll need to succeed. After reading this comprehensive guide, you'll be positioned for action.

You may want to bookmark this or save it to your Facebook. You may need to tackle it in sections, as each part of this guide is thorough, and put together it forms more of an eBook of information, than your typical blog post.

Brew up a cup of your favorite hot beverage, sit down, and let's begin.

1. Online Retail

Selling physical products online is a booming industry that continues to get bigger. To set up an online retail business you’ll need a few key ingredients:

  1. A platform for selling products. This might be a custom-built online store, or a pre-existing solution like Shopify, Magento or Open Cart.
  2. Products to sell. You might choose to manufacture your own product (like Square36) or sell a curated selection of products you like (like Huckberry). You’ll need to deal with suppliers or manufacturers in order to source the products at a price that lends itself to a reasonable profit margin for you.
  3. A way to attract customers. Most online retail businesses use a mixture of search engine optimization, pay-per-click advertising, and content or email marketing.
  4. A way to fulfill orders. If your online retail business is owned and operated by you then you should expect to spend a lot of time dealing with logistics: packing, addressing and shipping the products you sell. You’ll need space to store your inventory, which, for a microbusiness, is often your home.
  5. You need to offer something unique. If your online store sells commonly available items that you can buy more cheaply on eBay or Amazon.com, you’re going to struggle to compete with these big names. It’s essential that your store either sells something unique or is a place customers love to visit because of how well you curate a useful, interesting collection of related products.
  6. To provide follow-up service. When dealing with physical products and postal systems, packages inevitably get lost or damaged and human error means that customers sometimes receive the wrong thing. Of all the microbusiness types, running an online retail business will mean that you need a way to resolve these issues as they arise.

Of all the microbusiness types, online retail involves the most negotiation, physical work and face-to-face contact. It’s best suited to those who like dealing with others and enjoy the process of negotiating and interacting with people face-to-face. If your ability to find, befriend and negotiate with suppliers or manufacturers is good, you’ll get better prices.

This microbusiness type could be an excellent choice if you’re worried about spending hours alone at a laptop. This business model literally forces you to get out of the building and go meet with people.

Forty Ninth Parallel, a coffee producer, uses Shopify for their online retail presence.

There are several routes you can go down with an online retail microbusiness:

Creating Your Own Products

The internet has made it easier than ever before to get in touch with manufacturers and industrial designers who can transform your ideas into real, physical products. New products that solve an existing problem better than other solutions can be extremely valuable.

Bob Maydonik got the idea for the oversized yoga mats he sells at Square36 while doing the rigorous P90X home fitness program. “I was annoyed with how inadequate my typical yoga mat was,” he says. He partnered with a friend to create a better yoga mat, meeting up with several manufacturers via Alibaba.com before finding one who could actually produce his product concept.

Baseball swing expert Jaime Cevallos produced his own product, the MP30 training bat, to help baseball players everywhere improve their swing. He says that one of the reasons behind his success with the product is his knowledge of the industry. “You should have a considerable amount of knowledge about the niche market that you are targeting,” he says.

John Gallagher created an original board game, Wildcraft, after being disappointed with the nature board games available to play with his son. According to the board game’s website, Wildcraft has since sold nearly 30,000 copies.

John Gallagher's Wildcraft.

Creating your own product can be a powerful strategy, as you don’t need to struggle with the question of how your online retail business is different from others. You are selling a product they don’t have, unless you want them to have it (in which case, they need to buy it from you!)

Dealing with manufacturers can be one of the most difficult parts of this process. First, finding a factory that is willing to produce your product. And second, making sure the factory can actually produce the product to your standards. This process may involve touring numerous factories and, for some, trips to China, the world’s product manufacturing hub.

Curating Other People's Products

If product creation sounds like a hassle, you may be better off working with existing product lines and suppliers to stock your online store. To succeed against competitors who may be selling the same or similar products, you’ll need to provide something different.

To succeed against competitors who may be selling the same or similar products, you’ll need to provide something different.

Some businesses differentiate on price. They’re run by great negotiators who won’t rest until they get a ridiculous deal with a supplier. Yet, this model can be risky, as there’s always the risk of price wars and undercutting. It can be difficult to compete against big retailers like Amazon on price, because they purchase products in such large quantities.

Another strategy is to turn your online store into a destination for a particular passion or lifestyle. If you can succeed, you may not need to have the cheapest prices as long as you can introduce people to products that make their lives better. Huckberry, an online store for outdoorsy professionals, is run on this premise. They’ve been so successful that they’ve outgrown their initial microbusiness origins and now have a staff of 9. Rather than focusing on the cheapest prices, they curate and test products that fit with their audience’s lifestyle. They know their audience, because they are their target market.

“We don’t need Mount Everest tents,” said Greiner, co-founder of Huckberry, in a recent 37signals profile. “We need a tent where we can go on a little backpacking or car camping trip, something functional and well-designed. ... There’s no resource out there for ‘guys’ guys.”

“We are what we’re selling,” he says.

huckberry_pageA product on Huckberry.com.

By curating products that they would use, they’ve succeeded in attracting thousands of like-minded people to purchase products from their store and subscribe to their twice-weekly newsletter catalogue.

But an online retail microbusiness does have its downsides. “My girlfriend at the time wouldn’t come over to my house because there were just boxes everywhere,” says Greiner.

Additionally, needing to have physical inventory means that the startup costs for an online business are more expensive than most of the other microbusiness types. But if you have some capital to invest, and are confident you understand the market for your products, then it may be worth the risk.

2. Self-publishing

One of the most exciting new microbusiness models to emerge in recent years is the self-publishing of eBooks. Amanda Hocking is the most famous example of an author making millions in the self-publishing industry, but other authors, like J. A. Konrath, John Locke and Tina Folsom have also earned over a million dollars through self-publishing. And, unlike other microbusinesses, success with self-publishing can be achieved working completely alone--though the services of a cover designer or editor may occasionally be needed.

Self-published books bypass the traditional publishing industry and its publishing houses, agents, deadlines and book deals. Instead, the author produces and markets the book alone, assuming 100% of the risk but also retaining 100% of the profits, minus any of the fees charged by the platform being used to sell the books, if the author is using one. Authors may choose to sell books through their own website, or through a marketplace like Amazon’s Kindle store.

There are two main routes available to you as a self-publishing author. You can write non-fiction eBooks, technical or how-to guides sharing knowledge that others find valuable. Or, you can write fictional works.

If you’ve had dreams of being a novelist, the latter route could provide you with a chance to make those dreams come true. If the idea of writing a novel makes you cringe, the non-fiction route may suit you better. But, you must have (or learn) information that would allow you to write something valuable.

While some eBook publishers have outsourced the writing of their books, we’re not going to cover that here. Assuming that you want to write a book of your own, the most important prerequisite is that you love writing. If you’d like to have written a book, but don’t actually like to write, this type of microbusiness may not be for you. Becoming a good enough writer to sell thousands of eBooks will be extremely rewarding, but it will take plenty of practice, and many nights alone with just yourself and a blank document, waiting for words.

Non-fiction eBooks

Nathan Barry is a recent example of an author running a successful microbusiness selling technical eBooks. In fact, his business has been so successful that he’s written an eBook about how to make money from eBooks. According to the book’s website, Nathan has made more than $150,000 from self-published books on web design and development.

If you have some skill or knowledge that is valuable to others, turning it into an eBook can be lucrative.

app_design_handbookNathan Barry's App Design Handbook.

Fiction eBooks

Most of the millionaire authors mentioned above were successful selling novels in eBook format, primarily through Amazon’s kindle store. If you’ve dreamed of being a novelist but struggled to get a book deal, or didn’t want to get one, then this could be an exciting path for you.

Things to Consider

When you have a traditional book deal, the publishing company assumes responsibility for marketing your book. When you’re self-publishing, the only person responsible for marketing your books is you. You won’t be free to spend all of your time writing. Instead, self-published authors must be much more entrepreneurial than most authors. It is up to nobody but you whether your book is successful or not.

Most successful self-publishing authors don’t have a single big hit. Instead, they are prolific authors who create multiple income streams through selling an entire portfolio of eBooks. J.A. Konrath currently has a whopping 59 eBooks on Amazon. Amanda Hocking has 16, John Locke has 19, and Barry Eisler has 31. To be monumentally successful, you must also be incredibly prolific.

But, once you build up this portfolio of books, they’ll keep earning you an income even if you stop writing. Self-publishing is one of the most passive forms of income.

The risk of toiling with no reward is high with self-publishing. If the knowledge you have to share isn’t as valuable as you thought, you may struggle to find an audience as a non-fiction author. If you’re going down the fiction route, you’ll be judged purely on your skills as a storyteller, and competing against authors who’ve been practicing their craft for years. For example, thriller author Jon Osborne wrote and self-published four novels which have sold only 263 times as of this writing. The effort vs. reward in this case is staggering. You must be confident in your skills as a writer to go down this path.

Of all the microbusiness models, being a self-published author is the most solitary. When an eBook is finished you’ll most likely need to work with an editor, cover designer or layout artist, but when the book is being written (which takes up most of the time), you’ll be working alone. For extroverts, this can be a big challenge.

writers_lifeThe writer's life, photo by Beth Rankin.

A self-publishing business is one of the least sellable. With every book, you are building up your reputation as an author. Every book you write is a unique reflection of your mind. It’s difficult to ever sell your portfolio of books to another author, because they are so strongly linked with you. This might be doable for a non-fiction author transferring information, but for a fiction author, selling your self-publishing business might be near impossible. Your voice is too unique.

3. Blogging

A blog is different to a website in that it's made up of content posted in chronological order, with the most recent content gaining higher precedence than older content. Blogs can be personal, opinionated, journalistic or fun. They can be updated once a week or several times a day. There are millions of blogs, each one of them unique in many ways.

Once you have thousands of people coming to your blog every day, it’s not difficult to think of some way you might be able to sell something to them.

Because it is regularly updated, a blog is a way to attract an audience and keep them regularly coming back for more. The key factors in building an audience are frequency and quality. It might be better to post infrequent, high-quality articles than to post frequently but without much quality. But what is quality in the world of blogging? There are many beautifully written blogs that are rarely read, and many poorly written blogs that are extremely popular. Though good writing is a nice to have, a blog's success is primarily determined by its usefulness to its readers.

On its own, a blog is not a microbusiness. Rather, it is an audience attraction mechanism that you can use as the springboard for a microbusiness. Once you have thousands of people coming to your blog every day, it's not difficult to think of some way you might be able to sell something to them. This might be an eBook, products, online training, or you might sell marketing space to advertisers instead.

Three Blog Case Studies

Smashing Magazine is an example of a blog that publishes both frequent (once a day) and high quality content. It is, arguably, the most popular web design blog on the internet. It is a microbusiness with several revenue streams: an eBook store, advertising, paid workshops and a job board.

smashingSmashing Magazine.

The Next Web is an example of a blog that publishes with a very high frequency (several times a day). Their goal is to have loyal readers check the blog not just once a day, but many times a day. Its primary revenue streams are through advertising and conferences.

tnwThe Next Web, a successful blog.

Paul Graham, co-founder of Y Combinator, a group that does seed funding for startups, has a series of essays on his website which, for all intents and purposes, constitutes a blog. He publishes very infrequently (sometimes less than once a month) but his articles are incredibly in-depth, well-written and immediately circulate far and wide across the internet. He doesn't display any advertising or use any affiliate links, but his blog contributes to his business by establishing him as a thought leader among startup investors. His blog makes great startups more likely to want to work with his company.

pgPaul Graham's blog.

Key Factors to Consider

To succeed with a blog, you must publish a lot of high-quality content. If you're going it alone, you'll need to spend a lot of time working on blog posts. You must love writing, or be willing to recruit, pay and manage a team of writers to create great content for you.

If you want to have an authority blog, not just something that runs on search traffic alone, you must be willing to write the content yourself, or pay high enough rates that quality writers will choose to work with you.

You need to be reliable. Once you establish a posting frequency, your audience will be disappointed if it drops with no trade-off (for example, no increase in quality).

If you want to help people with your blog and build up a community, this route is a lot of work but can be the springboard for many solid revenue streams. You'll be rewarded with a loyal readership base but your content must be good, consistent and provide value.

When you write all of your content it allows you to build up a strong personal brand. The downside is that this will make your blog harder to sell in the future, if you decide to go down that route. The blog will have become strongly tied to your unique voice and expertise. By working with a diverse team of writers, your blog is less wedded to any particular personality, and can be more easily sold on a site like Flippa.

4. Online Training

If you create a sequence of online content designed to teach somebody something, whether it’s audio, video or text, it can be classified as online training. Some online training offers a mixture of formats (for example, part text, part video), while others stick exclusively to one format.

Below are some examples of different forms of online training:

plf

Jeff Walker’s Product Launch formula is a video-based training course in using email lists to launch successful web products.

chris

Chris Coyier, creator of CSS-Tricks, created The Lodge, a paid online video training area of his website with over 190 videos.

leo_babauta

Leo Babauta, creator of Zen Habits, offers several online courses, some of which are text-based, others which include video.

How it Works

In most cases, online training is spearheaded by someone with expertise in a field. In the examples above, Jeff Walker is an expert at internet marketing, Chris Coyier is an expert at CSS and web design, and Leo Babauta is an expert in positive habit change. These people built up an audience around their expertise, usually by providing extensive free material. In Jeff Walker’s case, the majority of this free material is delivered via his email list. In Chris Coyier and Leo Babauta’s case, it is through their blogs.

Video in particular is a valuable format, as it creates the closest experience to actually being in a room one-on-one with the person.

The online training they offer delves much more deeply into one specific subject area than their free content. In most cases, the customer pays either upfront or on a monthly basis to access the course material. The material is either offered all at once for the student to complete at their own pace, or released at set intervals so that the course runs for a certain amount of time.

Because of the in-depth nature of the training, and that it is personally taught by the expert, online training can command a higher price than other forms of web products. Video in particular is a valuable format, as it creates the closest experience to actually being in a room one-on-one with the person. It is the next best thing to personalized consulting, and as such, video courses are the most popular format for premium courses (those with a price around $50 or higher).

Online courses, even if primarily video based, almost always offer text transcripts or written articles for accessibility purposes, and to provide an option for students who learn better via reading. They are often accompanied by discussion boards where students can discuss the lessons, and an email list to let students know when new material is available.

Rather than being available at all times, many courses operate on a cohort model. The course will open for student enrollment for a limited amount of time, and if the creator is happy with enrollment levels, they will close the course until the first cohort has finished. This allows the course creator to re-launch the course to their audience each time one cohort finishes, and builds anticipation among people who wanted to take the course, but have found that intake is closed. It seems counter-intuitive, but closing and re-opening an online course at set intervals can lead to more sales than having it continually open.

Is it Right for You?

The core value provided by an online course is the teaching of an expertise, from the expert to the enrolled student. To create an online course you'll need three primary components:

  1. An expertise in something people are willing to pay to learn.
  2. A means of teaching that expertise in a repeatable format (i.e. video).
  3. An audience who want to learn the skill you have to teach.

Let’s dig deeper into each of these.

1. An Expertise

For your online training to be successful, you must be able to teach something that people are willing to pay to learn. This implies that the information is valuable, and that it cannot be as effectively learned using free materials. For example, a talented skateboarder might consider making an online course about how to master the kickflip, an important skateboarding trick. However, a quick search on YouTube shows that there are already a lot of great, free video tutorials about how to kickflip. Rather than pay for a course, a prospective student is likely to stick with these free YouTube videos.

If the skater had achieved enough success with skateboarding to turn professional, a better option might be to create a course about becoming a pro skater. While many people can kickflip, few are professional skaters. And, because of this, the free information on this topic is much more brief and disjointed. By focusing on higher level topics and strategies, the course is much more likely to be something people will pay for.

Lastly, the old saying that you need to “spend money to make money” holds true. People will almost always pay more to learn something that they feel is an investment in future earnings. You would struggle to charge more than $50 for a course about how to grow perfect garden vegetables. But a course about how to turn your backyard garden into a profitable business? That could command a much higher price tag.

Some online courses, created by expert entrepreneurs and aimed at other entrepreneurs, cost as much as $10,000 to join. People will pay because they believe the strategies they learn will help them earn much more than what they spent on the course. If you can teach a skill that will help people earn more money, you can generally charge a higher price for your training.

2. Teaching in a Repeatable Format

If at all possible, packaging your course in video format is ideal. It’s the most intimate format, and the closest to face-to-face contact with the student. Having video content will allow you to charge more for your course (though videos should always be accompanied by text transcripts).

Some people will struggle more than others with the idea of offering video training. You may not be confident on camera, you may have a much more authoritative voice in writing, or you may not have the equipment needed to produce quality video. At this point I should clarify that video is the ideal format when it is done well: when you have learned to be comfortable and concise on camera, and have invested in a decent setup for recording yourself on camera. Poor quality video is worse than no video at all.

Stick with whatever format works best, but keep in mind that video, if done well, will attach a higher perceived value to your course.

3. An Audience

You don’t need to have your own audience of followers before launching a course, but it helps. At minimum, you need access to an audience likely to be interested in the skill you’re teaching, even if it’s not your own audience. This is usually achieved through partnerships with other experts who have a relevant audience for you. These people might be bloggers, YouTube channel owners, podcasters, Twitter users, or anyone else who has built up a following through their online presence.

To reach them, you’ll need to start by building a relationship with the person who has accumulated this audience. They might be motivated to let you access their audience by the use of an affiliate program (meaning they will take some of the profit for any sales they generate for your course). But if their audience is unfamiliar with you, their belief in your skills as an expert might be shaky. In this case, most who want to sell an online course to a new audience will spend some time demonstrating their expertise first. They might provide free content to that audience, such as a guest post, free eBook, podcast interview, or other valuable demonstration of expertise.

The Pros and Cons

Knowledge is valuable. If you have a sought-after skill, offering online training could be extremely lucrative for you. But, you’ll need to be willing to put the course together in a professional way, potentially teach on video, and be willing to conduct a full launch and marketing campaign for your training. You’ll also need to gain access to an interested audience, whether your own, or somebody else's.

Of all the microbusiness models, offering online training is not the simplest from a technical standpoint. You need the ability to protect your content so that only paying customers can see it. This will involve the use of online training software, such as Wishlist Member, or paying a developer to build this protected training area for you. And, any time you have user accounts in play, things can go wrong with them. There will be some support load associated with this. Additionally, a teacher is expected to be available to answer questions from her or his students. You’ll need to spend time every day looking after your student cohort. For this reason, an online course is one of the least passive forms of online business (if done well and responsibly).

Lastly, an online course is one of the most personalized of all the business types. The online training is based around your personal expertise. It is difficult to sell this kind of business to a new owner, since you will be the author of the training content, and potentially appearing in all the video lessons. If you like the idea of selling your business for a quick windfall, online training is not ideal.

5. Creating a Web Application

Today, most of us use web applications almost constantly. Facebook is a web application, as is Google, as is Twitter. In addition to these, there are web applications to make life easier in almost every industry. For example, freelancers might use FreeAgent to manage their accounts, Basecamp to keep track of their client projects, and Dribbble to show off their work.

Though all of the above examples are web apps, none of them are microbusinesses. They require a team of developers, designers, marketers, customer support and product people to run.

In general, a web application is suitable as a microbusiness if it provides an automated solution for a problem facing a niche audience. By limiting the size of the user base, marketing, development and customer support load is easier to keep to a size manageable by one person assisted by a few contract workers.

mth

A great example of a web app microbusiness is Music Teacher’s Helper. It is deliberately scoped to address the needs of a niche audience (music teachers). If extremely successful it could outgrow the microbusiness model, but only if the owner chooses to take that step by bringing on a larger team. Because of its niche audience, the web app can be effectively maintained by a small team.

In general, it is much easier to reach and address the needs of a niche audience than it is to create something meant for everyone in the world to use (a Yelp, Tumblr or Shazam). And though a niche web app is unlikely to ever make you a billionaire, it could be very lucrative for you.

A web app, by its nature, allows the user to accomplish something through the app, without needing assistance from a human. For example, in the case of Music Teacher’s Helper, if everything is working well and there are no bugs in the app, music teachers should be able to pay for access, sign up and start to manage their music teaching business without ever needing assistance from you or someone on your team. This is the beauty of a web app business.

What You Need

To create a successful web app microbusiness, you will need each of the following components:

  1. A niche market with an addressable problem.
  2. The ability to solve that problem with a web app.
  3. A way to reach and convert your chosen market.

Let’s dig deeper into each of these components.

1. A Niche Market With a Problem

A business can only be successful if it provides value to a market. For this reason it can be much easier to start with a market idea rather than a product idea. Once you identify a market, you can find out the problems faced within that market, and then develop a product to solve those problems. One of the biggest mistakes entrepreneurs make is to create a product first and then to try to force fit the product to a market and a problem. We’re not going to make that mistake here.

Instead, choose a market that you know something about, or that you are interested in learning more about. For the purposes of creating a microbusiness, the market should be small. No more than a few percent of the population should potentially be part of this market.

Examples of appropriate niche markets: high school teachers, dog breeders, coffee fanatics, paralegals, construction foremen, professional poker players, iPhone app makers.

Examples of markets that are too big for a microbusiness: young people, mothers, home owners, online shoppers, car drivers, people who go to restaurants.

Instead of hunkering down to solve a problem you can’t prove actually exists and can’t prove that people will pay to solve, talk to people and validate your assumptions.

While it would be possible to make a successful web app to solve problems for people in those ‘too big’ markets, it would be difficult to limit your team to microbusiness size. If you deliberately want to stay small and avoid transitioning from maker to manager, you should choose a smaller niche market.

Every niche market has problems. Some are solvable with a web app, while others are not. Let’s use high school teachers an example. One problem they might have is that kids talk too much in class. This isn’t really a problem that could be solved with a web app. But what about the problem that grading papers and writing reports takes too much time? By creating a web app that helps teachers complete this task in half the time, you would be creating real value. Would teachers pay a small monthly fee to have significantly more free time? Probably.

But how do you identify the problems within a niche market? You could guess. To be honest, this is what most unsuccessful entrepreneurs do. They identify a niche market and a way to reach them, and then imagine what it might be like to be them, and the problems they might have. I did it in the paragraph above. I’m not a high school teacher, nor have I talked to any high school teachers about the problems they wish they could solve. I’m just guessing! This isn’t a smart foundation for the many hours of work it takes to build a web app.

The next best thing is to be part of the niche audience you’re solving a problem for. If you’re a high school teacher and it is indeed true that you spend too much time grading papers and writing reports and wish you could do it faster without sacrificing quality of feedback for students, then you’re more justified in being confident that you could create a business around solving this problem.

But if you’re the one building the app, you won’t have to pay to use it. This still doesn’t answer the question of whether people would be willing to pay to solve the problem. This is why even if you’re part of the niche market you’re building a solution for, you should still talk to as many members of this market as possible. Go out and meet them, email them, post on forums. In lean methodology this is called “getting out of the building”. Instead of hunkering down to solve a problem you can’t prove actually exists and can’t prove that people will pay to solve, talk to people and validate your assumptions.

  • You’ll learn about new problems in the market you didn’t predict.
  • You’ll learn which problems are the worst, and which are the least painful.
  • You’ll learn which problems are so acute that people would pay to solve them.
  • You’ll learn about whether these acute problems could be solved by a web app.

I went through this process recently with a product I want to build for self-published authors. I had an assumption about what their biggest problems were, and how acute they were. Through talking to many authors I learned that their most acute problem was one I hadn’t even been aware of. It opened up a new opportunity to create a product that would be much more valuable to the market.

If I hadn’t “gotten out of the building” (which, in this case, really just meant emailing a bunch of authors), I would have gone ahead with creating an app that was much less valuable for authors. The time you spend talking to the market will be the single few most valuable hours you spend during the entire process of building the application.

2. A Problem Solvable With a Web App

If you can learn about a market’s most acute problem and verify it can be solved with a web app, this is a product idea worth pursuing.

Though a problem may be solvable with a web app, do you have the resources to build a web app that could do that? Web apps are complicated. They require back-end development using a programming language like Ruby on Rails or PHP. They require front-end development (HTML and CSS) to create the user interface, and UI design so that the app looks good and is easy to use. Next, the app must be discoverable to its target market through marketing. It’s rare for one person to have all of these skills. If you have them, building a web app is the perfect microbusiness model for you. If not, you’ll need to hire contractors to fill the gaps.

Ideally, you’ll have enough technical knowledge to hire a good contractor and understand the work they will be doing. If you have no skills in web development or design, building a team to develop a web app while also understanding their skills and the work they’ll be doing can be very tough. In this case, I would recommend pursuing a different microbusiness model, unless you are extremely confident in your web app idea.

3. A Way to Reach Your Market

If your web app solves a problem for high school teachers, that’s great. But how do you reach this market, and how do you convince them that you have solved their problem in a way that is worth paying for? This part of the process can be just as challenging as building the web app.

The reachability of a market should affect your decision on whether to create a web app for them. Would you know how to easily get your app in front of them? A market with a healthy and well-organized online community of blogs, forums and groups is ideal. If you’re struggling to find gathering places for your market, it may be a challenge to make your app known to them.

Pros and Cons

If your web app is bug-free and well maintained, monthly subscriptions to access to the app can be a very passive source of income. Besides providing occasional customer support, maintaining your app’s servers and adding new features at the request of your users, you may be able to maintain a base of several thousand users in just a few hours a week.

A web app is also a very saleable business. As long as you could teach somebody else how to maintain it, and do the work to transfer it to someone else’s servers, it is a highly portable form of microbusiness. Web apps are being bought and sold on Flippa at all times.

The downside is that web apps are complex and require several different skills to maintain. Once the app is built, do you have the ability to fix the servers if they go down? Or to fix a bug that emerges for some of your key users? Or add a new feature that your users desperately need? If not, you may need to retain contractors who can solve these problems. This presents an issue, in that these problems may only be present 10% of the time. Yet, when they do crop up, they are likely to be very urgent.

There is nothing more urgent than your app being offline due to server problems, while paying customers become more and more angry. Do you have someone you could call in the middle of the night to bring the servers back online, if needed? Though the maintenance of a web app can be relatively hands-off 95% of the time, the other 5% of the time will require swift and expert action. You will need to either be able to do this yourself, or maintain a team of people who you can trust to take care of these issues as they arise.

6. Creating Niche Websites

The term ‘niche website’ literally means a website created for a small niche or a long-tail search phrase. Bestsurvivalknifeguide.com is a niche site created for the key search phrase ‘best survival knife’. The content on the website is aimed to help it appear in top search results for the primary keyphrase, and a number of related keyphrases. The goal is that search visitors will arrive at the content and generate income by clicking an ad or purchasing a product through an affiliate link (affiliates earn a commission on sales they generate for the product owner).

The main attraction of a niche site is that they provide passive income. Though a lot of work can go into setting up the niche site, writing content and building links, a niche site can eventually become a static resource that earns money through advertising and affiliate sales even if it is not actively being updated or maintained, as long as the content is still relevant and high quality.

Though one niche site on its own is unlikely to earn you a lucrative income, niche site owners usually aim to build up a portfolio of these sites which, combined, earn a significant and mostly passive income for the owner.

They’re a good fit for people who are easily bored working on a single project for a long period of time. By its nature, building up a portfolio of niche sites will involve successively planning and executing the creation of multiple niche sites.

To create a niche site you’ll need all of the following elements:

  1. A keyword phrase you believe your site can rank for.
  2. A way to create useful content around that keyword phrase.
  3. A way your niche site can make money from people looking for information around the phrase.

As we’ve done with each of these microbusiness models, let’s take a closer look at these elements.

1. A Keyword Phrase You Can Rank For

If you’re unfamiliar with search engine optimization, ‘ranking for’ a phrase means appearing among the top search results for that phrase. For example, the aforementioned Bestsurvivalknifeguide.com ranks #1 for the search phrase ‘best survival knife’. The creator of this niche website identified that there was not a lot of great content available for people searching for that phrase, and identified an opportunity to rank highly if he could do so.

Though it would be wonderful to rank #1 for the phrase ‘home loan’ or ‘buy a lamborghini’ or ‘custom yachts’, these are such high value search terms that many websites have created content specifically to rank for them. The niche site opportunity lies in identifying search terms that have been overlooked by others, but could provide a valuable source of traffic if you can create useful content for them.

You are looking for a search phrase that, when you search for it, returns results that either do not quite give the searcher what they want, or look like they are from low-quality or unknown websites.

For example, if you wanted to create a niche site about rowing machines, a great content idea would be to write an article about how many calories you burn using a rowing machine. At the moment, the top results for the search phrase ‘rowing machine calories’ are too general. It’s not until the 4th result that you find a forum thread asking specifically about the burn-rate of a rowing machine. It’s not hard to imagine that an in-depth article on the topic of how many calories a rowing machine burns could rank highly.

You can imagine that an article with the title ‘Rowing Machine: Calories Burned Per Minute’ -- that had been keyword optimized and had links pointing to it -- could rank highly among these results. Many times it is about taking into account the intent of the searcher more so than the specific keyword phrase used, and then asking, how well does the content currently ranking for the term match the actual intent of the searcher?

2. Useful Content Around the Phrase

Google’s algorithm is designed to highly rank the content that best matches the intent of the searcher. Your goal as a niche site owner is to create content that Google believes best matches the intent of the searcher for the keyphrases you are targeting. It will judge this using a complex variety of factors:

  • Does your article title and content use the same or similar keyphrases as the searcher? This is one of the primary ways it evaluates relevance.
  • Does your article have inbound links that use similar anchor text to the keywords the searcher has used? For example, an article people had linked to often with the phrase ‘best sources of iron’ would seem to Google like an authoritative answer to that question, as long as the links didn’t appear spammy.
  • Does your website as a whole seem relevant to the subject matter? An article about the best sources of iron which appears on a knitting website might seem suspicious. An article about the best sources of iron on a vegetarian blog would seem much more appropriate, and Google would have more confidence in the relevance and legitimacy of the content.
  • Does your article appear to be high quality? Just because an article uses the keyword ‘best sources of iron’ regularly does not guarantee its quality to any extent. Instead, Google will look at factors like the time visitors spend reading the article, and whether visitors decide to dig deeper into the website or immediately hit the ‘back’ button.

    The best way to succeed at these factors is, unsurprisingly, to create an awesome article that understands and meets the intent of the searcher, and also provides the searcher with other great articles where they can learn more about the topic they’re interested in.

A niche site’s success is determined by the amount and quality of its content, and how well its content matches the intent of searchers. Niche sites often include dozens to hundreds of articles targeting a variety of related keywords. If you want to create this content yourself, you need to really enjoy writing and researching. You’ll be writing vast amounts of content. Otherwise, you’ll need to hire writers to research and write content for you.

In general, the more you pay, the better that content will be. Very quickly, most serious niche site owners will begin to hire content writers. This frees them up to focus on the more strategic, higher level aspects of creating niche sites, such as identifying valuable keywords with ranking potential.

3. A Way to Make Money from the Phrase

Though it might be possible to rank #1 for ‘organizing wool for rug hooking’, it would probably be more lucrative to rank #1 for ‘buy food truck chicago’. I believe every keyphrase can be monetized in some way, but not all keyphrases have equal potential.

The ideal keyphrases are related to high-ticket items, purchasable products, financial transactions, have established advertisers in the space, or have well-developed affiliate programs (which we will explore in more depth later in this article). Before you choose a topic for your niche site, it’s essential to analyze the opportunities for income that exist around that keyphrase.

Pros and Cons

Niche sites require an in-depth understanding of search engine optimization. You need to understand the factors that help a website or individual article to rank for a keyphrase. You need to understand how to steer clear of practices that might result in your website being banned or penalized by Google. You must be comfortable writing or hiring others to write high quality content.

Every niche site creator should ask themselves: am I creating something that makes the internet a better place, or am I manipulating search results for my own personal gain?

Niche sites have a mixed reputation. Many are created so blatantly to try to extract money from visitors that they don’t actually provide value or match the intent of visitors who arrive. These might make a small amount of money, or make a lot of money for a short while, but they will eventually be penalized by Google.

Every niche site creator should ask themselves: am I creating something that makes the internet a better place, or am I manipulating search results for my own personal gain? If you know that your content is not the best available on the topic, then you might be participating in the latter.

However, some niche sites are truly useful to visitors, and are rewarded for this. The most famous example is Pat Flynn’s niche site SecurityGuardTrainingHQ.com. Before this site existed, information on how to become a security guard was limited and hard to find. By assembling as much helpful content as possible in one place, it’s now much easier for people looking to become security guards to find all the relevant information they need. In return for creating this in-depth content, Pat is rewarded with ad clicks and affiliate sales, and a #1 ranking in Google. The most valuable and successful niche sites over the long-term are those that genuinely make the web a better place.

security-guard-training-hq

Successful niche sites are easy to sell. They’re portable, not attached to an individual expert, and are simple to run, even if the owner has limited technical skills. Because most serious niche site businesses will involve a portfolio of niche sites, individual sites can be sold for a quick windfall, while others can be maintained for ongoing income.

Every niche site is essentially a bet on where it will be placed in search results. The skill of the owner affects the outcome, but ultimately, it is Google’s algorithm and its staff which have the final say. It’s possible to invest a significant amount of time or money into building a niche site, only to find that it underperforms. This business model is best suited to those with some appetite for risk.

7. Affiliate Site

Closely related to a niche site, an affiliate site is a website or blog primarily monetized through an affiliate program. It might focus on one affiliate program, or several related programs.

An affiliate program is a structure whereby an individual who generates a product or service sale earns a percentage of the revenue in return for making that sale. This percentage can vary from as little as 1% to as high as 100% (if the product owner feels the client will go on to buy other products at 100% profit).

Many niche sites are also affiliate sites. In addition, many websites or blogs earn part of their income through affiliate sales.

In general, the process of making affiliate sales involves creating content (usually reviews or guides) around a product with an associated affiliate program. The greater the expertise you can develop in the product area, the more people will care about your opinions, and the more likely people will be to buy through your affiliate links.

The most successful affiliates develop thought-leadership in the area. DPReview.com is a hugely profitable website through affiliate sales. It earned its status by posting extremely in-depth, knowledgeable and helpful reviews of digital cameras. Someone searching for ‘Fujifilm x100s review’ sees the DPReview.com review as the #1 result. If they make the decision to purchase after reading the review and click a link to Amazon or another retailer, DPReview makes an affiliate commission on the sale.

dpreview

The best way to create a successful affiliate site is to:

  • Develop thought leadership in the product area. You do this by being consistently helpful, knowledgeable and useful to people.
  • Provide the most in-depth and honest coverage of the products that you can. It seems counter-intuitive, but a review that points out a product’s flaws is more likely to generate affiliate sales than a review which glosses over negatives and reads like a sales pitch.
  • Remember that people buy products you recommend and review because they trust and like you. If everything you do is geared towards making affiliate sales, you’ll start to lose what made people trust and like you in the first place. I’ve seen many bloggers make this mistake over the years.

Pros and Cons

Affiliate sales require a much lower conversion rate than advertising to be worthwhile. If you earn 20c a click from AdSense, you need 500 clicks to earn $100. If you make affiliate sales of a product that earn you $20 each time, you only need 5 sales to make $100. The math is compelling.

They allow you to make money from your content without needing to plaster it with ads. But they do present ethical challenges. Do you personally test, use and review every product or service you try to make an affiliate sale for? Ideally, but it can be tempting to recommend a product you haven’t used in favor of quick earnings. Do you disclose all of your affiliate links, or do you make financial gains from your recommendations without your audience’s direct knowledge?

The product you are selling is, ultimately, under someone else’s control. What if you publish a positive review of a product, only to later see that it has been ruined by a terrible decision, bug or manufacturing error? What if it is taken off the market, or the affiliate program breaks, or the terms change? For this reason, it’s essential that you diversify your affiliate income.

If you’re passionate and knowledgeable about a particular product area, it is worth investigating the affiliate opportunities that might be available.

Choosing Your Microbusiness Model

The next step is the hardest: choosing and committing to a microbusiness model. This deep-dive covered the most common options in some detail. Evaluate the pros and cons, and choose a model that fits best with your individual strengths and weaknesses.

  • Do you want to do everything alone, or would you be willing to build a small team?
  • Which option sounds the most fun to you?
  • Are you prepared to deal with the challenges involved with the model? What will you do if things go wrong?
  • Is it important that you could eventually sell your microbusiness?
  • How much time do you have per week to maintain your microbusiness? Is it essential that the business could be run passively if needed?

If you have a friend that is thinking of starting a microbusiness, then share this guide with them. Shoot them a quick email with a link, or drop them a direct message on Twitter. They'll thank you for it. That single action could be the one push they need to begin their online business.

Next up, we’ll work on developing a business plan for your microbusiness. And don’t worry, unlike most, this business plan will be enjoyable to create, and useful to you throughout the life of your microbusiness.

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