GPWA Times Magazine - Issue 31 - February 2015

AFFILIATE FINANCE 101 The three golden rules of money management for affiliates By Dan Horvat B eing an affiliate is sometimes just too easy. If you got at least something right with your affiliate website(s), the money is pouring in and you're buying yourself things. Easy as pie. But that doesn't change the fact that you own a small business. You might be selling casino deposit bonuses, but you're no different from someone sell- ing fish and chips. At the end of the day, your ability to run the business will be the difference between success and failure, and businesses are run on accounting. You need to know how to count beans and what to do with them. There are so many cases of successful businesses going belly up when the own- er starts ''borrowing'' too much money from the cash register and/or when he loses control of the revenue and conse- quently of the entire cash flow. This type of behavior and the inevitable outcome are universal across all businesses. Personal finance and small business fi- nance aren't all that different from one another. The most common mistake is the same in both cases: not keeping track of revenue but focusing on expenses instead. While expenses are important when you're optimizing things and chasing that extra percent of profit, cutting expenses can't grow a company and won't make you rich. Focusing on the revenue side is what a business manager is supposed to do; his job is to bring more money in and to keep track of it. The bad news is that what you thought was your hobby is actually a company and you have to treat it as such. The good news is that it's not that difficult to run a company properly once you get the hang of the basic concept. A business is an independent entity For all practical purposes, we'll call your affiliate business your company. It's an independent entity capable of growing. Your website can get more visitors, you can hire a freelancer, you can get a part- ner, you pay for ads, you negotiate bet- ter deals and you make more money. It's a company. The division between you and your busi- ness is the first distinction that needs to be made. Some degree of abstract thinking is necessary. Even if you receive payments to your own name, treat your affiliate business as an independent entity. Your primary goal is to grow that business, and you do that by letting it be selfish, keeping as much money as it can. You, on the other hand, will only take what you need. Actually having a registered company and an accountant is irrelevant to what we're talking about. That type of accountant just makes sure you abide by the law and makes an accurate yearly statement for someone else. That type of accountant isn't working for you but for the government. The role of a company doesn't end when the money is earned. Quite the opposite, that's where the company's role really begins. Its role is to take the money (rev- enue), do something with it (add value) and then let some of it go (expenses and salaries) to grow and to make a profit. Keeping track of revenue and saving a portion of it will make a difference with most businesses. Why you should keep track of revenue If you don't keep track of themoney passing through the gates of your business, you've lost any chance of ever reconstructing it to keep track of what's happening with that money down the line — or with your busi- ness, for that matter. The money will keep slipping through your fingers, and judging by the number of people downloading vari- ous home budget apps and the number of small businesses failing in their first year, this is a widespread problem. The solution is simple. Keeping track of revenues (instead of expenses) allows you to manage the balance sheet of your business, to actually do small-business fi- nance. If your revenue sheet is incorrect or outdated, everything downstream is falling apart. Treat your affiliate business as an independent entity. Your prime goal is to grow that business, and you do that by letting it be selfish, keeping as much money as it can." 10 Affiliate Finance 101: The three golden rules of money management for affiliates