Editor's Note: The Grind is a weekly column that asks a revolving cast of young founders to take us through the daily rigors of running a business, as well as offer up advice on how they achieved milestones or overcame challenges. Follow The Grind on Twitter with the hashtag #ENTGrind.
Whether you're developing software or making delicious hot sauce, a strong product is vital. Nonetheless, the linchpin for any successful startup is the ability to market and sell your products. However, for lean startups with not a lot of resources, generating sales can be difficult for a constrained team. While some people turn to an outside sales force, it can be very expensive and such an investment (even if possible) does not necessarily mean success.
A great way to augment your sales with limited resources is to "outsource" your sales and marketing through an affiliate program. If constructed well, it can be a low cost and scalable solution to acquire customers. That said, if done incorrectly, it can be expensive and unsustainable.
At my startup Travefy, an online group travel planner, we are a small and development-heavy team of four. Our workaround was to create an affiliate program, allowing us to scale effectively utilizing an out-of-box method. Both publishers and people can earn cash by spreading the word about Travefy. A win-win all around.
Looking to jump into the affiliate game? Here's what we've learned -- both hits and misses -- as best practices.
1. Reward the actions you want. When developing an affiliate program, make sure to evaluate what actions are actually relevant to revenue generating activities and compensate only those. For all businesses an actual sale - whether it's a software subscription or a physical product - should be compensated.
Everything outside of that must be carefully evaluated to determine whether or not it eventually yields revenue. For instance, what is a Facebook "like" or site visitor actually worth to you? For some business, this value may be high, but for others it may be nonexistent.
A good rule of thumb is that affiliate program costs and sales should scale in tandem.
2. Manage your downside. Once you've identified which affiliate actions to reward, make sure to manage your downside, or the worst-case scenerio. As a test that you've identified the correct actions to compensate, ask yourself one simple question for each action: If you spent $5,000 on that one alone, would you consider the affiliate program a success? For example, if you spent $5,000 in profit sharing on actual sales, would you be pleased? Or would you be happier spending $5,000 on gaining new Twitter followers.
There are obviously nuances to all of this, but a well-designed affiliate program should be managed such that "failure" means only limited sales and not limited sales matched with high expenses.
3. Know your affiliates. A second test on the economics of your affiliate sales program is whether or not the proposed compensation plan is compelling for your intended audience. Remember, you have to convince people that it is in their best interest to sell your product.
To do this, you should first identify who your target affiliate is. This could be anyone from bloggers who write about your product to students who act as brand ambassadors. Once you've identified your target audience, reach out to people and walk them through your program to test whether or not it's compelling. If it's not, you need to reevaluate either the individual economics or your audience as a whole.
4. Set up your affiliates for success. Now that you've identified your program economics and prospective affiliates, set them up for success by equipping them with off-the-shelf marketing materials such as unique affiliate links, sales emails, social media and rich ads.
You should also provide an easy interface for your affiliates to grab these materials and track progress. To that end, know your own strengths. Unless you are literally an affiliate software platform you should not be investing the time and resources into building a platform yourself. There are numerous cost-effective platforms online that you can white-label with your branding. We checked out LeadDyno, Impact Radius, and LinkTrust.
5. Sell, Sell, Sell. You're not off the hook yet. Even though you've already developed a great way to outsource your sales, you still need to recruit your team.
Not to worry! Your prior planning will help. Since you know your audience and have developed competitive economics, you can create simple marketing emails and reach out to a few potential affiliates. Learn from their responses, make changes and keep going. In time, you'll develop a robust force that will grow itself.
The author is an Entrepreneur contributor. The opinions expressed are those of the writer.