Like traditional businesses, losing the main income source is a risk that online businesses face. One of the most crippling situations for any entrepreneur is to find your business model crumble in an instant where you lose everything. Worse, the end may come without any warning at all.
When your online business is doing well and income is on the rise, you may not think about this possibility of losing your income source. You may start to become complacent and think that good times will continue to roll forever. Sure, your business can continue with the upward trend, but do not ignore the possibility (however far fetched you may think it to be right now) that there’s always the chance that you could lose everything.
Let’s look at the scenario of an online entrepreneur earning through advertising.
Many online entrepreneurs running information-based websites earn through advertising or affiliate programs. They join advertising networks such as Google Adsense, or the Amazon Associates Program where members earn commissions from selling qualified products on Amazon.com.
When you are part of these advertising or affiliate programs and depend on them for your main income, do you know that they can just cut off your account with just one email? There will be no prior notice; instead you will just receive an email notifying you that you have been terminated from the program. Your account will be disabled and you can’t log into your account anymore. The company can even take away any unpaid income that you may have earned prior to the termination of your account.
You may be kicked out from the program due to policy violations (that you may or may not even be aware of). For example, you’re a Google Adsense publisher and you just receive the dreaded email that you are terminated from the program. Your website may be kicked out due to suspicious activities (e.g. from invalid clicks to clicking on your own ads to poor content quality or poor traffic quality, among other reasons). Sometimes Google will tell you why they are disabling your account, but more often than not, you will just receive the termination email without any explanation why. And that ends your Google Adsense income.
It could also be that your main income source may decide not to work with you anymore for reasons beyond your control. One example of this situation is Amazon.com’s decision to terminate its relationship from affiliates located in certain states due to the merchant’s response to government regulations. Amazon decided to pull out from states such as California, Illinois, Missouri, Connecticut, Arkansas and North Carolina due to state laws on Internet sales tax. Amazon decided to drop all of their affiliates from those states to avoid the state laws that require the mega-retailer to collect sales taxes if it has affiliates in the state. For affiliates whose online businesses were built around the sale of Amazon’s products for commission, their entire business model crumbled in an instant as a result of Amazon’s decision to pull out from their states.
If you are an ecommerce store, you may find success working with dropshippers or specific wholesalers. Or you may have a single huge customer, accounting for majority of your revenue, who without warning simply walked away and went to your competitor.
You can try to file for an appeal, or make efforts to win back the customer, but sometimes, you may find that getting back that income source may not be possible. If you don’t know the reason why you were kicked out of the program in the first place, you will not be able to change the things that led to your website’s termination. Worse, for some programs, once you’re kicked out, you are even banned for life.
Another situation is when you may not be terminated from the program, yet due to a change either from your end or your income source, your income suddenly dwindles. From earning $20,000 or more per month, your income drops to only $1,000. That’s a big ouch. The income drop may be due to a change in how they calculate income (e.g change in commission structure) or it may be because your traffic dropped due to getting caught in Google’s algorithm filters. Whatever the reason, you find yourself scrambling for other ways to earn money, while drastically tightening your belt to adjust to your new income situation.
When something like this happens, it is painful to suddenly lose all or part of your income. This is where diversity of income source is critical to the survival of your online business. Even if your business in on the Web, you need to follow one of the cardinal rules in business: “Don’t put all your eggs in one basket. Diversify and prosper.”
There is no certainty in business; the only constant are risks and change. Protect your business by making sure that you do not put all your eggs in one basket. When things are still going well in your web business, be sure to spread your risk, find multiple revenue sources, and give your business the best chance of success.