How small businesses can make money with affiliate marketing

As a small business owner, you can earn passive income through affiliate marketing. Small businesses can benefit by either allowing others to sell their products through an affiliate program or by selling another business' products and taking a commission.

What is affiliate marketing?

Affiliate marketing is an online selling strategy that lets small business owners and others earn commissions by selling products they don't own. The cost to the customer purchasing the product from an affiliate is the same as buying directly from the source.

Affiliates typically offer other companies' products in a number of ways that include online stores, blog post recommendations, site ads, email messages, and social media posts. They link to a product with a specially coded URL that tells the product owner where the referral came from, so commissions are tracked and paid accurately.

The advantages of affiliate marketing

For product creators, it's a cost-effective way to expand their reach. Ahmed Mir, who sells CBD products to consumers through his Nature & Bloom site, has discovered the positive impact of affiliates on site sales in just three months. "I am now focusing on growing this channel, as it is clear that affiliates are able to bring qualified traffic at a much lower cost than SEO in the short run," Mir says.

For small businesses with an online audience—bloggers, for example—it's a way to start earning money before or without creating their own products. When software company KYLeads first launched in 2017, 95% of its income came from selling affiliate products.

"Now, it's less than 10% of our income, but the early partnerships we established have allowed us to build goodwill and approach those brands to establish arrangements where they also promote us as affiliates," says founder Daniel Ndukwu.

How affiliates earn money

Commission rates vary widely. Amazon's Associates Program, one of the best-known affiliate opportunities, pays commissions ranging from 1 to 10%, depending on the product category. Digital course creators, on the other hand, often pay as much as 50% to affiliates who help them sell more of their online training programs or resources.

Affiliates can earn commissions from one-time purchases or secure recurring income by selling products with a monthly subscription fee, including membership programs and software access.

For example, DesignOye offers unlimited graphic design services for a flat monthly fee that starts at $369. Affiliates earn $50 a month for each referred customer for the life of that customer's subscription. "Let's say a digital marketer successfully refers five new subscriptions each month. By the end of one year, they would have a monthly passive income of $3,000," says Dushyant Bhatia, founder.

How to find products to sell

The secret to success is knowing your audience and what will appeal to them. Consider surveying your network to uncover favorite products or services, then searching online for their affiliate programs. Most companies that offer affiliate partnerships indicate that with an "Affiliates" or "Partners" link at the bottom of site pages. If you don't find that, contact the company and ask.

Many of the bigger brands offer affiliate programs through affiliate marketplaces or networks. They include:

• CJ Affiliate
• ShareASale
• Rakuten Advertising

Knowing that their followers trust their recommendations, many marketers protect that relationship by affiliating only with products they use or have experience with. For example, a small business marketing consultant might limit affiliate links in its guide to email list management and distribution services to options it's familiar with because of firsthand experience. Be thoughtful about what works best for your own brand.

Affiliate requirements

The Federal Trade Commission (FTC) requires disclosing affiliate relationships. Regarding disclosure placement, the FTC says, "The guiding principle is that it has to be clear and conspicuous." Requiring people to scroll to the bottom of a blog post or email message, or click on a website "affiliate disclosure" link, violates the FTC guidelines. Social media "influencers" must also declare their affiliate or sponsored status.

Some products or brands have email list size and site traffic requirements, but others are more flexible.

Learn more about how it works, then study how others in your segment, particularly competitors, use affiliate marketing. Next, create a list of appropriate products and sign up for their affiliate programs. Promote the products effectively and, before you know it, you'll see messages in your inbox, alerting you to your extra cash.