Another business model adjustment

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I hired Gian this week as a Virtual Assistant. He’s a young man living in the Philippines.

The initial task I gave him was to post Groupon offers on our site with our affiliate link. He also attempted to contact the business owners through their website or Facebook page to let them know we were promoting their offer on our site, and ask them if they would be interested in reducing the commission that Groupon keeps for every transaction.

It wasn’t long before he got a response from a man who represents a company who sells massage vouchers on behalf of over 200 providers. He claimed he was selling $10 million worth of vouchers annually on Groupon who kept 30% of sales. So my 20% offer sounded pretty good.

I was elated at finding our first potential client — and a large one at that — but soon began to wonder if we could make a profit after subtracting advertising costs.

I decided it was way too risky to start with a 20% commission so offered to do a 30-day test at 40% commission, and then reduce it to 20% after that, depending upon the results.

Although Groupon will often keep 50% or more of sales, it turned out that they were only keeping 30% commission for this client, so my 40% was not too attractive.

I began to think about ways we could maximize profit in order to make the 20% commission work. It occurred to me that using a sweepstakes to promote the product might be the answer.

I had planned to offer to run a sweepstakes for a client, but only after I had established a relationship with them. But now I began thinking about starting out with the sweepstakes.

Strangely, this was starting to look exactly like the business model I was pursuing without success over 2 years ago when I was calling the business LocalStakes.

I had made a couple of false starts in running a sweepstakes. My best effort to date had been over a year ago when I was holding weekly “live” drawings on Facebook and awarding a few prizes every week (items I purchased on Groupon). I was simultaneously trying to build my “Shop ABQ” Facebook group.

After a couple months, however, I became discouraged because it didn’t seem to be going anywhere. The problem was a familiar one, namely that my business model was only half-baked. It was not a complete model.

I knew how to run a sweepstakes, but I didn’t know how to get businesses interested in participating, nor did I know how to make it profitable.

I knew it was essential to award “consolation” prizes after the drawing. That was part of the plan last year, but I didn’t have anything to offer without a client — or so I thought.

But now, having actually found a potential client who was selling Groupon deals, I realized that the consolation prize could simply be his Groupon deal — or better yet — his deal sold on our website.

And I also realized that I could add scarcity — by making the deals available for only a limited time — to make the consolation prize more attractive.

And to further increase the odds of running a profitable campaign, I could have multiple prizes (and multiple consolation prizes).

Suddenly, I had a completely different business model, not an unusual thing for me to do, unfortunately. But this time, I have the strong feeling that my business model will work.

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