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When I first started a “real” business I was already in a position of positive cash flow, but it wasn’t because I had inherited money or because my parents had funded my business project, it was because of two reasons…

1. I had successfully generated a few hundred dollars a month from hobby projects - these were not things I considered real businesses, just websites I loved to work on that made a trickle of money.
2. I had a casual job.

I was 19 when I first became interested in computers (before that it was all about console gaming) and by my early twenties I was capable of putting together a website. My sites were not well designed, but functional, just text wrapped inside a few tables and basic graphics. My beginner training was with the free hosting service Geocities, so just getting text and pictures to appear were you want them to on a page was a challenge.

What I did have during this period was ample time, and that was definitely my biggest advantage. I lived at home, had minimal expenses and was attending university. As many college students understand, your university days can be very flexible depending on how good your work ethic is, and my work ethic was not directed at my textbooks or assignments, it was focused on the Internet.

After a few years playing around online, I settled on a few projects long enough that I made money. As people who have read my business timeline know, my first “cash cow” website was MTGParadise.com. I used the income from this site, plus money from my casual job at a computer helpdesk at my university, to fund my next business, BetterEdit.

During this period I started several other businesses, including an English school called Aussie Tutor, and plenty of different website projects, all of which failed in a traditional sense - they cost more money than they made. I never borrowed money to fund any projects, I used my energy and creativity, income from my job and the steadily increasing cash flow from my website and went from project to project.

You Must Have Something You Can Leverage

If you are considering starting a business you have two resources you can leverage -

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Now we head into the meaty section of the Sales Funnel, the back end, where the big profits are made. If you haven’t read the first two parts of this series make sure to catch up, starting with the sales funnel explained and a look at front end marketing.

As I discussed in the last article, the front end of your sales funnel is all about capturing the attention of prospects, people inclined to desire want you provide. Potential customers are called “leads”. The expectation is a certain number of your leads will convert into customers and a small but very responsive group, will buy up everything you offer. This last group are called your “hyper-responsives” and it’s this group that is responsible for a significant proportion of your profits because they fuel your back end sales.

Pricing Points

Your back end is made up of your higher priced items, products and services that present significant value - or at least perceived value. Essentially we are talking about meeting the same need (or needs within a niche), just with different media. This might include information distributed via audio (CDs/DVDs/MP3s/Podcasts) or visually (Video/Movies) or live (Conferences/Seminars/Workshops/Retreats) or privately (Phone Calls/Coaching) or even common front end media such as ebooks, newsletters (electronic and print), subscription services and teleconferences.

The specific distinction between the front end and the back end is all about the type of customer and the price paid. In the back end all your customers have traveled through your front end, sampled your free materials, purchased an entry level product or service (or several) and have enjoyed significant value from what you offer, so much so, that they are eager to buy more from you.

At this point it becomes much easier to make sales, although since the idea behind a sales funnel is to filter prospects to find hyper-responsives, you don’t have nearly as many people reaching your back end as you do entering your front end. In many cases it’s common that only a small percentage, say 1-2% of the overall people entering your front end make it through to the back end. That’s okay because that small group are spending big bucks.

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