Saturday, June 27, 2009

How to make money on Linkedin

I wrote previously about "productism" so let me expand on it, I think you will find this concept most fascinating -- and profitable.

There are many blogs and ebooks talking about how to use Linkedin, and that's fine. People need to learn the basics of using Linkedin.

Ultimately, though, you want to make money from Linkedin. I'm often baffled by people who still maintain that "Linkedin is a networking tool and should not be used to sell, etc." This is just a belief and, of course, all beliefs are valid.

If a person doesn't want to make money on Linkedin, that is totally find. It's a choice, a personal choice, and there is no judgment whatsoever.

However, the real issue is not whether one should sell or not on Linkedin in order to make money. The critical question is, "Do you have something to sell?"

If you're only selling your time (whether you're a marketing executive or an administrative assistant), you won't achieve financial freedom any time soon. That's because financial freedom requires time freedom so that you can do what you want every day, such as scouting for business opportunities.

To make significant money on Linkedin, you need to have a product to sell.

(Okay, sorry for using a large font, but I really want to drive home the message that you really, really, really need to have a product to sell IF your goal is to make money on Linkedin).

For example, consider John and Jane.

- John has no product to sell, but has 1,000 connections.
- Jane has a product to sell, but has only 120 connections.

Who do you think will make money from Linkedin?

Let's assume that both John and Jane have a full-time job, and are paid the same salary of $80,000 per year.

Assume also that Jane has a product priced at $50, and it's the kind of product that is useful to most Linkedin users. For example, a "How to use Linkedin to make $20,000 in extra income per year" ebook.

Since Jane has 120 connections, her sales potential is 120 X $50, or $6,000.

If she doubles the number of her connections to 240, she'll have a sales potential of $12,000.

John, for his part, could double the number of his connections to 2,000 and still not make any money. Why? Because he doesn't have a product to sell.

But John is a very clever person, so he contacts Jane and proposes that they strike an agreement: He will sell her ebook to his 2,000 connections for a 30% commission. That is, he would make 0.30 X 2,000 X $50, or $30,000. (Jane would make $70,000, which is much better than $12,000).

They both win. (Thanks to Peter, the wealth mastermind).

Suppose Jane's ebook were priced at $25, then John would "only" make $15,000 from his 2,000 connections while Jane would "only" make $35,000.

Notice, by the way, that John's income is restricted by the number of connections he has, or 2,000.

Jane, who owns the legal rights to her ebook, could potentially sell to 21 million Linkedin users. She only has to find more well connected people like John.

21 million X $35 = $735,000,000


From this example, you can easily understand why I maintain that the first step on the road to wealth is to create a product, preferably a digital product.

Of course, I'm conveniently ignoring many important issues, such as substitutability: Jane's ebook has many substitutes, so it is not at all certain that she can get 21 million buyers.

But the main point is that Jane has economic power because she has a product. She could even decide to reduce the commission from 30% to 20%, and she would still get a lot of well connected Linkedin users interested in becoming an affiliate.

This post is perhaps the most important post I've ever written so far, out of over 400 posts.

Indeed, I submit that the number one challenge for ALL Linkedin users is to be able to create a product.

I will write more about how you can go about creating such a product. I did it myself many times already.