Lead Generation was my first love back in 2014.
In 2017, I spent considerable amount of time to master the dropshipping business.
I created few successful dropshipping businesses including my shark onesie biz which I did $45K in sales.
Ultimately, in the long-run I found that the dropshipping business was not as profitable as the lead generation business.
Dropshipping also turned out to be way more work.
Here we compare the two business models and why I only do lead generation now.
What is Lead Generation?
Generating leads for local small businesses using my own websites (digital properties) that I rank at the top of Google. I have more control because I don't have to rely on another company like Amazon.com & I'm dealing with far less competition because it's in these local cities instead of of these global suppliers to compete with. Also lead generation is in such high demand because virtually every small business needs it.
What is Dropshipping?
Using Facebook ads to create paid traffic to a shopify store, whenever people purchase your product, you use the money they sent you to buy the product at wholesale from suppliers from overseas and have them ship the product directly to the customer. You're the middle man and you make the difference as your profit.
Saturation & Competition
- Competition can get fierce because they can simply duplicate your winning ad, funnel, product
- Not all products will sell with Facebook ads, you have to target trending products that can attract impulsive purchases
- These products eventually reach saturated in 3-6 months
- The need for continually testing new products because products reach saturation and/or go out of trend
- Unlike Facebook ads, people can't easily come in and overtake the top position of Google (It takes high-level skills & time to rank which keeps a lot of competition out)
- Most local companies you're going up against don't know what they're doing so its not too difficult to outrank them
- Over 50 niches you can go into AND the fact that every city is a completely different market (means there's a lot of opportunities out there, not close to saturation yet)
- There's 42,000 zipcodes in the USA alone which all acts like its own market when it comes to local search, that multiply by 50 niches is 2.1 million opportunities, even if we say only 1/3 of the zipcode is good, that's still 700,000 niche markets that you can go into with lead-gen (6k with Amazon versus 700K with lead gen, the difference is pretty significant)
Conclusion: Shopify Dropshipping might be one of the most fiercely competitive models out there to make money online, because everyone is taught to simply duplicate & copy the sellers that's already got a winning product & campaign.
The problem here lies in the fact that its so easy to duplicate Facebook ads, shopify store and finding suppliers...
If you copy someone else's success, great... what's preventing someone else from coming in and doing the same thing to you.
The same selling point of "this is what makes dropshipping so easy to do" is the exact reason that makes this business not suitable for the long-term, how ironic.
In business, when something is too easy anyone can copy it overnight, it means that's a business that has no high-level skill involved, its operating on hype, low profit margins and it will not last long-term.
As Facebook ad cost continue to rise and the business model continue to get ever increasingly saturated, it has a direct negative impact on profit margins (competitors undercut prices), these days 10%-15% profit margin with dropshipping is considered good.
How Long Does It Take to Make Money?
- May take around 1 month to find a legit product to sell that'll actually convert on Facebook
- As a beginner 2 weeks maybe a month to setup the store, find supplier, start learning Facebook ads
- Beautiful thing about Facebook ads, is that you can turn on traffic right away
- It does take some time to tweak the ads and funnel just right so that you have net positive conversions (takes 1-2 months of leaning curve usually)
- Takes about 6 hours to build your first lead generation site.
- 3-6 months to rank these sites to the 1st Page of Google (Free traffic definitely takes longer to build than running Facebook's paid traffic, but once the site ranks it's very consistent & hands-free)
Conclusion: The biggest thing dropshipping has over lead generation is the fact that with Facebook ads you can get traffic ASAP and begin to scale very fast if you have the winning combination of the right ad, funnel & product.
I've experienced that thrilling feeling of scaling the dropshipping biz and doubling your income over night, essentially why I decided to try dropshipping, when everything is working and converting, its amazing what you can do with Facebook ads.
Unfortunately I've found that it doesn't last forever. Eventually ads will exhaust the audience and stop converting as well. Also the nature of trending products is that they will eventually go out of trend.
The beautiful thing about dropshipping is that you don't need to invest in inventory in Amazon FBA, you can test different products / niches and run ads with virtually no investment just the cost of running the ad.
This allows you to constantly test new niches, which is what you need to do to make sure you always got products that's ready to sell when the current one goes out of style.
What On-going work is involved
Is it Passive Income?
- In general you should check the performance of each ad every day (15-30 min per day)
- Every 3-4 days more serious optimizing of ads (1-3 hrs) which involves killing low performing ads, creating & testing new ones.
- 1-2 hours everyday on order fulfillment and dealing with customer returns / complaints (you can get a VA to help you with this)
- Initially couple hours per week for 3-6 months to rank the site (15-25 hours total for each lead-gen site)
- Once the site ranks, you can pretty much leave it alone, you just collect monthly pay checks.
- No need for providing clients with monthly reports because our call tracking software automatically lets them know the volume of leads they're getting
- Occasional tweaking of the website
Conclusion: Lead generation shines bright when it comes to its ability to produce truly passive income on the internet.
However, dropshipping is pretty awesome because I feel it allows people to start making some kind of money faster than learning the lead generation model with only few hours of work each day. Sure does beat having a job.
Dropshipping becomes harder to scale though past $10K per month income, because each Facebook ad campaign requires daily maintenance and its not something that's smart to outsource to a VA especially when you've got thousands of dollars going out in ad spend each day.
Where as with lead-gen, sure it might take some time in the beginning to set everything up but once these sites begin ranking organically in Google, it creates the most hands-free residual income because all the traffic is free, there's no ad spend or cost per click to worry about everyday.
How much initial investment is required?
- No need to invest in inventory so this is a big plus (but be ready to throw some money on ads)
- $5K to $10K in ad spend (not every product will make you money, you have to test a lot)
- $15 per month for tracking phone number
- $12 per month for hosting
- $50 in citation
- $25 in Google My Business
- $500 to $1000 to rank the site
Conclusion: Don't listen to the people that tell you that there's no risk in dropshipping just because you don't have to invest in inventory. You still have to cough up your own money to test different products by spending money on Facebook ads. And running ads ain't cheap.
It is less investment required than Amazon FBA though, that is for sure.
But you could easily be out $3K to $5K during this testing phase, a lot of people will give up at this stage. If you're not careful and fixing your mistakes (whatever is causing your store to not convert) you could keep losing money.
That is the nature of paid ads, Facebook doesn't care if you're profitable or not, they will spend your daily ad budget even if it means putting your ad in front of questionable audiences which you don't have control over.
All this means is that you can't go into this business with such low budgets and being afraid to spend some money.
Lead generation at least has a finite amount of money to invest in that business before you should be making money, let me explain, we've been training students since 2014, and there hasn't been a student that wasn't making money if they built at least 10 lead-gen sites. Let's say its $600 to build & rank sites, at 10 sites, you've invested $6000 at that point you're pretty much virtually guaranteed to have created several long-term passive income flows. You're well on your way to quitting that job or adding some meaningful bonus to your monthly income. BTW: building 10 sites before seeing profits is painting the worst case scenario. Most students will see profits in their first 2-3 sites.
What's the earning potential?
- With drposhipping profits can vary greatly
- From my experience & observing the community closely last few years (since 2017), it seems that most students will create stores that profit around $3K-$5K per month for 3-4 months, before having to find a new product.
- Perhaps 5%-10% of cases you find a truly home-run product that goes VIRAL and the dropshipper experiences nearly 10x results: $20-$30K in profits per month for 3-6 months.
- The up & down ride of dropshipping will at times feel like a roller coaster ride, make sure you don't spend all your profits on dumb shit because you will need that money to find your next winning product when your current one fizzles out
- Fast explosive profits are possible but just as fast as the biz took off is as fast as they can phase out
- $750-$2000 per month per lead generation site (not life-changing income for 1 site but the magic is being able to scale)
- Because each site is such low maintenance, you can easily have 100 lead gen sites without it causing too much issues on keeping them all in tip-top condition
- A lot of students get to $10K per month in their first year (but unlike dropshipping $10K this income is very stable & long-term) True financial confidence.
- As you begin to build a team, you can stack on another $10K per month in additional revenue every 6-8 months.
- Not so much ceiling to your earning potential because its all stacking passive income on top of each other, there's no trends or fluctuating FB ad costs to worry about. Ceiling is only determined by your ambition.
Conclusion: When it comes to looking at the earning potential of the business, you cannot just look at what someone made in 1 month with the business, but how long were they able to sustain that level of income? How many months in a row were they able to make that level of income?
With Shopify Dropshipping profit margins are at 10-20% after you take out cost of goods sold and ad cost. So a lot of the big numbers you see online has to be taken with a grain of salt. Yes I've seen some products go super viral and hit over $200K in revenue in 1 month which is around $30K per month in profit, however note that there's a lot of work involved in now fulfilling those orders as well.
When you're making $20 profit per sale, you're selling to thousands of customers to hit reasonable income.
It's better than having a job though.
Dropshipping has pretty good earning potential but its fast cash money grab style of business. Not something that continues to grow consistently overtime, which is what lead-gen provides.
Q: If lead generation is so much better why does it seem like dropshipping is more popular?
A: Dropshipping is promoted as the fast track to wealth and I believe that caters to the masses out there. Pick a product, hide behind a computer screen, click couple buttons and make $$$ online.
Lead generation actually takes learning a high-level skill of ranking sites on Google which doesn't happen overnight, and going out into the real world and forming relationship with business owners, which does take some practice.
The masses are into the get rich quick.
But one thing I've learned over the years. If I see something that everyone is flocking to, I wanna do the opposite.
The truth is, if something is too easy to get into (low-barrier of entry) it gets saturated, and the business is actually tougher to remain profitable long-term.
Why do plastic surgeons make more money than most people, because they have took the time to develop a skill that not too many people have.
Sure it wasn't easy for them to go through medical school but because of it they have an easier life of not having to worry about bills.
In much the same way, lead generation is more difficult to master but if you master it you'll find that it's very lucrative and you'll be highly demanded in the marketplace. What business owner doesn't want leads?
I like businesses that has some barrier of entry like lead generation (sure it takes longer & bit more challenging to master than dropshipping) but that's what keeps a lot of tire kickers out which makes lead-gen less popular but more lucrative long-term imo.
Q: Clearly you're promoting a local lead generation coaching program, so your opinions are biased?
A: I'm not as loyal to 1 business model as people might think. This is why in 2017, I pretty much put my lead gen biz to a stand-still so I can really master the eCom business including Shopify dropshipping and Amazon FBA. And for the record I made both models successful.
I'm very ambitious with big goals, I'm more interested in constantly researching for the best vehicle that's gonna get me to my goals the fastest.
I could have easily promoted a dropshipping coaching program on this blog if I felt that it was better than local lead gen. I would be busy launching various Shopify stores right now, not more lead gen sites.
What I discovered is that selling digital products simply outperforms selling physical products long-term. Lead generation is all digital which is why its great & I still do it today. So is selling courses, which is why so many eCom guys eventually transition to selling courses as their main source of income.
Q: What if I'm not good at sales, can I still do lead generation?
A: Yes absolutely, we teach students results in advance method to close deals which means we build & rank the websites and get the leads coming in first, then we send local businesses free leads for few days so at that point, they already know you got what they need: leads. They don't care where you live, how old you are, or your background. They will be asking you how they can keep working with you and keep getting those leads. Its almost like they're the ones selling themselves to you.
Q: What do you see is the biggest issue with Dropshipping?
A: The fact that its so easy to duplicate someone else's business. Facebook ad, funnel, shopify store, and product can pretty much all be copied over night. This is what is taught in many of the prominent courses and it creates an environment where all the drop-shippers cannibalize each other in 2-3 months for any new trending product.
As more people get into dropshipping its getting harder and harder to maintain a profitable Shopify store before it gets swiped by the competition.
a real business solves people's problems and you get paid for it.
Which is what lead generation is, you solve small business owner's problem which is their lack of customers by learning skills to generate leads for them using the internet specifically by ranking websites at the top of Google's search engine.
with Dropshipping you're not truly solving problems, you're simply profiting off of fads or going after people's impulsive purchases and shipping them knock off versions of the product from overseas.
Because the supplier is overseas, your customers don't get the products for 4-6 weeks which results in plenty of customer complaints and disastisfaction along the way.
The dropshipping model begins to feel like you're conning people out of money and a good service.
When most people can find much better products on Amazon.
Ultimately I love lead generation because I know everyday my clients are very happy about my service and I get paid handsomely for it.