Lead Generation was my first love back in 2014.
In 2017, I spent a considerable amount of time to master the dropshipping business.
I created a 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.
I'll also tell you a bit about how I'm now making $52K a month from lead generation and why I now only focus on this business.
What is Lead Generation?
Local lead generation is basically the process of 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 I'm competing in local cities with a few local business owners, instead of these global suppliers from all over the world.
Also lead generation is in such high demand because virtually every small business needs it.
At the end of the day, which business owner doesn't want more customers?
What is Dropshipping?
Dropshipping is the process of using Facebook ads (or any other paid advert platform) 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 you then have them ship the product directly to the customer.
You're the middle man and you take the difference as your profit.
Sounds simple enough, right?
....Trust me, it's not as easy as it seems.
Saturation & Competition
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 though?
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 costs continue to rise and the business model continues 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?
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 my dropshipping biz and doubling my income over night.
This was essentially why I decided to try dropshipping, which was great when everything was 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, and your sales will start to decline, no matter how good the product is.
So while you can maybe start getting sales quicker with Dropshipping, the truth is that they don't last and before you know it they will drop off and you'll be looking for another product to sell.
With lead gen this isn't the case...
I've got sites that have been paying me every month since 2014.
It may take a little time to rank your site and start getting traffic, but once you do you'll be golden, and the leads will continue to flow indefinitely.
What On-going work is involved
Is it Passive Income?
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.
You also don't need to worry about tracking calls obsessively, as you get awesome call tracking software that does that all for you.
How Much Initial Investment is Required?
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, and a lot of people will give up at this stage.
If you're not careful and you don't manage to fix 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 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 $6,000, and 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?
When it comes to looking at the earning potential of the business, you cant just look at what someone made in 1 month with the business.
Instead, you gotta look 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, and they'll often show "sales" rather than profit.
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 fulfilling those orders as well.
When you're making $20 profit per sale, you're selling to thousands of customers to hit reasonable income.
All in all, it's a ton of work...so be ready to deal with that.
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 when it does the owners get paid for it.
This is what lead generation is.
You solve small business owner's problems, 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 dissatisfaction along the way.
The dropshipping model begins to feel like you're conning people out of money and a good service, especially 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.
If you want to learn more about how I do local lead generation, click here.