Over a year ago, I got involved in a home business. Over the course of six months, this business set me back financially by $4,885. I earned exactly $807 during this time.
Obviously, something was wrong. Ultimately I discovered that I had made the wrong decision about what type of business to join. I wasn’t aware of the features that are common with different business models.
In fact, I didn’t even know there was anything other than network marketing (also known as multi-level marketing, MLM, consumer direct marketing, and referral marketing). I wrongly assumed that network marketing was the only option available to me.
So, I got excited about something and I jumped in. Sadly, that is exactly what most people do. I wasted precious time, and a lot of money.
What’s The Difference?
Most home-business companies are direct-sales companies. However, some direct-sales companies use a network-marketing business model, while others use a direct-sales business model.
Here’s the best way to explain the main difference between the two. In network marketing, when a sale is made, all of the available profit from that sale is shared between you and your upline (the line of people who got into the business before you). The more people in line above you, the more money they make, and the less there is for you. With the direct sales business model, when a sale is made, all of the available profit from that sale goes to one person -- the person who made the sale.
Is that a big difference? You bet. Check this out.
Let’s say you make a sale, and your customer buys products valued at $1,300 dollars. You earn, on average, 7 percent if you're with a network-marketing company. So, for that $1,300 sale, you make about $91.
In a direct sales business, if you make that same $1,300 sale, you keep the entire profit of $1,000 or more. (Not all direct-sales companies offer such high margins; this is just an example.)
I experienced this situation firsthand in my network-marketing company. I brought in about $5,000 in sales in one month, and my paycheck was just about $200.
Do your research carefully! In general, information products or internet-based products offer a much higher profit for the direct-sales marketer.
Company Performance Levels and Sales Quotas
As you probably know, in each company there are various performance levels you can achieve and, at each level, you can earn more money. But do you know what is required to maintain these performance levels?
Requirements vary by company, of course. But every company I’ve researched requires one or more of the following to maintain your performance level and your earning ability:
1.) Monthly personal product purchases. Whether you need them or not, you must buy products each month, typically valued at $100 or more.