This is such a taboo subject to write about and discuss but I think that is because there is also a lot of confusion around Network Marketing and how it is mistaken for what is known as Pyramid Schemes. In my humble opinion, I believe a lot of people want nothing to do with it because there are a lot of misconceptions of what network marketing actually is and what it is not. I would like to take a moment to dispel some myths about this business model and if nothing else, provide a better understanding of why it is a valuable source for a side income.
Have you ever felt like there's never enough like no matter how much money you make? Even when you take that promotion, get that raise in pay doesn't it always seems like the harder you work and the more you try to climb up the ladder, there's always a thing associated with that come up that is just draining you financially and you can’t seem to get ahead? I think that’s what happens to most of us. Let's just be all the way real... that's most of us. On the other hand,there's a lot of us work two and three jobs just to keep food on the table. We could all use a part-time job. I've been there done and I got the t-shirt coffee mug right and pad and pen to match, all right? But is network marketing really a better way?
Let me just be all the way real, ok? There's a lot of stigma attached to this network marketing thing. But I think you gotta go into any new situation with your eyes wide open. You also gotta go into it with a certain amount of optimism and a certain amount of belief in yourself and what it is you are capable of doing given the opportunity. So, let me just dispel some of the myths and confusion because honestly a lot of the misunderstanding of network marketing and pyramid schemes is not based in fact or supports the legal definition of either. So what’s the difference between a network marketing company and a pyramid scheme?
Pyramid schemes are, first and foremost, ILLEGAL. So, the long and short of it is, if you ain't got no (yeah, bad grammar, my bad) product to sell but you’re selling people a promise on being able to make money, you’re probably in a pyramid scheme. If you can't make no money unless you have a bunch of people investing and you rely on those investments to make money, you’re probably involved in a pyramid scheme. If only the people who are at the top or the first to invest are making the most money in the business, you are probably involved in a pyramid scheme.
The defining factor about pyramid schemes is that there is no product or service involved and your return on investment relies entirely on people who sign up after you to invest and you get a piece of the sign up fee. Therefore, there is a ceiling on the amount of money you can make. In other words, people are giving money to something but there's no exchange of products or services. So if you’re #500 of five hundred people that invested in a “business” where no product or service exists, you're never gonna make as much money as the first person. That’s the makings of a pyramid scheme my friends. Here's where those pyramid schemes comes up short …if for any reason the person who's doing all the recruiting can't bring nobody else and those “early investors”, top people don't get paid, people get mad. They should because the entire enterprise is biased toward the first to enter scheme. That is why it is illegal.
This could be confusing to some people when you think about how traditional business is operated every day. If you think about early investors in like Amazon, you recognize that when the stock sold at $5 a share (just an example probably not the actual price) early investors are now wealthy and someone who bought stock today at about $2,000 a share is not going to make as much money unless Amazon comes up with something so extraordinary that it shoots the stock price sky high. I can't tell you how many times how much wanted to kick myself for not putting my $5 when they had their initial public offering. I had already been spending money on textbooks and trading textbooks on Amazon for years during my college years. I was doing a lot of business with Amazon and I wish I invested because I knew what that what they were offering in 2002 was an example of innovation in the online space. However, you have to keep something in mind…if a company is particularly successful over a period of time, their stock prices will rise. All kinds of things influence the price of stock. So as long as Amazon remains profitable, those first investors will continue to reap the most profit.
Here’s the thing…Amazon has a product to sell to the end user. Therefore, investors will receive a dividend from their investment as a result of sales revenue and innovation. So, this should clarify the legitimacy of industries like Amazon and frankly, network marketing companies.
So, for people who think that network marketing are pyramid schemes on the basis that only the people that get in first make the most money, I have to say, you’re argument is weak at best. We have a legitimate system that people invest in every day called the stock market and a concept called first to market. First to market is when a company is first to bring product to the market that meets the need of the consumer. When a company is successful at that, they will get the benefits of the first fruits as they should. Once other companies get wind of what is going on, and create their own version of the original product, the profits becomes more evenly distributed based on the successful execution of the other companies that enter the market afterward. In fact, companies that come afterward, if they are really good at what they do, they may even over run the company that was first to market. It's capitalism at its best. In this principle alone, I argue that network marketing companies become more credible.
Now I can’t say that all network companies are created equal. In fact, in my network company, no one, no matter when you became a distributor, holds the market on how much money can be made or whether the first to arrive will continue to make the most money in comparison to those who join the company after they did. First fruits may belong to the first to get into the business but if they are not working hard to corner the market on profits they will not make the most money in the long term.
In my company, there are some people who came in at the beginning are either not there anymore or they are not engaged in the business and therefore, are not making any money or not nearly as much as people who came in 5 years ago who is committed to becoming a millionaire and succeeds. I know that there are probably other companies out there but I can't really speak to those because I am not involved with those companies. What I do know from my own experience is that as a new distributor, you can make money in retail (selling products to customers) and building team (people on your team also sell to customers and build teams of their own). Network marketing is defined on the FTC website as where there is a product or service in exchange for an investment. So, the consumer is going to buy something. If you decide to become a distributor, you are going to pay a nominal sign-up fee and possibly buy some products at sign up. However, the purchase of products is not a requirement to become a distributor. Having said that, it only makes common sense that if you sign up to distribute a product for a company that you are actually a consumer of the product.
This is where a lot of the confusion lies with some apparent similarities between network marketing and pyramid schemes because the purchase of products by incoming team members in network marketing (placed under the recruiter in a binary structure such as it is in my company) when they start their business is seemingly not differentiated from the investment for no product or service exchange that is characteristic in illegal pyramid schemes. However, in a legitimate network marketing company, the sign-up fee is paid 100% to the company not the distributor that signs up the new distributor.
Now, I want to be very clear… there is a some language in the FTC explanation that says if the bulk of your income is gonna come from building the team then there is a question of whether the company is a network marketing company or the makings of a pyramid scheme. I can tell you from personal experience that building a team doesn't mean anything if the people that you're building the team with aren't buying products. By design, the team bonus is significantly smaller than that which a distributor can earn in commission by selling directly to the customer. However, you can’t get into the scheme without a minimum investment. In my company, you don’t have to buy product to become a team member. It’s a little less effective from a business perspective but I think what the FTC is concerned with is a company making this a hard and fast rule. I can tell you I have had team members that have never bought anything except for the first time they signed up. There is no team bonus, no commissions or any financial reward when people don’t buy products. No business makes money without repeat business or new customers. No surprise there, right?
There are people in my downline right now that are just sitting there paying a monthly fee just to be a distributor but they're not really taking advantage of the of the wide array of products that'll help them to live a happier healthier life. They're not doing it so I don't make any money off of them. As a business, they are not making any money either. The monthly fee that they pay goes to the parent company not to me. I think the key here and where you actually build a business in network marketing is when you have people who are actually buying the products and I think that that is the key for skeptics to understand. Like I said, I don't know how other companies do what they do and what the compensation structure looks like elsewhere but what I know about where I'm at. At the end of the day, you won’t make any money if nobody's buying product. Period. When I compare network marketing to traditional business, I find that McDonald's don't make no money if nobody is in the drive thru or the dining room. Staples doesn't make any money if businesses aren’t buying office products. If you don't have a customer and team members are not buying product no one is making money in my network marketing business.
Having said all of this, you must be asking yourself, “Why should I listen to her?” I have a Bachelor of Science degree in Legal Studies with a concentration in Business Law and Public Policy. One of the fundamental things about the program and my formal training is that you need to know how to do legal research and analysis so that you can come up with a conclusion and a recommendation for your client. Not only have I been formally trained but I've also done compliance work for big companies and universities where I have built compliance programs around doing effective legal research and analysis.
I have a deep appreciation for doing the research making intelligent decisions on your own based on the facts found in that research. To be clear, I'm not even advocating that network marketing or any other business model is for everybody because I really don't think everybody should be doing it. However, I do believe that it is for some people who want to create a side income doing something that they actually really, really love and they know can serve people in a profound way AND are willing to work really hard to accomplish that goal. So I think you can find your fit out there among the many opportunities available in a way where you don't have to put up a huge investment. I think that network marketing is a very economical way to start a business. If you pick the right one, the company will have really good leaders that will share their secrets and teach you some business fundamentals to help you succeed. So, if you're struggling financially and you need something beyond your full time job to help ends meet, you need a side hustle and retail ain’t doin’ it for ya, this might be a cost effective way to get started doing something on your own. It could be something that can be turned into something big, like a legacy for your children.
A company worth its salt is gonna have extensive training in how to build a business and will teach basic business principles with really good leaders in your company that's willing to share what they've learned and implemented to build their business. Networking marketing could be something where you should shoot your shot. At the end of the day, do your research and make an educated decision for yourself. Don’t depend on word of mouth and definitely don’t listen to anyone saying that being in business for yourself is easy. Understand that every business, network marketing or traditional business is going to take hard work, determination and time to build into something that can replace your 9 - 5 income. I'm just saying if you think, “I was meant to do something more with my life, damn sure more than the hell I'm doing right now”, then investigate and find something that suits you. Find something that you love and go for it!
Follow some people who you know are in network marketing or doing what you like to do you know and see what a day in the life looks like for them. One of the first things I do when I'm exploring a new industry, I evaluate whether it is aligned with the things that I like. So if it's book club, makeup, hair, or fashion accessories, then I'm gonna be looking for somebody who's doing that and doing that well or at least appears to be doing that well. Then, I see if they have a social media outlet (other than the one I found them on, obviously) dedicated to talking about the things I like and other topics such as how to start a business or how to create a product or any kind of teaching content. It’s clear they’re really adding value to their community and they're really showing you how to do things. They're giving you business tips and they share things you need to know and how you need to be thinking about business.
Let me be even more clear. This article is intended for intelligent, grown folk who are inspired or need to start something on their own and is interested in a low cost of entry in an industry that can turn into a significant income. This is not intended to try to convince anyone who does not have an entrepreneurial spirit and is not open to learning about better ways to create extra streams of income. Basically, I'm talking to grown folk who are responsible, got homes of their own, got families of their own and they want to make responsible choices in line with those priorities. So I'm talking to those people who are of that age where we can make intelligent decisions about our lives and about the risks were willing to take for the greater good and who want to level up their lives. At the end of the day, don't automatically dismiss network marketing as some kind of scheme or you think the products are overpriced. I haven’t addressed this in this article until now, however, I will say this. I think that the differential in the price of the products in network marketing companies and retail markets, is 1) the quality of ingredients, and 2) the time and method it takes to sell the product. Again, this is my humble opinion based on the company I am with and the “belly to belly” method with which we share and sell products. Personally, I think that mass market products don’t come with 30 day money back guarantees even if you consume all of the product. They also include a lot of artificial ingredients and fillers in order to sell more, in the least amount of time to the most people. If they sell it for an inexpensive enough price, most people will at least try it. However, it is unlikely that you will be able to get your money back if you so much as crack the seal on that product. When I tried my first program, I invested because of the money back guarantee. Frankly, it did what it said it was gonna do if I did what the program directed so I didn’t return it. I believed in the system so much that I decided to become an advocate. Then I talked about it when people asked about it because I then became I walking billboard not by harassing friends and family. I started my business on being an example of what works and I have found that people will invest in what has been proven to work.
It would be worth the investment to find that company that you connect with who has something that you want and that you would enjoy using and consuming. That, in and of itself, for me as a consumer is worthwhile. I think it’s really worthwhile to invest in when you know you can get your money back. So if the investment to get started as a distributor is $500 and you get a guarantee from them that if it didn't work for you, you can't sell this thing and you can send it back to the company and they’ll give you five hundred dollars back you should go you should definitely invest in that product or service based company. With my company, you can you can invest as little as $140, use the products for a month and then go about your business. If you don't like it, return it, cancel your membership and go about your way. At least you gave yourself and the products and the business a chance and you don’t have the regret of saying ‘what if’.
A couple of things I want you to take away from this article. First, know the difference between network marketing and a pyramid scheme. Network marketing is legal. Pyramid scheme is not legal. Only people at the top (early investors) make money in a pyramid scheme while this is not necessarily true in network marketing (at least in my company). In my company, some people who came in at the beginning, may not be necessarily be making as much as someone who came in 5 years ago. My company has been around for 20 years the network has been around for 12 years. Someone who came in 12 years ago may very well be making no money at all if they are not treating their business like a business. Meanwhile, someone coming in a year could be killing it and become a multimillionaire. Your level of income in my business is truly going to depend on what level of time and grind you are willing to invest in it not when you started your business.
Second, pyramid schemes don't have products and services to exchange. Network marketing does. I believe in any business you have to have something to offer people in order to justify the money changing hands between the business and the consumer. You have to be selling something to be in a legitimate business. There has got to be an exchange of goods and services. As with any legitimate business there is going to be some skin put in the game in order for that business to be profitable at some point. The harder you work in business building activities, the more your reward. Anything worth having is going to require a good amount of hard work. So do your research, be accountable to what it is you're investing in, be smart, use your God-given intelligence to make a good decision for you and your family and don't just listen to what everybody else got to say about what it is you want to do in your business. Make intelligent decisions by doing your own research.
Feel free to get a comprehensive overview of pyramid schemes on the FTC website. They do a good job of laying out a layman's version of what it is you need to be looking at when deciding to join a company as an independent contractor. Do your research and figure it out for yourself. You don't wanna get yourself involved in mess that is not above board.
I hope this was helpful and it cleared some of the mystery and misconception about network marketing. If it was helpful, great! Share this article with your community. Comment below and let me know what you think. Be constructive, not mean (cuz that doesn’t serve anybody) then we can still be friends. Subscribe to the blog. There is always more to come.
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