An MLM home business is a great way for a company to get product out into the marketplace with little overhead. It is also a great business model for the independent contractor or representative for creating wealth via a leveraged asset and a residual income stream. The model is successful because it revolves around the company’s end products being sold prior to any commissions being paid out (or advertising, for that matter). The company only pays out once what they are marketing has been sold. And, regardless of what a company is selling, no one gets paid unless something does get sold. Something – a product, service, membership, etc – must be purchased before anyone in an MLM home business organization is paid. That transaction determines who and how much is paid out.
3 main approaches or philosophies to creating income with the MLM home business model:
1. The first MLM home business approach is the retail sales model.
This is the lowest income approach of the three and essentially involves buying “product” (which could be a product, service or membership) at a discounted or wholesale price and then turning around and marking up the price to allow you to make a profit when you sell it. This is a direct sales approach. The more “product” you sell, the more money you make. Your income is directly related to the amount of “product” you sell and the amount of profit you add-in to the price of each sale. When you don’t make sales, you don’t earn any income. Pretty straight forward and self-explanatory.
Many people new to the MLM home business industry or not familiar with the industry mistakenly believe that this approach is the main marketing approach one needs to follow in order to see success with an MLM home business. This is where the “I don’t like sales” or “I’m not a salesman” type of objections usually come from, where someone learned about the MLM home business model as someone was trying to sell them on a MLM home business “product.”
2. The second MLM home business approach is the whole-sale model, focusing on organizational sales.
Rather than relying on just yourself to sell “product,” with this approach you widen your focus some by bringing on a few other people to help you increase your overall sales volume, taking in a little less per sale because you are paying your people part of the commission of each sale. So now you have say ten people allowing you to move ten times as much product which perhaps may allow you to multiply your profit by 5 (to account for your profit margin being cut in half, say).
This is a better model in that it allows you to leverage yourself somewhat, allowing you to increase your revenue and profit by being able to move more “product.” However, the focus here is still on the “product” itself. If you limit your operations to just 10 people and yourself, you are limiting your income as the 11 of you are only able to move a certain amount of product. Also, you are dependent on all 11 people to continue their production level to maintain your revenue and profit level. So it is a better model than the first model as far as revenue and profit are concerned, but it’s still a “sales job” and limits your income potential.
3. The third MLM home business approach is similar to the second approach but the focus and philosophy is entirely different.
Rather than focusing on building a small team of people to move a large volume of “product,” the focus revolves entirely around team building. Rather than trying to find a maintain a few that can move a lot, it becomes instead finding a whole lot who in turn all move a little.
Here’s one way to look at it: one person is only capable of producing so much in a given day. So, as with the second approach, even if you had ten key distributors who were all able to produce 100% (for illustration purposes will use a figure of 10), that would result in 1000 units . On the other hand, using this third approach where team building is the main focus, suppose you put together a team of people focused on team building who only moved 10 units. In this instance, it would take 100 people to produce the same as your core group of 10 sales people.
However, over time as you continue to focus on the team building aspect of the business, while your core group of 10 sales people in the second approach is totally maxed out with 1000 units being sold, your team of 100 in the third example continues to expand all the time. This method of duplication sees your group in the third approach growing from 100 people to 150 people, then 250 people, then 500, then 1000. Even if that process took two years to build a team of 1000 people all moving 10 units each, your team building organization would then be moving 10,000 units resulting in a a profit ten times that of the second example, everything else being equal.
And obviously a team that large only moving 1/10th of the amount of “product” each is a much simpler model to duplicate which means you also wouldn’t need to personally oversee or supervise these team builders but simply teach them leadership skills and duplicatable methods to grow their team with the other 9/10ths of their time (or much less even) which is what allows your team to grow with or without you as the organization becomes system dependent not personality dependent (you couldn’t oversee or supervise a group that large anyway so you’d have to have a system in place, a proven system that great organizations already have in place). This is what creates that thriving walk-away residual income.
Now that you have a basic understanding of the three different approaches or philosophies to building an MLM home business, which approach would you prefer?
Just remember something that John Paul Getty once said:
“I’d rather earn 1% of the efforts of 100 people than 100% of my own.”
That is the key to creating walk-away residual income with an MLM home business. Keep that concept at the forefront of your mind as you build your business and stay away from the sales model.
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Originally posted 2011-02-07 10:08:50.
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