When you begin the process of starting your own home business, the decision about what company to work with can be a daunting task. It took me over 6 months to make my decision, but in that time all I had really learned about was a little about the companies and products, and I was totally clueless about the type of business models and compensation plans available. If you haven’t made a decision on the type of business you want to work with, congratulations, because what you are about to learn, will educate you and allow you to make better decisions. Through my research, I have found there are really two business models that are the most widely used in the home business industry today. The first is traditional multilevel marketing and the second is a Top Tier Direct Sales Model. Let me educate you about both of these plans.
Traditional Multilevel Marketing has a plan which is structured around building an organization or a down-line, through sponsoring people. You can earn commissions and develop residual income based on the volume your team produces each week or month, and it is usually based on auto-shipments of products to your existing team members and new recruits. There are various compensation plans with this industry, however the most widely used is the binary program, based on building two teams with your primary goal of multiplying in depth in each of the two organizations. With this type of plan, you increase your income potential by massive duplication, and by working to equalize the volume in both of your teams so they are as close as possible on a consistent basis. Commissions can vary in this type of plan, with an average pay out being anywhere from 5-10 percent of your total volume.
Naturally, all business models have an up side and a down side, so let’s begin with the up side. What attracts most people to traditional multilevel marketing is the residual income, due to the auto-shipments, and the opportunity to generate a substantial income. Another plus is the start up cost or investment is usually pretty low, so it is a low risk venture, making it a little easier to recruit. The start up cost depending on the company can range somewhere between $50 – $300 give or take, with a monthly auto-shipment ranging anywhere from $30-$150, again give or take. Opportunities in this category commonly fall under health and nutrition, skin care, or various services like legal plans or educational, personal growth materials.
Now let’s address the negatives. Number one, since the start up cost is lower, you can have a tendency to attract more of the hobby style business owner, which means there may be less duplication from the majority of your team. Unfortunately, although I believe it is not intentional, most companies sell you on the dream and paint a beautiful picture of success, but fail to tell you on average it can take 3-5 years to build a career type income. Which leads us to the 85% attrition rate in multilevel marketing, due to improper expectations, because if people are not generating income fast enough, they give up, and stop their auto-shipment. Another negative, especially in today’s market, is the lack of long term security. In these current times, companies are here today and gone tomorrow, so there is a chance that when you finally build that dream team, the company may be ready to close their doors. Keep in mind, there are many successful companies that are thriving, but it’s important to be educated to make sure you choose the right one.
Now, let’s talk about the Top Tier Direct Sales Model. This type of plan involves you being the direct seller or retail salesman for higher ticket items, and you can generate commissions by recruiting direct sellers. When you sell product you earn a profit margin between the wholesale cost and the retail price, or you can earn a one time commission from the recruitment process. With this type of business model, the pay out is often based on a single purchase of products than can range from $1,000 to $10,000 or more, and it varies with the company and product line. In this type of structure keep in mind, you are not earning residual income through team building in depth.
What are the up sides and down sides to the top tier direct sales model? First, this is also known as a GPT or get paid today program, so you don’t have to wait until you build a massive team to earn the larger commissions. Due to the higher profits, you have the opportunity to create job replacing income in a shorter period of time. A further up side is because of the increased level of investment, it appeals less to the hobbyists, and draws in more career minded individuals to your business. Another positive, again related to the increased cost of entry, it provides for more of a business owner environment, lowering the attrition rate. Now for the down sides – higher priced products leads to a lengthened sales process, when you are talking bigger figures, people think more before deciding. Due to the fact that there is no long term residual income, with this model, if you want to continue to make the same amount of money, you need to do the same amount of work, which means you have to continue selling or your income will stop. Finally, because of the increased investment, this plan will exclude anyone who cannot afford the investment, regardless of how qualified they are and how much potential they have.
As you can see, there are great points with both Tradition Multilevel Marketing and the Top Tier Direct Sales Model, so you may be wondering, well what is the best option? In my opinion, you’ll want to research and find a company that combines both strategies, which allows the business owner to create larger short term cash flow and profits following the GPT model, and also gives you the ability to create long term residual income. It’s having the best of both worlds, which again in my opinion is the key to lasting success. This is truly the anwer to what people want, and also what people don’t want, because most people when they start a business want to see results and cash quick, and they also want to eventually be able to take a vacation, or may need a sabatical, or even retire and not worry about losing their income or lifestyle. That’s what I call creating the winning hand.