Network Marketing

What is Network Marketing?

It's a business model where companies distribute products and services through a network of Independent Distributors (aka Sales Agents). When you join a network marketing company you are "signing up" to represent the product as an independent contractor. You're not hired as an employee, but rather, you're signing up by making a small investment (commonly $500 to $1,500) and volunteering to represent. You're then awarded commission based on the volume of the product sold through your sales efforts as well as your team's efforts.

A successful Independent Distributor will need to sell products as well as TEACH his/her team to sell products since you earn commissions on the amount of product that moves.

Another way to think of Network Marketing is Franchising

For example, fast food organizations are popular franchises. 80% of McDonald's restaurants are owned and operated by independent contractors or business owners, where each franchise earns money by the amount of product moved within each store. In addition, you earn a small percentage of sales made by the whole organization which includes the other stores you don't own or operate. This means leveraged income vs linear income.

Due to the structure of network marketing businesses, many mistake it for illegal pyramid schemes. In actuality, legitimate network marketing companies aren't pyramids.

However, there are companies that claim to be legitimate when they aren't so when considering this business model, the following should be asked:

  1. How long has the company been in business?
  2. What is the start-up fee? (Many reputable companies don't require a high fee)
  3. What is the product return policy for the company? (Legitimate companies generally allow product returns)
  4. What is the amount of training available to you?

     
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