Tweamster's Blog

Residual Income | May 10, 2010

What Is It & Why Do I Want it?

People join network marketing companies for many reasons. I’m sure you can think of several; a like-minded social group to hang out with, a little extra spending money, something to do, a source of personal growth, getting a great product at a discounted price, being able to help someone with a product or service they provide through their company, because they benefited from the product or service and thought others should know about it.

Residual income is, or certainly should be, one of those reasons. So, let’s define what residual income is. Here are some definitions that give a very good idea of residual income and how it might apply to network marketing.

Refers to the income or monies that arise from earlier efforts which still continue to generate a revenue flow over time without requiring the need for any additional effort (e.g., a stream or flow of future royalty payments from a song).   http://www.tuition.com.hk/dictionary/r.htm#Residual_income

Royalty income that accrues to the owner of an intellectual property, such as art, books, lyrics, music, patents, etc.  http://www.businessdictionary.com/definition/residual-income.html

RESIDUAL INCOME is income from efforts which continue to generate revenue over time without requiring any additional effort (e.g., a stream of future royalty payments from a book).  http://www.ventureline.com/accounting-glossary/R/residual-income-definition/

The word comes from the Latin word “residere,” meaning “to remain behind, rest,” from re- “back, again” + sedere “to sit.”

In other words, you get to sit back and keep collecting income once you’ve done the work to generate the income. Personally, I kind of like this idea.

My brother likes it, he’s a musician and he gets residuals on things he’s done over the years long after he actually did them.

Insurance agents like them, they collect residual commissions as long as you keep paying your premiums.

J. K. Rowling (of Harry Potter fame) most definitely likes them.

Okay, So How Does This Apply To Network Marketing?

Let’s say that you sell someone a bottle of vitamins. Let’s say they pay $40 for it, and that out of this $40, you make a commission (income) of $2. The vitamins work well for them, they notice a difference in their energy level or they sleep better or they don’t get colds anymore. They keep buying these vitamins every month and you collect your $2 every month.

You keep telling people about these vitamins and they try them and like them and you have more people buying vitamins and you get your $2 from each of them (as a commission from the company you’re working with). Maybe you have 20 or 30 people buying vitamins from your company and you now are getting $40 or $60 each month which means your vitamins are now covered by your income. Hey, free vitamins, not bad, but you’re just getting warmed up.

You keep working at it and a couple of people who love the vitamins want to start selling them too. They each tell some people and start selling a few vitamins and a few of their customers want to start selling. And they do and they get their customers and a few want to sell these great vitamins. And so it goes…

Let’s keep it simple and say you get paid on four levels down; you sign up Bob who signs up Joe, who signs up Rose, who signs up Jack. You get paid on any vitamins that Bob, Charlie, Diane and Erin sell. And to keep it really simple, let’s say you get $1 on each month’s worth of vitamins sold in your organization. Each person signs up two people to sell vitamins and each seller sells 10 people vitamins every month.

You

Bob     Becky

Charlie  Crystal  Chad  Cara

Diane  Dave  Dominique  Dylan  Deirdre  Donny  Deanna  Dyan

Erin  Eric  Evvy  Erica  Erina  Eddy  Ev  Edsel  Erry  Elly  Eva  Edina  Ed  Edrick  Ev  Es

That’s 2 plus 4 plus 8 plus 16 = 30 people in your organization. Thirty people each selling vitamins to 10 people makes 300 people buying vitamins every month and you make a dollar for your part in helping the company acquire these customers. That makes $300 every month plus the $40 or $60 on the customers you personally acquired. Still not the gravy train, but are you selling those 300 customers every month? Are you answering their questions about the vitamins?

This is a very simplistic example, but I wanted to give you the flavor of residual income. Now, since you’re not selling all of these customers every month, does that give you just a tiny bit of incentive to go out and find more customers and more customer finders?

What if everyone on the above list decided to play a sales game and everyone found 2 more customer gatherers? Now you have 60 people selling vitamins and they all find 10 customers, that’s 600 customers or $600 every month. What did you do for that extra $300? You found 2 more customer finders.

What if the company that you worked with was paying $10 on the product you were selling? And $5 on the first 4 levels? Hmmm, $5 x 600 customers =$3000. Not wealthy yet, but I think you’ll breathe a lot easier at the end of the month with that extra 3 grand in your pocket.

What if they paid five levels deep? You really should start getting excited about residual income somewhere along about here when you start playing with the numbers.

If It’s That Easy, Why Isn’t Everyone Doing It?

I don’t recall saying it was easy, but it certainly is rewarding. Did you ever get anything without working for it? Learning is the key to succeeding in this business. Work hard, learn lots, discard what doesn’t work for you, find mentors. There are hundreds of ways to make it difficult or impossible. Mentors will help you avoid those.

Want to increase your odds? Check out your company first before you put your blood, sweat and tears into it. Go to www.AlansMLMTips.com and sign up for the “7 Days, 7 Insider Secrets” email newsletter.

Quote

“Everybody’s a self-made man; but only the successful ones are ever willing to admit it.”

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2 Comments »

  1. If you have that Entrepreneurial spirit, building your own business that pays you day in and day out is definitely the way to go.
    Waking up in the morning and having a check in the mail for something that you did years ago, puts a BIG smile on your face 🙂
    Sharlene

    Comment by Sharlene Stevens — May 11, 2010 @ 8:35 am

  2. Hmmmm – sounds good! Will you be my mentor?

    Carrie

    Comment by Carrie — May 22, 2010 @ 7:34 pm


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