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Where does the money come from?

 

We’re in the money!

 

We're in the money

 

Have you ever wondered where all the money comes from to pay all of the distributors? It seems like some distributors think that there is a secret money tree at the home office and they just pick the money right off the tree. The money has to come from somewhere, right? Do you know where it comes from?

 

If you said, from the sale of the products, then you would be right. Give yourself a gold star!

 

Who buys the products? That’s the question. If you do what your company asks you to do, you made a memory jogger list that has the names and numbers of all of your family, friends, co-workers, neighbors, the mail man, the milk man, Superman, Batman and Spiderman. You should be selling your products to those people. If you aren’t selling to those people, turn in your gold star.

 

Now you may be selling your products to the cold market and that’s great! If you are doing that, give yourself that gold star.

 

Oh yeah, more than likely you are buying some of the products for your personal use. Most companies require a certain number of products or personal volume to be sold each month in order to stay qualified to get commission checks. If you are doing that, then great. Well, that is if you are getting a commission check. If you are buying products, to stay qualified, but you aren’t getting a commission check, turn in your gold star.

 

That gold star is getting a workout!

 

give yourself a gold star

 

From the perspective of your network marketing company, you are not just a distributor, you are also a customer. Hmm, that’s interesting. Okay, your network marketing company gets a gold star for that one.

 

This is how I see things

 

Your network marketing company got someone to recruit you into the business, knowing full well that you have a 97% chance of never making any money in the business, but you will be willing to buy the products every month that you are in the business. Why would they do this?

 

Apparently, they want as many customers as they can get. Go figure.

 

Let’s go back and see where the money comes from to pay the distributors. We already decided that the money comes from the sale of the products, but who is buying most of the products?

 

Most of the products that the company sells are bought by the distributors. I’ve seen numbers, from some companies, that 60% or more of the product sales are to existing distributors. Only about 40% of sales are to people outside of the business.

 

its not a zero sum game

 

Is network marketing a zero sum game?

 

The other day, I read an article, by a fairly well known critic of the network marketing industry. He said that network marketing is a zero sum game. A zero sum game means that if someone in the business makes money then someone in the business would loss the same amount of money. I’ve read about this guy and he seems like a pretty smart guy, but I do disagree with him. I disagree with him because he’s wrong!

 

If we accept that 60% of sales are from distributors and 40% of sales are from people outside of the business, then the break down would be like this. If you make $100.00 in commissions, then $60.00 of it would be from your downline distributors and $40.00 of it would come from people outside the business.

 

If 100% of the sale of the products were to distributors then he would be right.

 

I’ve seen numbers as low as 20% to 30% for outside sales in some companies. Now you’re looking at 70% to 80% of your money coming from your downline.

 

To sum things up

 

Most of the money in any distributor’s commission check came from their downline’s pockets. That downline is desperately trying to make money. They have dutifully bought their company’s products in that effort. Unfortunately, they have a 97% chance of never making money and in most cases they will lose money.

 

Network marketing isn’t a zero sum game, but it is close to that.

 

My conclusions

 

This is the craziest thing of all. The network marketing companies have charged you to be one of their customers. Can you imagine if WalMart were to charge people $299.00 to be their customers, what would happen to them? That would be crazy, right? In essence, that’s what the network marketing companies are doing. Who else, but the network marketing companies could get away with this?

 

I know you have to be thinking, “I paid $299.00 to buy a business opportunity!”

 

Have you noticed that network marketing companies have “opportunity” meetings? When you decide to join, you are getting a business opportunity. You aren’t getting a business. You’re getting a business opportunity.

 

Is it true, in network marketing, that you get what you pay for?

 

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