Residual income is an IMPORTANT topic if you want to create financial freedom in your network marketing business.
When we sit down with network marketers and ask them what their “residual income” is from their company, they always give the total income that they made for that month… which is not the right answer.
There is definitely some confusion around this topic. There is a MAJOR difference between these two types of income… so the intention of this blog post is to clarify this for you.
Most of the companies out there are direct sales opportunities, but they’re being presented as residual income opportunities. Their business models do NOT support residual income… so we are here to clear some things up regarding this topic for you.
Let’s Dig Into The Details About Residual Income
The #1 reason why people join this industry is to create “lifelong residual income”… not just to earn overrides. If that were the case, they would have just became a salesman or saleswoman, right?
There is absolutely nothing wrong with direct sale companies, if there is VALUE in what they are selling (that’s another story)… but there is something very wrong when these companies pitch creating lifelong residual income when the opportunities aren’t set up to fulfill on that promise.
Most of their business models are NOT designed to create residual income because they violate a very important universal business principle called the ‘80/20 Rule’. This is the exact reason why network marketers fail in the industry, but nobody has shared this kind of information with them before… until now.
Don’t Confuse Overrides With Residual Income…
An override is when someone earns a ‘one time’ compensation when someone within their organization makes a sale or enrolls a new person. Did you catch the KEY word in that sentence? Overrides are ‘one time’ payouts… not continuous payments.
I think the confusion sets in because in most of these network marketing opportunities you have the potential to make overrides off of so many other people besides yourself. People think since they didn’t actual do the work themselves to make the money, that it’s residual… it’s not! It’s an override…
If you have a team underneath you producing one time sales, and the majority of those customers don’t come back and re-order long term, then that is not the definition of residual income.
There is nothing wrong with commissions, we love them… but it’s residual income that will create wealth long term. Let’s be honest, isn’t this the reason that you joined this industry in the first place? Keep reading and let’s look at the difference…
What Is Residual Income?
Residual income can be compared to something like a royalty… a payment received on a continuous basis for something you did one time. Unlike an override or a commission where it’s just a one time payment, residuals get paid to you on an ongoing basis from the customer coming back and consuming month after month, year after year.
The reason why it’s so hard for network marketers to create this type of income in their business is the masses (the 80%’ers) aren’t sticking around much longer than 30-90 days… not even as a customer re-ordering the products/services.
In these types of companies, you have to keep bringing in new customers/sales within your organization to get paid… because the majority of your existing customers don’t come back and re-order long term.
Since the attrition rate is very high in all most these opportunities, meaning the majority of people quit within a few months after joining and don’t stay ordering long term… then there is no chance of earning “lifelong residual income”. Are you starting to see why network marketers fail in creating long term success?
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Thanks for reading our post about residual income.