Residual Income Vs. Overrides

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residual income 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?

We shot a video today go further into depth on this topic, watch it now…

Please enable Javascript and Flash to view this Viddler video.

What Are Your Thoughts?

We’d love to hear your feedback on this topic.  Are you clear on the difference between overrides and residual income?  Leave a comment below and let us know what you think…

Also, share this post with your friends on Facebook and Twitter.  This is a topic that definitely needs some clarification, so pass this blog post on.  Your friends in the industry will thank you for it.

If you’re interested in more REAL Network Marketing knowledge:

Yours In Success,

Jason Fisher & Eric Goldstein

If you’re interested in learning how you can partner directly with us and earn true lifelong residual income, give us a call at 631-218-2720.

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31 Comments
  1. Thanks, Jason. You offered some fine, clarifying points. Sadly, many MLM companies fail to make this distinction clear to the masses of new recruits looking to earn lifelong residual income with their companies. Your explanation is easy to understand.

    Thanks, again,

    Jay

  2. Big High Five :-)

    This is a huge topic that clearly needs mention and thank you for giving it so much clarity and distinction in simple terms anyone can understand. So many folks out there are falling victim to many home business’ who mislead them into a “residual income” opportunity and your post will help a lot of folks out there who really don’t understand the concept of what a true residual income business model is. Especially in these economic times, there are those who don’t carefully research their prospective home business opportunities and jump right in because they see all the hype. As we know, it’s really important to get the facts first, and be sure to get a complete understanding of a home business before making any decision. I support your mission too and thanks for sharing this wonderful post – I am re-posting on my biz FB page too! Look forward to reading more posts soon, have an awesome day Jason and Eric!

    Susanna

  3. THANK YOU, Jason and Eric, for such a great article and video! I have to give a double ditto to Crissy and Amber’s statements as EVERYONE needs to read this and understand it!

    Thank you, again!

    Eli

  4. Amazing Clarity! Talking about the clouds breaking open and having understanding. Every person in the home business industry needs to read and understand this information.
    Thanks Eric & Jason

  5. Jason and Eric-

    I so appreciate and love that you guys are addressing the main reason why so many people get frustrated and give up…. because their companies cannot deliver on the residual promise. You have set out so clearly the distinction between residuals and overrides/commissions– the distinction is such a critical one! And just because a company requires an autoship does NOT mean you will have residual income… because the majority of people do not want the product being autoshipped in the first place!! This is the kind of information that needs to be shared with everyone interested in earning true residual income. Thank you so much for articulating it so clearly!

    You guys ROCK!

    ~~Crissy

  6. Jason,

    I am so grateful for the information you and Eric share. It has completely changed my confidence level in my decisions.

    There is such PEACE in KNOWING that the business I am now involved in passes such strict principles of integrity and business, thanks to you. Friends and family are now grateful for me sharing the opportunity with them, because it is ethical and realistically achievable.

    It’s great to be a part of your team, knowing that today’s efforts truly WILL continue to pay off, day after day, month after month, year after year.

    I’ve always wanted to position myself to care for my family in a way that previous generations of my family were not yet able to achieve. I’m breathing freer today, as I see the results of “doing my homework” and aligning with TRUE leaders.

    Many people claim philanthropy and integrity in their companies, but companies that truly possess these traits don’t need to announce it. The data speaks for itself.

    It’s a pleasure to do “business” with you. Now my business is naturally merging with my high standards for honest, quality ethics.

    My deepest gratitude to you and the truth, :) Carrie

    • Hey Carrie,

      Thank you for sharing such beautiful
      words. Eric and I appreciate all that you
      said.

      Messages like this is what keep us doing
      what we are doing. We are truly CHANGING
      people’s lives… and I say that with absolutely
      no hype.

      We’ve seen this response over and over. When
      people sit down with us, and take a look at what
      we’re doing… they’re blown away… and it’s because
      of simple business principles.

      We’re really looking forward to working with you
      Carrie… it’s going to be totally different from anything
      you’ve ever done.

      We’re all about honesty… the truth is ALWAYS
      good enough. You won’t find any ‘fakin’ it till you
      make it’ here.

      THANK YOU again for sharing here :)

    • Carrie,

      Thank you for your great words! Just
      like Jason said… we’re super HAPPY to
      have you on the team.

      This will be different from anything you’ve
      ever done… you’re in for a great journey.

      Chat soon :)

  7. Great points Jason! I actually had a conversation with someone the other day about this. A great consumable product it what brings the money down the road :)

    • Hey Emily,

      It’s important to have a product that is
      consumable… but it needs to go one step
      further than that…

      You need a product that is highly consumable
      by ALL… by the masses. This is what keeps the
      80%’ers ordering month after month, year after
      year, decade after decade.

      There are a lot of consumable products out
      there… but if they’re not highly consumable
      ‘by ALL’… then there won’t be long term spending,
      which in turn doesn’t create lifelong residual income.

      Thanks for sharing here Emily!

  8. Jason & Eric,
    Love that you guys are speaking out and addressing in truth the frustrations that many people in the industry are not speaking out about. Thanks for outlining the differences between residuals and commissions/overrides. This is the kind of information that needs to be shared.
    Wishing You Much Success,
    Krista

    • Krista,

      We’re just hear to share the truth and
      be ‘authentic’… so many are tossing that
      word around online, but aren’t living up to
      it at all.

      How can they when they’re being taught
      to ‘position themselves as a leader/expert’
      so they need to ‘fake it till they make it’…

      How is that ‘authentic’… hmmm??

      Thanks for adding to the conversation
      here Krista… we appreciate you!

  9. Hummmm, ya, this makes sense. Tnx for the heads up here. I totally “get it” and yet until I watched this very clarifying video I had not gotten it all. There’s so many half truths floatin around there – glad to see you guys are “keeping it honest”.

    • Alison,

      Happy that this post clarify some things
      around this topic for you. There is a lot of
      ‘half truths’ floating around the industry, so
      the intention of this blog is to keep it real
      and share the truth from the perspective of
      straight business principles.

      Thanks Alison… we appreciate you!

  10. Hey Eric, you know I’ve always loved your insights :)- I’m a pretty big fan of residual income, hadn’t really heard of the term override before – alot of great insights! thanks
    Kat

    • Hey Kat,

      Great to see you here! An override is
      just a commission that you earn on what
      someone else in your group does..

      For example, a real estate broker gets
      ‘overrides’ when an agent in his office
      sells a piece of real estate.

      It’s not residual… it’s a one time commission
      that happens off of something they didn’t
      personally have to be involved in.

      We wanted to bring some clarification to
      this topic as there seems to be a lot of confusion
      in the industry.

      Thanks for sharing here Kat!

  11. Eric and Jason,

    Thank you for clarifying this for a lot of people. I love my residual – I’m cruising in a pretty new car based solely on what I earn from my masses buying products every month. The override bonuses require me to be prospecting and sharing all the time which is fun and exciting. And then when I see my monthly grow because of that initial partnering! Now that’s freedom!

    With a big smile,

    Gail

    • Great to hear Gail… it’s a great feeling that if
      absolutely no new business comes in for the
      month…. that the big checks still show up.

      That’s true residual… and that only happens
      when their is a super high re-order rate.

      Thanks for stopping by the blog!

  12. Hello!

    Most of the companies have autoship, which is the product they have to consume every month and out of that monthly consumption we get our residuals, (if they don’t buy it they won’t be eligible for bonuses and commissions). In my company I get BOTH, bonuses and residuals, and my autoship is one coin of silver a month!
    Hope this helps!
    Dalia

    • Hey Dalia,

      You said something very important in your
      comment… “if they don’t buy it they won’t
      be eligible for bonuses and commissions”.

      There has to be more to it than people just
      buying the product or service just to stay active
      to hopefully earn commissions…

      There has to be overwhelming value to be
      a customer… whether or not there is a financial
      gain or not.

      Overwhelming value to be a customer ‘long term’,
      long term has in year after year, decade after decade.

      When people have to change their buying habits
      to get started with a company, buying something
      that they weren’t buying before, more likely than
      not they won’t continue to buy long term… especially
      when there isn’t a financial gain on their part.

      And the 80%’ers are the 80%’ers… and the majority
      of them aren’t going to take action and do what they
      need to do… and when they don’t, they quit… and that’s
      when they stop ordering the luxury product.

      Thanks for your comment Dalia!

  13. Hi Jason,

    thanks for clarifying the difference between overrides and residual income. Did I get you right that the decisive question is how many people come back every month to buy products and services ?

    Take care

    Oliver

    • Hey Oliver,

      It’s all about people coming back to
      order every month… that’s where the
      residual is built.

      Pure residual is how much is coming
      in when no new business is created in
      a month.

      Residual income creates freedom, and
      that’s the main reason why the masses
      join this industry.

      Thanks Oliver!

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