There are endless opportunities claiming to be the “best way to make money online”. Many claim to be the easiest MLM to make money with, or claim to show you how to make money fast in network marketing. You probably see friends on Facebook talking about their latest network marketing home business and how great it is. But, is network marketing a good way to make money? What is the difference between network marketing and a pyramid scheme? Can you make money with network marketing?
Multilevel marketing (MLM) opportunities get lumped together with pyramid schemes all the time. But what are the differences? Are you able to spot a ridiculous get rich quick scheme from a legitimate multilevel marketing opportunity?
This article (with video) will take a look at network marketing and show why most who jump in (yes, most) fail. I’ll show the common compensation plan structures and go over real numbers from network marketing income statistics that may surprise you. Is network marketing a good way to make money? Let’s see, shall we?
Is Network Marketing a Good Way to Make Money?
Watch the video below to fully understand the difference between network marketing and a pyramid scheme. What are some examples of popular MLMs? How do network marketing compensation plans typically work? What is a realistic expectation for someone beginning a network marketing business? And most importantly, is network marketing a good way to make money online? Can you make money with network marketing? All these questions and more are answered.
Difference Between Network Marketing and Pyramid Scheme
“So is that thing you’re doing one of those pyramid schemes?” This is the question everyone hears when they first jump into network marketing. The fact is, it’s an honest question, and most people actually don’t know the real difference.
The difference between network marketing and pyramid schemes is that in a pyramid scheme, which is illegal, money is exchanged without any service being rendered or product being sold. It involves passing the buck to the person who just gave you their money.
“Give me $100 and I’ll show you how to make $500.” “Sure, sounds great! Here’s the money. How do I do it?” “Go get 5 guys and ask them each for $100 like I just did to you. You’re welcome.”
Network marketing, on the other hand, involves the purchase of a product or service and then recruiting a team and teaching them to do the same. Because of the product or service involved, it makes network marketing legal.
One of the main reasons for its popularity is the concept in network marketing of getting paid not only for what you do, but for what your team does as well.
Is Network Marketing a Good Way to Make Money? What are the Most Profitable MLM Companies?
There are many successful network marketing companies who have been in business for a number of years. This doesn’t necessarily mean their distributors are all making money with the business. This simply means that there is a steady growth of people who are buying into the business opportunity and that the product or service has stood the test of time.
A true measure of what distributors within a network marketing company are making is the yearly income disclosure statement. We’ll take a look at a few in just a bit to show the similarities.
There are many diverse network marketing opportunities that span a wide range of niches. There are literally thousands out there online. Some have been around for decades, while others are new up and comers.
Some other popular network marketing businesses you may have seen on your Facebook feed are:
- It Works
- Scentsy and many, many more.
Is Network Marketing a Good Way to Make Money? How do MLM compensation plans work?
There are several compensation plans widely used within the network marketing industry. It’s always important to research and understand the compensation plan before beginning a network marketing venture. While each specific opportunity can add it’s own nuances to a compensation plan, the majority use the core elements of the unilvel, binary, and matrix compensation plans.
How does the Unilevel compensation plan work? With this compensation plan you are able to go as wide as you like. This means you can personally sponsor as many into your team as you like and they are free to do the same.
It is the simplest of the 3 main MLM compensation plans. You will get the most compensation for the members you personally sponsor, and then get decreasing percentages of your team’s commissions as they get further away from you.
In this basic compensation plan there are no ranks and everyone is an equal distributor. No one can surpass someone who’s above them. There are hybrids of this compensation plan like the Breakaway compensation plan which allows for a member of your downline to be able to “breakaway” when he or she meets certain requirements.
How does the Matrix compensation plan work? With the Matrix compensation plan you have a set number of spots open in your team and it is your job to fill them.
For example, in a 3×5 Matrix compensation plan, each distributor can sponsor 3 people into the team and you will get compensated up to 5 levels deep.
When it comes time to sponsor that 4th new distributor, instead of being able to place him directly to yourself, you have to find an open spot in another level below. This is called “spillover”.
This “spillover” feature is one of the selling points of the Matrix compensation plan. If you find yourself directly under someone who is exploding the business, you may be the recipient of distributors being placed in your team.
How does the Binary compensation plan work? The Binary compensation plan or Dual Team compensation plan allows you to build two teams: a left team and a right team.
It is unique in that it only allows you to personally sponsor 2 people into your team, however this allows for a good amount of spillover, thereby helping your downline.
The Binary compensation plan has one major downside in that you only get paid for the lesser of the two teams.
To fully max out this compensation plan you’d need your team to grow out symetrically which is very rare. In other words, if your left team has absolutely exploded, with 50+ members and growing, while your right team has a whopping 3 distributors, well, you get paid on those 3 distributors on the right and not on the exploding 100+ on the left.
The Reality Check: Network Marketing Income Statistics
The real way to answer “Is network marketing a good way to make money?” is by looking at network marketing income statistics. This is a black and white, bottom line, objective way to determine how the majority of people fare with a business opportunity.
Income disclosure statements are public record, and should be easy to look up and easy to understand. It will show the revenue breakdown for distributors of a company.
Unfortunately, the vast majority of network marketing income statistics show that most distributors do not make their money back with network marketing MLMs.
Let’s take a look at two income disclosure statements for a couple of network marketing opportunities I’ve written reviews on. The first is for Organo Gold.
As you can see, the vast majority of distributors with Organo Gold in this particular year (86.34%) made an annual revenue of $0-$599. When you take into account the expenses and membership fees involved, the earnings is less than the expenses. Zero profit. Additionally, only 1% made the lofty six figure numbers many dream of when enrolling into these network marketing opportunities.
The following World Ventures income disclosure statement fares even worse.
In the example shown above, less than 1% of distributors earned what I would call full time income, and a whopping 77.76% of all distributors didn’t earn a single commission: $0.
Network marketing MLM opportunities appeal to many people looking to work from home. The difference between network marketing and a pyramid scheme is all about the product or service rendered.
Legit network marketing opportunities use a number of compensation plans like the unilevel, matrix, and binary compensation plans. Be prepared to recruit, recruit, recruit.
Further, they usually claim to have multiple ways for their distributors to earn revenue. They really sell the idea of getting paid on the efforts of others instead of just getting paid on your own.
Unfortunately the network marketing income statistics don’t lie. Is network marketing a good way to make money? Can you make money with network marketing? While a very small percentage, usually at or below 1%, make full time income, the vast majority who get involved with network marketing opportunities do not make their money back.
If you’re looking to create a revenue stream online, there are better, more straightforward ways to build an online business. I highly recommend taking a look at the online platform I found that opened my eyes to how online business works. No recruiting, no experience needed, and the training and mentorship are second to none. The best part, it’s free to try. What have you got to lose? Create your free account and see for yourself.
Has this article answered your question “is network marketing a good way to make money?” Do you know and understand the difference between network marketing and a pyramid scheme? What’s been your experience with network marketing in the past?
Share your experience in the comments below. I’d love to hear your story. If you have any questions, as always, don’t hesitate to ask.