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I_____________________________________________________________ NTRODUCTION If you’ve read the first part of this book, I hope I’ve convinced you of the importance of having a small, part-time, home-based business to provide financial security for you and your loved ones.
Many people don't like the business model variously known as Network Marketing, Multi-Level Marketing, Direct Marketing, "one of those things" or "a pyramid”! Let’s take a look at why this business model should be given more respect. What is a "pyramid"? It could be a huge structure in Egypt.
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One business model that many people disregard or even “hate” is the network marketing model. Let’s compare that model to the “normal” corporate model and see which one gives ordinary people the best opportunity to make whatever revenue they wish.
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It could be the structure of your family tree.
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It could be the structure of a corporate organization chart.
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D EFINITION OF PYRAMID BUSINESS MODEL _____________________________________________________________
Pyramid schemes are frauds that are based on recruiting an ever-increasing number of investors. The initial promoters (those at the peak of the pyramid) recruit investors who are expected to bring in more investors, who may or may not sell products or distributorships. Recruiting newcomers is more important than selling products. No new money is created in pyramid schemes. Investors who get in early take their profits from investors who join later. At some point, no new investors can be found and as a result the last investors, who are at the bottom of the pyramid, lose their money. They also face prosecution, as pyramid schemes are illegal. Pyramid schemes are illegal under the Competition Act, and serious charges may be brought against you if you are operating or
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Effective January 1, 1993, Industry Canada made amendments to the Competition Act, Section 55. A multilevel sales procedure is a pyramid if: • There is compensation paid for recruiting a new salesperson. • There is inventory loading, that is, the recruits must purchase an unreasonable quantity of product. • Purchases are required as a condition of entry. (You may, however, be required to pay for a sample kit, but this kit must be at cost.)
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affiliated with one of these schemes.82 _____________________________________________________________
N ETWORK MARKETING BUSINESS MODEL _____________________________________________________________ I am one of the people in the business group depicted in the diagram below. Are we involved in a “pyramid scheme”?
Two Business Models As we saw in the definition on the previous page, “recruiting newcomers is more important than selling products” and “no new money is created in pyramid schemes”. In the business group depicted above, there are only 41 people involved in the business. They are responsible for helping to bring approximately 60,000 customers to the company. None of the 41 people got paid for bringing someone into the business group. The 41 people get paid only when customers buy products.
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Ninety-eight percent of the corporate revenue comes from sales of products to customers with only 2% of product revenue coming from sales of products to the people participating in the business. The business group depicted above is somewhat similar to 41 people working in a large grocery store serving 60,000 customers. _____________________________________________________________
C ORPORATE BUSINESS MODEL _____________________________________________________________
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This is a typical organization chart for corporations.
Who makes the most money in this organization? The CEO of course. Do any managers earn more than VPs? Do any supervisors earn more than managers? Do any labourers earn more than supervisors?
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The people at the top make the big money and the people at the bottom earn the least. That’s what most people think happens in the network marketing model. Not true!83 _____________________________________________________________
P RODUCTIVITY KEY TO HIGHER EARNINGS _____________________________________________________________ In this group of 41 people, 9 people (circled) earn more than the people one or two or three levels above them. Could that ever happen in a corporate organization?
Two Business Models In the network marketing business model, people get paid according to the sales volume they’ve helped the company generate. The people who are more productive get paid more money! Isn’t that the fairest way to be paid? Please note that in the diagram above, the people who started earlier are at the top and the people who joined later are further down the list. As you can see from the circles, people who joined later can earn more than people who started earlier. 83 http://www.youtube.com/watch?v=tKj_7fGsZnc (Monday 19 August 2013) _____________________________________________________________ Profitable Planning & Management Inc. Page 120
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Productivity is the key to higher earnings. Do nothing, get nothing. Do a little bit, earn a little extra income. Do a little more, earn a part-time income. Do an enormous amount of work, create wealth. _____________________________________________________________
I_____________________________________________________________ S CORPORATE SIMILAR TO NETWORK MARKETING?
The corporate CEO earns their income based on the productivity of all employees below him or her in the organization chart. The same can be said for the VPs, Managers, Supervisors and every other employee in the company. Everyone in the corporate organization is paid according to a perceived level of productivity. Everybody gets paid only if products or services are being purchased by customers.
All of the statements in the previous two paragraphs can be said about everyone in a legitimate network marketing organization with
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One could argue the corporate business model is very similar to the network marketing model (multi-level marketing); however, there is one major difference when it comes to an individual’s earnings.
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the exception that the top spot in a network marketing corporation’s org chart is not necessarily earning the biggest revenue. If you participate in a network marketing business, you aren’t concerned about the title or earnings of people above you in the big picture. Your main concern is the earnings of the people within your own organization - the more they earn, the more you earn. It’s in your own best interests to find people who are more productive than you because you will always earn a percentage of whatever sales they help create.
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In the corporate world, if someone is more productive than you, they will very likely be promoted above you; then, they earn more than you but your income is no longer affected by their income. In the network marketing model, your income will always be affected by their income even if they are promoted to a higher title and earn more than you - they will remain in the same position within your org chart. You’re the person responsible for bringing them into the organization; you will continue to be rewarded for that. In the network marketing org charts displayed on previous pages, the people who are circled will always remain in the position immediately below the person above them who recruited them. The person above the circle will continue to earn commissions based on the organization built by the person in the circle - even as that person’s organization continues to grow and generate more sales. In the corporate world, some people are “afraid” of people who are more productive because they’ll make us look bad. In the network marketing world, you want to find people who are more productive than you are. You will always benefit financially from their productivity.
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S UMMARY _____________________________________________________________
I’ve also demonstrated that the corporate business model is very similar to the network marketing model. In both models, everyone’s earnings are based on products and/or services being purchased by customers. One major advantage of the network marketing model is that if you recruit a very productive person into the organization you will always be rewarded financially for doing that rather than seeing them being promoted above you and out of your income stream.
"Today network marketing is considered to be the best business model around for creating financial freedom and lifestyle freedom. It is the great equalizer empowering anyone from anywhere, with any educational background, and with any social, ethnic, and financial heritage - to build a thriving business. The only limitation is how big one can dream." – Kathy Paauw
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I’ve compared the Network Marketing business model to the corporate business model and shown that both models are legitimate. I’ve also discussed a group of 41 people participating in the Network Marketing model and experiencing various levels of financial success with several people earning more than those above them in the organization chart.