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Home Based Business – Direct Sales Vs. Mlm
By Chris & Julie Chojnowski
If you’ve been looking at home based businesses for any period of time, then you have no doubt come across the terms multi-level marketing (or MLM for short) and Direct Sales. These are the two most common models for home based businesses. But do you really know the difference between these models and which one is right for you? While there are many differences, we’ll explore 3 key ones here.
Payment & Profit
When starting your home based you’re looking to earn maximum profit as quickly as possible. Now that sounds like a fairly obvious statement. Yet, one of the key differences between Direct Sales and MLM is when and how much you get paid.
In an MLM business, your commission is a small percentage of your overall sale, typically somewhere between 6 – 9%. That means if you made a $4000 sale, your commission would be about $280. The reason your commission is so small is because in an MLM the sale is being distributed amongst many people throughout the overall organization. In a Direct Sales business, typically the majority of profit from a sale goes to you, and can represent about 50% of the overall sale. So, the same $4000 sale would net you a commission of about $2000. Remember, it’s the same amount of work and effort to make the sale, yet the MLM the commission is $280 and the Direct Sales commission is $2,000.00.
Now let’s look at when those commissions are paid to you. In most MLM companies there can be a lag time of anywhere from 20 to 25 days to receive your check once you complete a month’s worth of work. This means, if you made a sale in the first week of the month, you would have to wait until the end of the month, plus an additional 20 – 25 days for the check to reach you. That’s as much as six weeks! In Direct Sales, typically the products are purchased directly from you meaning that you are paid today for a sale made today.
Sales Quotas
Another major difference between MLM and Direct Sales companies is quotas. Typically in an MLM company, you are required to purchase products each month to maintain a certain volume. Additionally you’re required to have a certain number of distributors in your downline who are also purchasing products. Anytime either of these numbers are missed, then you risk losing
your commission check for that month. It’s possible to have a scenario where you maintain the correct volume throughout the month, only to have one person drop out of your organization just before the end of the month causing you to miss out on a that month’s commission check.
In most Direct Sales organizations, there is no quota. You’re compensated on your actions when you make sales and don’t have to rely on a certain number of people being in your in order for you to get compensated on the work that you do, regardless of what that is.
Residual Income
So this leads us into the conversation of residual income. As we discussed, MLM commission checks are notoriously small per sale, which means you are heavily reliant on work other people do, which means you have no choice but to recruit a large downline in order to build any “reasonable” check. No matter how much you do, if they don’t build, you’re doomed to a small check. This means you’re more of a babysitter than builder.
Additionally, don’t believe that once you’ve built up a sizable commission check that you can just “retire” from your MLM and live off that residual. The minute you step away from your MLM (even if it’s for a month) your starts to dwindle, and that’s because you’ve removed a key component – you. Once you’re leadership and motivation is gone, so does the size of your commission check. And get this; it goes a lot faster than it took to build.
In Direct Sales, you’re paid large commissions, you’re paid right away, and you’re paid for the work you produce. You have an opportunity to invest those large commissions anyway you see fit to continue to grow your income. It’s called an exit strategy and it’s something you can do a heck of a lot quicker in Direct Sales than you could with an MLM. Once again, it’s your on your terms.
Choosing to have your own is infinitely better than continuing to work a job. But how soon you can quit your day job and retire from your home is entirely dependent on which model you choose. If you’re looking for maximum profit and complete control over your financial future, then Direct Sales is absolutely the way to go.
Copyright 2009 Inspire International Inc.
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Chris and Julie Chojnowski have been freeing people from "The Matrix" for over 15 years and assisting them to Master their Destiny and Inspire their World by teaching them about the concept of G.P.T. Get Your Free Report Now!
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