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Residual Income -- Making Money while You Sleep

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What exactly is Residual Income?
"Residual income is the reason that MLM business opportunities can be so lucrative. It's the reason why as many as 10% of new millionaires made their money in MLM... and who knows how many settled for just half a million?"

You're looking into business opportunities on the net, and you keep coming across the term 'residual income'. At first, you ignore it, one more piece in the puzzle that constitutes trying to find ways of making money online. But residual income keeps popping up. It seems lots of people are making a big deal out of this. Probably, it would be a good idea to find out what it means.

Residual income, also known as royalty income, is income that you keep on getting for months or even years after the work you did to earn it is finished. So, for instance, a song writer will get royalties on his song every time it is played on the radio, even years afterwards. The royalty for songs and literature lasts throughout the author's lifetime, plus 50 years, paying a small amount for each airplay, which can add up to a lot of money over the years. A big hit brings in a huge amount, which gradually fades down to a tiny trickle over the years, depending on the popularity of the artist.

How do you make Residual Income?

Not everybody is a pop singer, though! So why do people online go on about this so much? How can an ordinary bloke earn residual income? Oh, heck, I'm no good at writing stuff...

No, no. Chill. There's no need to worry. The way to earn residual income does not necessarily involve any writing skills at all. For example, you can make residual income as interest on shares. But you may prefer not to invest large amounts of cash in an institution that can drop through the floor and take all your hard-earned savings from you overnight.

Another possibility is investing in property. Buy a house, do it up, and rent it out or sell it on for a profit. A lot of work. A lot of up-front investment. And no guarantee the housing boom is going to continue long enough for you to even get your initial investment back.

But there is another way...

Looking for a Residual Income Opportunity

The way to earn residual income that you have been stumbling across all over the net is almost certainly a variation of the type of business opportunity known as MLM ('multi-level marketing'), relationship marketing, network marketing or referral marketing. There are many of these online, all offering different products, different pay plans, different startup costs and different trading zones.

At first glance, they all seem much of a muchness, but look again and you will find there are many pitfalls for the unwary. It's important to do your homework, and check out exactly what is on offer for your initial investment.

But it's definitely worth the effort. After all, residual income is the reason that MLM business opportunities can be so lucrative. It's the reason why as many as 10% of new millionaires made their money in MLM... and who knows how many settled for just half a million, or less?

Finding a network marketing business

Obviously, the level of investment is a factor for most of us, but in general, you will probably find the required investment is pretty minimal, far less than setting up your own business or buying a franchise. Once you've scraped together enough for your initial investment, it's time to find the MLM for you.

Is it legal?

The first thing you absolutely need to consider is: does this opportunity follow the rules governing network marketing businesses? You probably know that pyramid selling is illegal. Many people believe that MLM and pyramid selling are the same thing. This is not the case, as MLM is completely legal. So, how do you tell them apart?

As a swift rule of thumb: if you earn your money from sales or from getting customers (or recruiting others who sell or get customers), then it is a legal MLM business; if money is paid out merely for recruiting other representatives, with no customers or sales involved, then it is an illegal pyramid scam. Steer well clear!

  • Pick a product you can be proud of, at a good price. It's much easier to sell something you consider to be worthwhile. How sincere can you be about a shoddy item, or one that is overpriced? Before you can convince customers to buy, you have to convince yourself.
  • Pick a market you can sell to. If you're over 50, don't try to sell products aimed at kids under 20. You don't speak the same language or see things the same way. Similarly, if you're younger, products aimed at pensioners are probably not your area.
  • Even if you are pitching to the right market, it's also important that you feel right about selling this product to your market. For example, if you have a product that is aimed at people over 60, but you feel bad about selling goods to pensioners for some reason, it would be better choose a different product with a different market.

Once you have eliminated products and services that you can't work with, you will probably find you have reduced your choices to a more manageable number. This is the time to compare the companies you are looking at.

Choosing like from like

Right, so you have a number of network marketing businesses to choose from, all within your investment budget, with products and markets you can deal with confidently. The next step is to check out

  • how much is the initial investment?
  • how long does this cover you for? a year? a month?
  • is the product a 'pre-sold' consumable? (eg. gas, water, telephone, broadband, electricity)
  • do you need to keep stock? if so,
    • do you have to pay for your initial stock on top of your initial investment?
    • how much space will you need for storage?
    • is this a perishable product? if so, how long before you have to throw it away?
    • what is the company's policy on returns?

  • is a website included in the package, or do you have to pay extra for this?

In general, holding stock, dealing with deliveries and returns, is a nightmare and best avoided. No matter how wonderful your product, people will change their minds, send things back, and repeat business is not guaranteed.

The best product is what is called a pre-sold consumable; these are products your customer uses regularly, and is billed for monthly or quarterly. So long as your product is well priced and properly supported by the company, you will find the highest levels of residual income from these products. They have the added advantage that you never have to deliver electricity in the rain, or pay a refund for unwanted water and then wait for the company to reimburse you.

You may think a website is unnecessary. But, really, here you are trying to find an opportunity on the net. If you do set up in MLM, you will be trying to recruit others to work in your downline. Don't you think a website would be a good idea? Yes, I know you can set one up for yourself, but unless you are wealthy enough to pay someone, or skilled enough to write your own, it's not going to be a patch on what you would expect. You have to have something that can impress a potential prospect. It should both sell your product and act as an aid to recruitment. In the longer term, perhaps you will want to augment your free site with others, but when you first start, a good quality free website is a definite plus.

What about the residuals?

You should look at the potential residual income with care. The main rule to remember is: avoid 'forced matrices'. If you have a choice between one MLM with a forced matrix and one without, go for the one without. The forced matrix restricts your income.

The second rule is: choose the matrix (not forced) with the highest number of levels. The more levels, the higher your residual income will end up. It's a bit hard to explain briefly, so I won't try.

There are thousands of opportunities available online, many of them through my page at: <"http://www.informationzone.biz/what-an-opportunity/">www.informationzone.biz/what-an-opportunity, but whichever you choose, do bear these points in mind before making a final decision.

Finally, let me wish you as much success as you deserve in your new venture.

©Frann Leach, 2004

About the Author
Frann Leach

Frann lives in Edinburgh, Scotland. She has her own internet marketing business and is always on the lookout to recruit go-getters like herself.

Find out more: here


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