With all the turmoil in the economy, more and more people are looking for supplemental ways to make money (or even get out of having a job). Often, network marketing is being presented as a, or the, way for people to make money. You can now find companies selling energy-saving devices, financial services, certified wellness homes, or solar power. There's still resistance to network marketing from people who just don't understand what it is. The claims I hear most often is that it's one of those things-a pyramid scheme, or you recruit people to make money off them. Nothing is further from the truth. Pyramid schemes and network marketing are very different, and legitimate businesses require the sale of products or services in order to make money

So what's the difference?

Pyramid schemes are illegal. Network marketing is legal. Network marketing is no more than a business model and marketing strategy.

Other models for marketing are retailing and franchises. Retailing can be as big as Wal-Mart or as small as a local boutique, and can be actual brick and mortar, Internet sales, or both. Retail sales had been the most common form of doing business until franchises came along. Franchises can range in size from Soho Heroes to McDonalds. Their buy-in costs can range from thousands of dollars to millions. When franchises first came into the marketplace, they were called pyramid schemes, and Congress had considered outlawing them-they were legal by one vote!

So what exactly is a pyramid scheme? Let's say you had a "business opportunity" presented to you with a promise that you will make huge returns in a short amount of time for doing nothing more than making a $1,000 "investment" and getting others to do the same. You also pay a monthly $100 fee to use the company name, as will everyone you recruit. In return, for every person you recruit, you receive $500 recruiting bonus plus $50 a month out of the $100 monthly fee. Wow-50% commission. Sounds easy. But, where's the value in the transaction? It's possible that the founders of the scheme will attempt to hide the program to make it look like a legal network marketing company by claiming that they have a product or service. The product is usually of little value and such poor quality that only those joining the opportunity would have an interest in getting. If the "payment plan" depends on getting new investors to pay the earlier ones, it's a pyramid scheme. Once the "company" gets very large, there won't be enough money coming in to pay commissions, and those who joined later lose their money.

In legitimate network marketing, there are true products or services that are sold. The parent company, as diverse as Nikken, Young Living Essential Oils, or Prepaid Legal, develop products or provide services and use a network of independent distributors to market and sell the product or service. In a legal business, for a $1,000 investment you would receive something of value, such as a collection of products that you could use for demonstration purposes to start your business. When you recruit new distributors, you then receive a commission on the products that the new person purchases - not for recruiting the person. You also receive commission for products sold to people who do not join your opportunity. You can also earn monthly income, for example, the people you recruit or customers each pay $100 per month for automatically receiving a monthly shipment of supplements and you get paid $30 commission for each order.

So, you see the difference between an illegal scheme and a legitimate network marketing business? In the illegal scheme, there is nothing of value exchanged, and if there is a product, only those in the "company" have any interest in purchasing because they have to. In the legitimate business, people who are not distributors will have an interest in purchasing the product or service.

Another criticism of network marketing is that people get paid from the efforts of other people - therefore it's a pyramid. I'm not sure what people mean by that criticism. When people join you, you become responsible for their success - in fact, you become successful yourself by helping others build successful businesses. In a traditional business, the owner of the company makes money all the time off the efforts of the company's employees and in return, the employee gets a salary that is determined by the owner of the company. There is very little chance that you will ever become owner of the company - you'll continue to help someone else become wealthy. In fact, you'll be at the bottom of a pyramid with the owner of the company at the top.

To me, network marketing is similar to a real estate business (with advantages that I'll explain). Real estate brokers recruit sales agents. When a real estate agent joins a company, there is no guarantee of an income since real estate sales is purely commission-based. All fees for every transaction are paid to the real estate broker - not to the real estate agent who made the sale. The real estate broker then pays the agent a commission. The broker therefore made money from the agent's effort. The broker trains the new agent because a better-trained agent can make more sales, and therefore, more money for the broker. Of course, the more sales an agent makes, the better the income for the agent. A successful real estate broker has many agents, therefore duplicating the process. What do you think a successful agent would do? Once an agent learned all the tricks of the trade and has become successful, that agent could either go work with another broker who pays better commissions, or even go into competition as a broker. This is where network marketing has an advantage. After you train someone in being successful, your star stays a member of your team. All of your hard work continues to be rewarded.

Network marketing is perhaps the best form of doing business ever created. By using independent distributors, the parent company saves tons of money on advertising. In a traditional model, advertising is paid for regardless of results. In network marketing, the company pays distributors for results. The distributor is rewarded by receiving bonuses, free cars, and even free houses. The consumer has access to network marketing products that are high quality and cost-competitive to traditional retail. They also receive very individualized service, something that is lacking in today's retail climate. Ever try to find a sales associate at a big box? Even if you did find one, their product knowledge, in the majority of cases, consists of reading the label.

If you would like to learn what makes a good company good, read How to Evaluate Network Marketing Companies.