Making Money in Network Marketing

Network marketing is a business model utilized by some companies to sell products or services. This type of business model relies on independent sales associates or consultants to sell products or services as well as sign up other associates or consultants. Companies that typically employ network marketing do not spend money on traditional advertising.

Making money in network marketing can be very profitable when the right compensation structure is used and a solid team of motivated entrepreneurs is assembled.

There are several well known network marketing companies. You have probably heard of some of them. I have summarized some information from Wikipedia on a couple of the well known network marketing companies below.

Amway was founded in 1959 and is based out of Michigan. This is probably the most famous MLM company and many people are familiar with Amway. They distribute primarily household items, but have expanded their product line in recent years. In the United States, Amway is now operating under the name of Quixtar. Amway has been at the center of pyramid scheme controviersies. The FTC has ruled Amway is a legitimate business, but has imposed some rules and has fined Amway when the rules were violated.

Excel Communications is another good example of multi level marketing. Excel entered the telecommunications service industry when it was deregulated and had a very successful run before reduced profitabilty in the telecommunications industry took its toll. Many aspiring entrepreneurs made a lot of money by building huge networks of people using Excel long distance. They only got paid a few cents per customer in their group, but that led to big profits for those who got in early and ultimately built networks of hundreds of thousands of customers.

When you are interested in making money in network marketing, it is extremely important to work with a company that has a profitable compensation plan. It is also important to have a product that sells and that you understand and believe in. Ambit Energy is offering entrepreneurs a great way of making money in network marketing and I will use them as an example of how multi level marketing works.

A network marketing plan starts with becoming a consultant, sales rep, associate, or whatever a particular company calls it. As with any business, there is usually a fee involved in becoming a consultant. Often, you get a business start up kit with that fee.

Once you sign up as a consultant, you start to gather customers to generate revenue for the parent company. The more sales you make, the bigger the commission checks are that you get. This is just like a normal job where you get paid more (usually) when you do more work. The thing that you probably don't get paid for at work is the work that other people do. In a way, a plant manager gets paid for what the people that work for him do, but there is no direct relationship. In a good network marketing program, you get paid for the work that other people do. In Ambit, you get paid for the customers that are gathered by consultants for 6 layers below you. From the example below, you can see how this can really grow fast after you get a few layers below you. Mathematically, this is called exponential growth and that is a very good thing when you get paid for every person that enters your organization.

In many programs, bonuses are paid when you sign up other sales associates or consultants. In a true network marketing business, these bonuses are not paid until a certain number of sales is made. This is just like getting a bonus at your normal job for doing something good.

There's the basics of making money in network marketing. Check out the chart below to see what kind of money can be made with a good program.

A pyramid scheme as defined by the US Securities and Exchange Commission is a program where participants attempt to make money just by bringing new members into the program. They are illegal and should be avoided unless you really like living behind bars. There are many sites like Pyramid Scheme Alerts that try to educate consumers before they get involved in something unethical or illegal.

One simple test you can do without checking any websites is to look at how money is generated. If the money is generated by sign up fees and not customer purchases, there may be some unethical or illegal elements to the program.

One way to check if a company is good is to look it up on the Better Business Bureau or Better Business Bureau Online. Many legitimate businesses aren't members of the Better Business Bureau so it isn't an absolute must, but if a company is listed with the Better Business Bureau you have a dealing with a company that will give you a legitimate chance of making money in network marketing.