Introduction

There are many options for home based businesses, but they all fall into a few general categories. This hubpage is meant to help distinguish the different types and how they work. I have been involved or work with people that used to be involved in these over the years, so I feel qualified to offer opinions on them.

Residual Income

Businesses that are residual income based involve you doing some work once and being paid each month afterwords without having to do anything. Not too many home based businesses fall into this category. One of them can be insurance sales, but there are a few others that work this way as well. Insurance sales generally requires specific schooling and licensing to work this industry.

Pros

• Do some work once and make ongoing residual income without having to repeat the same work
• This can be a great way to build a very significant monthly income
• Time flexibility without sacrificing income. For example you may not have time to build your business but your income can stay close to the same.
• More of an executive style white collar job. No hard manual labor.

Cons

• You have to retain the customers to keep getting paid commission on their accounts (so picking a company with a high customer retention rate is critical)

Service Based

You run something like a maid service out of your house. This is really pretty much a traditional job but you own the company and/or work for yourself.

Pros

• Some flexibility in working around other things in your personal life but typically you still have appointment times that you must keep
• You can make a wage higher than typical retail jobs

Cons

• You only make as much money as there are hours to work

· Generally pretty hard manual labor

· Can be hard to find clients

Product Based

This is where you sell something and distribute them from your home. A good number of home based businesses work this way. It can be something like juice, chocolate, vitamins or personally made crafts etc.

Pros

• Some flexibility in when you work
• If you work really hard you can make money at it if the compensation plan is good

Cons

• For many of the major companies out there the compensation plan is not fair and as you make more money the more you have to put out, so it gets hard to really earn a good income
• You have to stock and distribute products. This can have insurance considerations along with using up space. Not to mention delivering of the products.
• Most of the major distribution type companies will suggest you “buy in” at a higher level in order to make more of a percentage of commission.

Party Plan

Party plans are also a very common home based business. Where the term “Party Plan” comes from is that they rely on you setting up house parties and selling products that are either delivered immediately or shipped and distributed by you later on. As you can see this category can fall into some of the other ones already discussed, but they are different enough that I think they should be considered a group of their own.

Pros

• If you are a good sales person you can make some good money at each party
• Some flexibility in when you work

Cons

• If you are not a strong sales person it can be very hard to make much money for the time put in
• You can wind up with a party in which you make nothing at all or very little but yet have invested the time to travel and setup, plus present
• Some of these have a lot of products to bring with you and show or sell
• You have to have a car
• You are usually working when everyone else is off. The parties are at night and weekends and can run quite late if you have much travel.

Get Rich Quick Schemes

I wanted to put “Get Rich Quick Schemes” in their own category as well. They often try to disguise themselves as one of the previous categories but I cannot stress enough that they are scams. Sure some people get rich but it is all about getting people signed up with huge start up fees or the product is extremely overpriced. I have never been involved in one of these schemes but I know many that have. I don’t know of a single friend that ever got rich, but the person that signed them up told them they would.

Pros

• Well once in a while people do make some big money once in a while, but honestly you would have better luck in a lottery
• Time flexibility

Cons

• Trust me you will lose a lot of money
• Big cash investment
• Generally the people you have signed up and lost money will resent you
• Borderline illegal. These are really a thinly disguised pyramid scam.
• Often make claims about health benefits that are not backed by science and can risk people’s heath by the users thinking it is a cure all

Conclusion

There are many options out there and many things to consider when choosing to work from home. If it sounds too good to be true it generally is. Some can give you a chance to make a very significant income, but they let you know that you have to do work become successful.

Pay attention to the details and make sure of what is the real income potential. Do they have audited statements showing statistics of what actual people earn?

Make sure whatever you choose to do, it is in line with your personal values and that they offer free training to get you going.

I feel strongly that the residual income model is the best option for most people. I enjoy the freedom of being a stay at home Mom and set my own hours.

An important thing to consider when thinking about working from home is can you put in the necessary time to succeed.  Different types of opportunities have different time requirements.

Party plans often have a minimum number of qualifying parties a week or month to remain working with them.  To be honest if you say you can’t work that much, it is best you not consider them because yes they are pushing you to do this but in order to make any money at it you have to surpass their expectations for numbers of parties.

Other home businesses have no expectation of how much time you have to put in, you can work it at whatever pace you want.  Obviously if you don’t do any work you are not going to make any money at it.  Well not completely true as the residual home based business can pay you from your previous efforts even if you were sick or were unable to work.  That being said you need to have realistic expectations for how much time you are willing to put in.

In any business at the start if you are only willing to commit to 2 hours a month and want to make $500 or $1000 a month, you might have a hard time meeting this goal.  Generally the more time you are willing to set aside specifically for your home based business will give you more results.

It is important to make the distinction between working part time or spare time.  Part time means you set aside specific times to work while spare time means when you are not doing anything else you will work at it.  I don’t know about you but does anyone these days actually have spare time?  If you did not set aside time to go work out at the gym would you go?  Probably rarely.  You have to set some hours and work those hours to achieve results.