How to create true, recession proof, residual income.
July 27, 2010 by Rob
Filed under ACN, How to Succeed in Network Marketing, acn-ohio
There are some common misconceptions in regards to residual income. I run across this all the time. People feel and think they are building true residual income when in essence they are not. They are really just selling their products or services on a monthly basis, still trading time for money, just like any normal job.
Let me explain,
To understand what I am talking about you first must really understand true residual income. Residual income means you earn income over and over again, month after month, day after day, from one single occurrence or event. This even could be the sale of a product. However, not every product can creates true residual income.
Here are some examples of residual income:
- Income from rental property.
You rent the unit and every month they send you money.
There is no thought or decision being made, they know they pay you or they don’t have a roof over their head. - Income from a loan or note, you loan money and every month they send you a payment with interest.
- Income from a required monthly service you provide or sell.
This has to be something someone needs and can’t live without!
IE: bookkeeping, accounting, cell phone, home phone, utilities, etc.
It is only true residual income if the service is required, and paid for month after month without question, thought, interaction or decision.
This is where people get it wrong.
Selling an unneeded consumable product like a juice, vitamin, lotion or potion cannot and does not create true residual income.
Here is why.
Each month when it come times to pay that bill or buy that product the consumer makes a conscious decision whether or not to send that check and continue on that product.
This means the product is resold each and every month. Maybe you don’t actually do the selling, maybe you do, that doesn’t matter.
The fact is that a decision is made every month. Is this actually worth the $XX I am spending for this product or service. If the answer is no your income is gone.
To create true residual income you have to provide a needed or required service, a service or product that is paid for each and every month without question.
I know when my mortgage, cell phone, satellite TV, gas and electric bills come in, they are paid every month, no questions asked.
There products and services not only create true residual but they create recession proof residual income. Income, that cannot and will not be affected by the state of the economy.
Let’s face it when times get tough, that autoship of your juice product, nutritional doo dad, lotion or potion is going to be the first expense your customer quits buying.
I know one thing for sure, if times were to get hard for me, I’m not ever going to quit paying my cell phone, internet, gas, electric, or satellite TV. IF I had two bills in front of me, a credit card bill and cell phone bill you can guess which one I am paying.
Now if everyone we know uses these services and pays for these services every month doesn’t it make sense to earn residual income by simply being the middle man for these services?
Of course it does.
If you think something like this is too good to be true you’re wrong.
You can see all the details by Clicking Here!
Any questions contact me directly.
Rob
216-408-9874
Great points.
I also would like to add the difference between residual income and passive income because I believe there is a difference.
Residual income like you said comes from rentals, insurance renewals, loans and stuff like that.
Passive income is what I would classify as the money earned from other peoples efforts. It is not always guaranteed and it is dependent on other people.
To allow your income to be dependent on your downline, and/or other outside factors is naive.
If you are not able to pay your bills with your own efforts you are playing with fire.
Good luck and have a wonderful day!
Joe
Thanks for the comment Joe.
Here are my thoughts on what you have mentioned. What you are referring to as passive income, is really leveraged income. Income created from the efforts of others and it is in fact the key to massive wealth.
The power of leverage is “Wealth Principal Number 1″.
If you take every billionaire out there and compare them, they will all have one thing in common. That is leverage, someone else does the work and they get paid.
One man’s efforts can only create so much but there is no limit to what a team of people can accomplish.
J Paul Getty said it best. “I would rather have 1% of the efforts of 100 men than 100% of my own”.
Earning leveraged income form the efforts of your downline is the power of network marketing. If you are only earning off of your own efforts it will be very hard to obtain great wealth. You are in essence still trading time for money, because it is only your efforts that are creating you income.
If a downline is not successful it is normally due the the training and upline support available to them or the lack of a duplicatable system.
Naturally we all know a majority of people will not make it in network marketing because their lack of commitment.
Our job as the upline is to make sure it is not our fault that they fail. We really need to over deliver on training and support. When building a true team using a proven system duplication is easy. However, the system has to be something that the weakest link on your team can accomplish. This is where most fail, they rely on tricky marketing tactics, complicated personal presentations, individual selling of the opportunity or product, ETC. Networking is not about any of that stuff. Yet that is exactly what most people are taught to do when they join a MLM.
When Aunt Betty who is 60 years old and only checks email on her computer, joins a company there needs to be a system in place that Aunt Betty can use which will produce results. If there isn’t there will never be good duplication. This is another place where most fail, they complicate things. Simplicity is the key to success in Network Marketing. If it is simple then anyone can duplicate and the downline grows. When the downline grows leveraged (passive) income is created for everyone above.
Here is the next problem, the internet has created 100′s of ridiculous MLM / Network Marketing opportunities that have no business existing. The compensation plans do not promote true teams and earnings to unlimited depths. They are all based around a quick sale and large commissions. These types of programs will never produce long term true residual income, nor will they produce great downlines that create leveraged income. Here you are correct, in a program like this you will have to create your own income, because most people will never duplicate.
A true networking company with a real compensation plan can create an amazing leveraged income. One of my upline team members, someone I work closely with, just made SVP with my company. He achieved that rank because of the efforts of his team (over 14k now) (BTW 5 years ago there was only 1 person under him). This position pays him 6 figures monthly. He could of never accomplished that on his own. Nor could I and chances are almost anyone who reads this would not be able to accomplish that on their own.
Without leveraged income we are leaving a fortune on the table. If the company you are with cannot or has not created you leveraged income you might want to reevaluate your methods of duplication, your compensation plan or your company.
The only reason I know this is because I spent 7 years in the wrong companies.
To your success!
Rob
Rob,
I enjoy your clarity.
New TSA member- Gary
Hey Robert, interesting post
It is a fine line between residual income and passive income.
Even in your examples something could happen to disrupt the income flow.
In network marketing to achieve residual income you need to develop leaders in your team.
If I have four solid leaders in my business do you think I would not have residual income.
However, it is very difficult to develop just one leader in your team let alone four.
Thanks for the comment Peter, I agree 100% there can and always will be things out of our control that will interrupt income flow. However, through smart business and good choices we can drastically sway the odds to our favor. Which is not normal for most network marketing companies.
If you have 4 solid leaders I am sure you would have residual income. But is it recession proof? Is it true residual? Keep in mind if it’s an unneeded product or service, each month there is a conscious decision made to pay for it or cancel it.
I know some big reps in one of the biggest drink business out there, I won’t mention any names here, but I am sure you know which one I am talking about. Since the recession hit they have watched their income dip, some by over 50%. These are guys who were making over 50K a month. So imagine building a big team and working up to 50K a month then over a one year period watching that drop to 40 or 30 or 20k. When a poor economy hits anyone in your business who is not making money will really question the auotship and the expense to be in that business. The attrition rate is much higher, because people are scared and or can’t afford the autoship.
Here is an example, I am not picking on any one company or product but lets say my company sells red bull energy drink. I build a team of red bull reps, I bring in a new rep he is excited and gets started, he hops on auto ship of a case a month. Two weeks later he disappears. Won’t return my calls he has decided this is not for him. He then stops his autoship. I am not only out a rep but I am also out any residual income from his autoship. I am sure you will agree this is a very normal and likely occurrence in network marketing.
Now lets look at a different product, lets say my company sells cellular service, home energy, satellite TV service, Broadband internet, and other essential monthly expenses. So the same new rep joins, he gets started, but instead of buying red bull which he likely doesn’t want anyhow, in my company his autoship is simply buying his essential monthly services through our company. The service and cost is the same or better than he already has. In most cases he can even keep the same provider, IE: Sprint, Verizon, Nextel, Dish Network, Direct TV, ETC. So the same thing happens two weeks later he decides this is not for him and he quits.
This is where my company and products makes all the difference. Just because he does not want to work this business, that does not mean he doesn’t still need his cell phone, home energy, TV, internet, etc. These are services he is going to keep regardless. So I will continue to earn residual income from his services until he is no longer a customer. Sure eventually he may change providers, or enter into a new contract, but in most cases I will be earning from those services for around 2 years. Some will stay a customer for ever and some will leave sooner. The bottom line is this is more residual than I would make if I was selling red bull to this new rep.
There is a bigger piece this puzzle that all but locks in the residual income. With my company to maximize my comp plan reps only need a lifetime 20 customers (actually 20 services). In most cases they will be 7 or more of their own customers. Since our products are essential monthly expenses this is possible without adding any additional monthly costs. This is key, we have very little attrition because there is no extra monthly autoship. Our autoship are products we all use and can’t live without, products like home phone, cell phone, satellite tv, internet, home security, home gas, home electric, digital phone, etc.
Our additional services come from close family and friends, mom, dad, grandmother, grandfather, aunt, uncle, brother, sister, etc.
“Hey mom do me a favor, I just started a new business I need to get 20 customers, can you get your Verizon cell phone, home phone, home gas, home electric and satellite TV, though me, it will really help me out. There are 5 more of my lifetime 20. My mom will be my customer until she no longer needs the service, this is true residual. Between me and my mother I already have 12 of my lifetime 20 customers. Much easier than finding 20 people to buy a case of red bull, or whatever unneeded products are being sold.
As for team leaders you are correct, they are hard to find. Company and team leadership and training is key to finding leaders and keeping them. You also need a system that they can plug into that works. If the weakest link on your team cannot duplicate the system your chances for long term success are almost 0. This is where most people they try to reinvent the wheel instead of sticking to what is proven to produce results. If you have a solid company, with solid products, that make sense and a system that works, it is much easier to find and keep leaders. One of my upline leaders went from 1 rep to 14k reps in 5 years and now sits on a six figure monthly residual income. Naturally he is not the normal rep, however, keep in mind he did this in a down economy, where other companies are struggling to keep the reps they have. We have had record growth the last 3 years in a row.
Network marketing is had enough, it just makes sense to not complicate things more.
Rob
I partially agree you on the true meaning of residual but if you’re in the rental business you could just as easily lose that tenant same as you held mortgages and you had to foreclose on them. They are not guaranteed either. If you have built a passive income that will not only provide for you but with excess and you have a product that will always be in high demand in an industry that was over $19 Billion and growing at the rate of 20% per year then I believe you have something.
Thanks for the post,
Michael
Thanks for your response Michael I appreciate your thoughts.
I agree you could lose residual in a mortgage or a rental house or any product or service. There will always be circumstances that will affect this. They key is to keep the odds in our favor. Like you mentioned with your example some industries and products are more stable and still growing than others.
Let me ask your thoughts on this. I have in front of me three bills for $50 each I can only afford to pay two of them. Which two will 90% of people pay?
Cell Phone = $50
Satellite TV = $50
Weight Loss Product = $50
You could toss almost any non essential item as the third choice and the decision will be the same. Unless you are dealing with an addiction product like smoking or alcohol but that’s a different topic all together. When times get tough and income is short, as they are now with our failing economy non essential products are the first cuts made from our budgets.
So it clearly makes sense that the most stable and residual income is created from essential expense and it’s easy to get because we don’t have to change any buying habits.
Carlos Slim just became the most wealthy person in the world passing, Bill Gates who held the title last year and Warren Buffet who held the title the year before. Most people have never heard of him, do you know what industry he is in?
If you said telecommunications you are correct.
http://abcnews.go.com/Business/worlds-richest-man-carlos-slim/story?id=10067743
The next disruptive technology to hit the market is the Video phone. Here is the Proof. Apple is releasing video calling on teh new G4 iphone. Cisco just bought a company called Tandburg for 3 billion dollars. Tandburg’s only commodity is video phone technology. If Crisco is investing 3 billion in this area and Apple is launching the technology right now we know this is the next big market trend. In the 10 years every house hold will have a Video Phone.
This is great place to create a fortune of residual income, my company already has this technology in place and has been refining it for the last 2 years. They are in fact right now the world’s largest provider of video phones.
Anyone can see more info on this technology here.
http://acnpros.acnrep.com
Thanks again Michael
Rob
Most will stop an autoship of a juice, vitamin, weight loss product, doo dad, etc before they would stop paying their mortgage, rent, cell phone, home energy, etc.
Hi,
In the examples you gave, that is not really residual income. If you are providing electric, you are currently providing a service and are being paid a fee for service. If your service stops, the payment also stops.
Residual income is income earned while you are possibly currently doing nothing tangible to receive the fees. Someone else is doing the current work and you are receiving a percentage of the fees.
But I do get your point about selling a nutritional product that could be the first item to be cut during financial hardship.
Hello Dr Goodstone, thank you for your comment.
I’m not sure I understand your thoughts. Maybe I didn’t clearly explain my thoughts in the post.
You mention residual being income earned from efforts of someone else. I would consider that leveraged income. Someone else does the work and I get paid. That is actually wealth principal number one. “The Power of Leverage”
Residual income would be income earned over and over from a one time effort. This is where my post comes from. I make the sale one time, when they sign up for the gas or electric. Every month the bill is paid because they need the service. So every month I make a commission. I don’t do anything else because I am a reseller, the gas or electric company does the work and provides the service. I just get paid commission every month.
Here is what makes it a true residual in my eyes is: There are no question asked monthly when the bill shows up it’s simply paid. Like rent, car payment or house payment. When was the last time your home energy bill showed up and you questioned if you really need this service and if you were going to discontinue using gas or electric? LOL I am sure the answer is never. There is no decision made, it’s just paid.
If you compare this to a health & wellness, juice, energy, widget, or something that is not required there is a conscious decision made each month to continue buying the product. Is this really needed? Is this worth $50 dollars a month? ETC. In most cases it is a product or service that will not be missed if discontinued. The bottom line there is a much higher attrition rate on these types of products.
Rob, what you said about residual income is right. What is missing, though, is the multiple streams of income, preferrably residual on all of them, in various niches.
Steven
Good point, one needs to be careful when having multiple streams of income. It is very easy to become involved in too many things and not see any results at all. I would not add any secondary income streams unless they were passive or your primary income stream is in place and working.
Rob
Hello Rob,
Hey, quite the debate going on here. Everything that everyone has said so far, its all good! Rob, I fully agree with you about many companies popping up that will do way more harm than good.
I may get some flack here but if 75% of the networking companies that are in business today would be lost tomorrow the whole industry would benefit big time and so would everyone involved in this industry.
And I think your right on as far as if your in Network Marketing you want products or services that people will continue to buy no matter what else happens in their life.
I see so many people joining up with companies that have products that when it comes to push and shove money wise on what things one may buy each month or even can afford to buy each month,when money gets tight, like it is nowadays for people, they WILL quit buying them! Oh boy, there goes the residual income with it!
For leveraged income you need to have products and services that people will buy every month no matter what because they can’t live without them.
That is the kind of company I have partnered with. They have products and services that everyone wants and needs and will buy no matter what in most cases, and offers them at a better price than you can get anywhere else in the private or corporate sector. Tim Sales says the same thing in his Brilliant Compensation Video. He said you want to be in front of long lasting trends. Trends the majority of the population wants and needs and will keep buying.
And that is what Rob is trying to explain in his comments. And I think he is right on!
That situation can create residual income. I’m not saying it will continue forever but business wise in Network Marketing its more bankable and makes good business sense and you have a much better chance of earning leveraged income from it.
And last but not least. Do not ever think that everything will be fine by just earning income from your network marketing company and that it will always be there. You know the old saying, don’t put all your eggs in one basket!
And really when you think about it, our most valuable asset is ourselves. The more we learn, the more we can do, the more we can share, the more people we can teach, will help anyone create more leverage in ones life from all kinds of different ways and means. We all reap what we sow in the end!
Wishing all of you all my best:)
Thanks Larry great addition and clarification.
I do agree with you if many companies failed to exists we would all be in a much better place. I’ll go one step further and say 90% have no business being in business. This should be something the FTC, SEC or AG’s should regulate more closely. Maybe have an application and approval process to start a network marketing company. Im not sure how they would do it but they should put our tax dollars to work and fix it.
The big problem is anyone can start one up with 30 minutes of time and a computer. It’s too easy and there is no one to answer to until the damage is done and people are being sued. Then it’s too late another hit to our industry and more people losing their hard earned money. The most import thing for people looking for an opportunity is to do research using credible third party validation. IE: the BBB, Direct Selling Association, Direct Selling News. These places will have real world information, and are place you can trust.
I personally try to stay away from new companies and startups because so few actually make it. Even some with strong integrity, great products and the best intentions have a very hard time making it. An overwhelming 90% fail in teh first 3 to 5 years and only 80 have made it past 10 years. WOW how about those stats.
Although a startup can reward you like nothing else. If you get it right and pick the right company you could be wealthy beyond your wildest dreams. For me I rolled my dice 5 or 6 times over the last 10 years I made some great money but ended up with craps each time. I’m getting too old to keep trying so this time I went for long term security and less up front payout. It’s now paying off in a big way.
Thanks again Larry I value you thoughts and appreciate you being a part of my blog.
Rob
Hi Rob,
Great, great point on residual income especially for the internet marketer, the truth is your just selling for the company your involved with If they decide to cut their commission or go out of business so do you. That is why my belief is to sell yourself and have people follow you with your opportunities. Got your blog through TSA. Please visit my blog and leave a comment. Have a great day.
Paul