What Do Network Marketers Mean By "Residual Income"?

By Richard J. Norris

It's one of the first things you'll probably hear mentioned when you start looking into network marketing - residual income. But, just what is meant by the term residual income?

When you work a traditional job, you are trading hours worked for a set amount of money. Work more hours, make more money. But, if you stop working, the money stops as well. Residual income is money you make over and over again for work you've already done in the past. You may be most familiar with the term from industries such as television or music, where the performers are paid over and over again each time a television show they appeared in or a song they recorded is viewed or performed. Normally you'll hear these payments referred to as residuals.

One of the things that draw people to a home business opportunity is the offer of similar residual payments. Companies that employ distributors as their preferred advertising method produce products that are consumable, meaning they will be used over and over on a regular basis. Vitamins are a great example of a consumable product. And, every time these products are used and reordered, you get paid, thus the residual aspect of the network marketing business. So, you work upfront to sponsor another distributor, or sign up a customer for the products and as long as they remain ordering the products on a monthly basis, you get paid over and over for the initial work you did to introduce them to the company. Rather than rely on traditional marketing such as television, radio and print advertisements, network marketing companies choose to pay residual income to their representatives (you the home business owner) for spreading the word about their products.

The power of residual income is one of the most important elements involved in selecting a company to get involved with, selecting one that has developed a compensation plan that will maximize your potential to eventually build a "walk away income." Many representatives of network marketing companies eventually reach a place where their organization has grown so large that it will actually continue to expand regardless of the effort of the initial distributor. At this point they are free to "walk away" from active participation if they choose with the knowledge that they will continue to enjoy weekly residual checks that will continue to increase, while they are enjoying the life of their choice.

Summary:

Residual income is what sets network marketing apart from other forms of money generating activities, including being a traditional business owner. I doubt that any traditional business owner would ever walk away from his brick and mortar establishment, leaving it in the hands of others and bet his future income on the result. It's the attraction of residual income that should be why you initially explore network marketing and is why you should work to build your business once you've made the decision to join a business opportunity in the industry.

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