Residual Income = Formula for Success
Residual Income = Formula for Success

I’m a big believer in building business by educating people. Because so many people don’t understand the concepts of residual or leverage, you can get a lot of traction building your business by helping people to understand these two keys concepts. And, understanding these concepts and being able to explain them a bit will help you to gain confidence and get some rock-solid foundation that you can build on for years to come.

Years ago I coined the term Cooperative Capitalism. Team Work. Leverage. I think it describes what we do really well. The other way I put it is that instead of dog-eat-dog, our business model is dog-help-dog. Cooperative Capitalism – a new twist on building income.

John Paul Getty (the richest business person in his era) once said: I’d rather have 1% of the effort of 100 people than 100% of my own. Actually he said MEN, but that was 100 years ago…Anyway, what he’s talking about is leverage. You’re much better off to have 100 people working for or with you and getting paid a little bit on what they do. Your risk is spread out, so is your effort. It takes time and energy to create, but it gives you what many others will never have, and more to the point, what you might not otherwise have any way to have.

Employers get leverage by having employees. They pay a salary because they make money from the efforts of the people who work for them. Leverage. You can get leverage on your assets – interest is leverage – it’s your money working for you. Networking is a way to use ‘sweat equity’ to build leverage. You don’t have to invest a lot of money, you invest your effort (or your sweat) and your time. Along the lines of employing people, except everyone is in business for themselves, with the potential to create their own income, and to determine, by their own efforts, how big they want that income to be.

People seem to think that the networking model is people making money off other people in some kind of strange or even unethical way. I see it as being able to work with people, without the hassle or expense of employing them. Essentially, it’s just another method of distribution. Let’s look at a typical distribution chain.

You have the person who produces the product. They either buy or grow or build or create their own ‘ingredients’ depending on the manufacturer or the product in question. Let’s take a bottle of wine as an example. Someone grows the grapes, someone picks the grapes and prepares them. Those people may or may not be involved in creating the wine. Sometimes vineyards sell some of their grapes to people who make wine, sometimes they make their own, sometimes they do both.

Now, the wine gets produced and bottled and the distribution chain begins (well, it has to age etc, but you get the idea…). The wine is usually sold to a wholesaler or a distributor who then gets it to the retailer. Sometimes the vineyard sells directly to the retailer. Somewhere in there is the trucker – self-employed, employed by the vineyard or perhaps the distributor. Someone who works for the retailer (or the store owner in a smaller operation) unloads the boxes, someone else gets them on the shelf so you can come and choose it off the shelf and take it home. And, I didn’t even mention the manager at the retail locations who has the job of inventory, decision making, ordering, relationship building….I’m tired just thinking about it.

However – all along that chain people made money. It’s what greases the wheels of commerce. All that goes into getting the product to market and it provides many people with a living. In the network distribution model, the company usually produces the product and pays the distributor handsomely for building a distribution network that gets the product right into the hands of the end user.

All the commission that would normally be paid to many people: grower, manufacturer, trucker, distribution company, retailer (and sometimes there are more people involved, the jobber, etc, but let’s keep it simple here!) is paid to the distributor, the network builder. That commission might be split among several people, but again it’s the leverage concept at play, because not everyone was involved in making that transaction happen, but they’re getting a small percentage of each ‘action’ for having gotten that network started and because they’re contributing by helping it to grow and prosper.

And it’s very similar to the employer paying people – let’s go back to the vineyard example. Say the vineyard employs a vintner to test the soil, tend to the plants, decide when to harvest. And also employs people to pick the grapes. Those costs are figured into each bottle, they have to be or the vineyard owner would go out of business. Is that wrong? Unethical? Does it provide everyone with a living? Hopefully! It should be profitable for the employers and the employees. The employer is taking a bigger risk and so gets a bigger share of the profits. But, the employees are being paid (ideally well) and are entering into an agreement to trade skills, talent and time for money.

Here’s what’s cool in networking – products that get launched often need explanation – why would you use the product? What can it do for you? The distributor gets it explained efficiently, and has a financial motivation to share the word about it. Word-of-mouth is STILL the most powerful marketing medium, and our business model monetizes that effort in a fair, ethical and potentially profitable way. The consumer gets very personal service, and someone who explains the benefits to them and is interested in making sure the whole process goes smoothly. It’s win-win-win. Good for the company, good for the distributor, good for the end-user.

And, if that distributor can find some others to do the same and get a small percentage of their sales for teaching them how to do what they do, how great is that? Especially when each person has the chance to rise to their full potential – contrary to the myth that one person gets it all started and makes all the money. So, as you begin to explain the power of leverage, of team work, of each person doing a little, together we can accomplish a lot, people start to see and understand why network marketing makes sense. And, as that light goes on, you get someone who sees it and gets and might really do something about it. Again, it’s win-win!

Residual Income = Success
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