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Network Marketing Compensation Plan - What is Residual Income?

how network marketing distributors are paid
Network marketing compensation plan for stay at home mom businesses.

This is a very important consideration in multi level marketing.

Important because it determines how to calculate residual income in order to stay a stay at home mom.

What is residual income, or a residual income model?

How do you earn money in a Network Marketing business?

What is Residual Income?

Residual income is a term used to describe money that comes in month after month with little to no effort.

That is not to say that it took no effort to begin with, but that it eventually comes to a point where the money is received without working for it.

For example, someone who owns an apartment complex, and has a management team running it would receive residual income in the form of profits every month.

Or someone with a huge savings account would receive residual income of interest.

Or a book author would continue to receive royalties.

The allure of residual income is the fact that it does not take up your time to earn; you go on enjoying life, and the money just keeps showing up.

Network marketing is a way that with a lot of hard work early on, one can be enjoying the residual income model for the rest of their lives.

How to Calculate Residual Income

There are two ways that a network marketing compensation plan works for stay at home mom businesses. Both bring in income, but only one is a residual income model.
  • Sell Product
  • Build an Organization
  • You can earn money with a network marketing compensation plan by selling products to customers at retail prices. Some companies allow you to set your own retail prices.

    The difference between your cost or the wholesale price, and the price you sell the item for, is your profit. Selling product is a very important aspect of Network Marketing.

    Not only to you receive a quick profit turnover, as you introduce your product to your customers by selling it to them, they will be more likely to want to join your organization.

    Which brings me to the second way to earn money in MLM, which is by far the most lucrative. The second way to work the network marketing compensation plan is to build an organization.

    You do this by recruiting, or sponsoring others. These people become your downline. When you sponsor others, you get compensated by what they purchase for their own consumption and for what they sell.

    Each company is different as far as how much of a percentage you get. Also, some companies require you to sponsor a certain number of people before you get paid. But for the most part, you get paid a certain percent on every order those you sponsor place.

    And here�s the best part: you also get compensated for every order placed by those they sponsored.


    MLM companies are called Multi-Level because they pay out on many levels, also called generations or tiers.

    Those you personally enroll, are on your 1st level. Anyone sponsored by someone on your 1st level becomes your 2nd level.

    Anyone sponsored by those on your 2nd level become your 3rd level.

    Your organization is made up of all the individuals on all your levels.

    How Do Multi Levels Work?

    The number of levels a distributor receives income on varies by company, but most companies pay out on 6-8 levels.

    Why is this good?

    One word: Leverage.

    Let�s say you are in a company that pays on 7 levels. You go out and sponsor three people who are on your 1st level.
    Level 1: 3 people
    Now each of those three people go out and do the same thing. They each sponsor three people of their own. Now your organization looks like this:
    Level 1: 3 people
    Level 2: 9 people
    And it continues. All your level 2 people sponsor three people, and all your level 3 people sponsor 3 people, and so on, through all 7 generations. Your organization looks like this:
    Level 1: 3 people
    Level 2: 9 people
    Level 3: 27 people
    Level 4: 81 people
    Level 5: 243 people
    Level 6: 729 people
    Level 7: 2,187 people
    Total in organization: 3,279
    That's over THREE THOUSAND people in your downline!

    You have leveraged other people's time, and resources, to build a much larger organization, in a much shorter amount of time, than you ever could have on your own.

    So what happens to your monthly commission as you gain thousands in your downline?

    Click Here for an MLM Compensation Example

    This network marketing compensation plan example is designed to help you more fully understand the possibilities in this industry.

    Keep in mind, however, that the above residual income model is a "perfect-world" scenario. Not everyone you sponsor will sponsor 3 people. Many will sponsor none. But others will sponsor 6, or 9, or 50. This is the reason why you never quit sponsoring, as your business needs you to succeed.

    Work with Rayven

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    Related Pages

  • Work with Rayven
  • Choose Your MLM Company
  • What is Network Marketing?
  • How You Join a Network Marketing Company
  • Compensation EXAMPLE for MultiLevel Marketing
  • Can You Get Rich With Network Marketing?
  • Why People Fail in MultiLevel Marketing
  • Is Network Marketing a Pyramid Scheme?
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