A was having dinner with a friend of mine a couple of weeks ago. He asked me for my opinion on a business this guy had pitched him about starting an online business. Now, my friend is retirement age, has done quite well for himself, so he really doesn’t need the money. He sells used cars for a living and golfs more than he does any work anymore. He doesn’t have much experience online beyond emailing and browsing. As I asked him a few questions about the offer, he tells me this guy has a business that will set up a website for him, with about 800 merchants who offer products that people can come to his website and buy from. He will be able to make money when people go through his site and purchase something. I said, “That’s great! How are you going to get people to go to your website and buy from you? There are millions of websites out there now, why are they going to buy from yours? How are they even going to know it exists?” He scratched his head and said he didn’t think about that, and as I talked about it with him further, he asked if I would talk to the guy, check it out and let him know. It would cost him about $49 a month to have the site.
Well, after a bit of phone tag - I connecting to the guy today. I will not share his name or his organization here. After listening to him broadly explain the overview (which he left a lot of details out on) I started to aks him questions. The problem with people like me, for people like him, is that I know what I am talking about, I know what to ask and am very direct about it. Here’s what I learned:
His is basically a multi-level affiliate business. Instead of buying products from the store, you buy products from your own store (your website) and you get a slight discount as you keep the affiliate commissions. Your sponsor (I did not get into the details of their commission plan) gets a cut also. So at first blush it looks like an online buying club - a pricey one at that ($49 per months!!!! - you better be saving some money! ) This is where it gets interesting - The way you grow your business to be profitable, is to refer your friends and family to the site and get them to buy through your site. I asked him how many “customers” he had, and he told me 15-20 (btw a lot of the numbers he would quote me were ranges, which is kind of fishy, because anybody running a decent business - especially a small one, should know EXACTLY how many customers they have - especially if they were regulars - more on that in a bit) and I asked him how much he was making off those customers and he said he did not know. I asked him for a ballpark figure and he said about $200 - $300 per month. So I will give him the high side of that number and lets look at the profitability or return on his investment of time and money (ROI). I also asked him how long they have been in business - he said about 6-8 weeks. He got these customers for doing what he did with my friend - selling them on the service. So I am going to give him the ideal and say he spent about 1 hour (between rejects and actual sales) getting each of his customers. So, lets break that down. Again- I am going to use low side expenses and high side numbers to examine the ideal here:
15 customers * 1 hour each to acquire = 15 hours.
1 month website costs = $49
Gross Profit = $300
Gross Margin (Profit after deducting expenses) = $251
Hourly wage you just earned (approx.) = $16.73
Now, some might argue with me and say “yeah, but now he gets that every month and he can get his customers to get more customers and grow that into a residual income which is what you taught me was the best way to do it!”
Yes, that is very true, and in many ways, this is close to the truth. Here is the ultimate problem though. This guy has to count on phone sales and personal referrals to build his business. Let me tell you, once I explain that to my friend, he is not going to like the idea that he would be bugging his friends and family to join this as a way to make it succeed and to grow. And that they would have to do the same thing - even with this great phone guy to help make the sales…. Anyone remember a little company called Amway? Same idea, slightly different model - to me will equal the same result = a few guys on top make most of the money, a few more guys in the middle make hobby income, and most of the people on the bottom, make little to no money and just support the system. It does not sound like a good deal to me.
Affiliate sales are a great way to make money if you are good at sales and marketing. You refer or sell someone elses product, someone else completes the sale, collects the money, and issues your commissions - easy peasy right? If it were that easy, everone COULD make it work. The problem is, most people don’t like to sell and are not good at it. Even the ones who do, don’t like to sell to their family and friends, and they certainly don’t want to count on the sales from their family and friends to make or break their business - as that adds an extra element of pressure no one likes. That seams like an awful lot of work to MAYBE make $16.73 an hour or so.
Now lets take the principle and improve it so that it WOULD work. First of all, the marketing system for the business has to be automated and online. It has to be able to explain and sell the business 24/7 FOR YOU. Secondly, the leads system (how you find new customers) HAS to be integrated so that any new member can just plug in and USE THE SYSTEM and can truly duplicate. Finally - anytime you can produce a business that Returns MORE than you put into it - even on a small scale - you can turn that into a monster income, even if you don’t grow that business into a big one. Let me explain it to you this way - I will give you a couple of examples. Lets say, you develop a niche site. For this example, lets say you develop a website that is devoted to Beanie Babies. You write lots of great articles and have picture and information on the site to help people find out if a Beanie Baby they have is worth a lot of money or not. You put some ads on your site and advertise it a little and it starts to make money - not a lot, but after you set up the site once, do the research, write the articles, etc, you make about $200 net profit. Lets say that you do 1 site like that a month. Your first month you make the $200. 12 months later you are making $2400 per month (12 * 200) and now you stop making sites. You did not cold call people, you provided a good service of providing helpful, informative content, and you are leveraging the power of the internet to put automation to work FOR you.
For the second example, lets look at it like an MLM / Network Marketing model. You start a business that makes $200 profit for you a month. You help 2 people sponsor 2 people (2 per month) do the same thing. That is, you sponsor 2 people once, each person they sponsor sponsors 2 and so on.
So the first month, you sponsor 2 people (we are going to figure all commissions at 10% to make the math easy - although most pay plans pay higher than that on your first level). So now there is you and 2 others in your business, you are making $200 + $40 in commissions.
The second month (and here is the leverage that MLM / Network Marketing can offer that NO OTHER BUSINESS can touch) You sponsor NO ONE PERSONALLY - but your first 2 downline members each sponsor 2 people! Now you have 6 people in your downline. Lets add up your profits = Your commissions from your sales $200 + $120 from your downline = $320 total.
The third month, the new people who joined last month all sponsor 2 people. Your total downline is 14 people. Your total profits from your inital business is still $200 and you are now making $280 from your downline for a total of $480.
The fourth month, the growth continues, slowly but steadily and you now have a downline of 30 people. Your profits are up to $800/monthly from your online MLM / Network Marketing business!
We proceed to the fifth month, where your group has grown to 62 people - Your profits are up to $1240 just from your downline which totals $1440 from your business.
If we continue this to the end of the year, you would have theoretically have a downline of 8180 people and be making $8,000 to $10,000 a month (the percentages on your payouts decrease as your groups grow - it is natural mathematical flow due to the distance of the people who joined later that made up the majority of your group.)
Doesn’t that sounds like a better strategy that building niche sites and typing till your fingers and wrists ache? Just kidding, building niche sites is a great additional income stream, but I think you get my point about the leverage of growing a group like that can bring you. As long as we are talking about it, lets look at the reality of some of the factors that start to play into when you are trying to build a MLM / Network Marketing business that size.
Uniformity: People just don’t come in and all act or grow at the same rates. This always causes imbalance in groups. Generally, I think of it as a 30/70 rule. Only about 30% of the people who will actually do the work, grow about 70% of the group. When you put 2 small groups side by side and grow them, always one group will outgrow the other. This is natural, and is what you find with most groups, most of the time. The ones that can actually grow, anyways.
Timing: People don’t all act at the same speed. So you don’t get this steady of exponential growth. But you still get exponential growth and great numbers!
(Back in the real world) When I started my Automatic Builder / Nutronix business I saw that rapid kind of scale up after my first 4 months - it started to grow exponentially. For example, in my first few months I had sponsored about 11 people who had stayed, but no one was duplicating yet. In the 4 month, I sponsored a few more people. One of those people went on to grow a big group in a couple of months - he had about 30 active people and about 70 who were just watching in his group at the end of those 2 months (does that sound like where you work? 
)
Within 4 months, my downline grew to have over 1000 people in it (my total business was about 8 months old - for those of you keeping track). It took another five months for that group of 1000 to double (unlike my previous theoretical example, where every 2 people doubled every month) at that point it was the 1 year anniversay to being in business and it had been 9 months since I had sponsored my first active recruiter. Can you see the power of that kind of model working for you?
If I extrapolate out to where my group will be at the 2 year mark, I would bet there will be about 3500 people in it then. Well before I hit that mark, I will be making $9,000 to $10,000 a month from that! And that is NOT 3500 ACTIVE members! about 30% of them are the ones who are driving the commissions and the growth! 70% of them are sitting and quitting! Imagine that, a business where it’s failure rate is higher than it’s success rate, yet it is wildly successful! Residual Income - Ya gotta love it! 
Now this business is actually in it’s baby stages, it has not hit momentum yet. Once it does, you will see that group of about 3500 people grow to about 35,000 within a few years. Where would you like to be in that group? Towards the top or the bottom?
If you want to learn more specifics about that story, or check out the business for yourself, you will find it at http://www.nutronixhelp.com
Matthew Yonan
