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That's FijiAirways.com. From here to happy. Flying direct with Fiji Airways. About once a week or so I get an email from a listener that goes something like this. "Joshua, what do you think about net work marketing, aka multi-level marketing? Is it a great business opportunity or should I be careful?" Today let's tackle this minefield.

Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge, skills, insight and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less. Today let's tackle this very important question because done right, network marketing could be very profitable.

Done wrong, it could cause major problems. Network marketing is one of those things where it's increasingly hard for me to believe that we haven't, all of us, had at least some exposure to it. What I have found is that many people that I've interacted with, usually if we look back and start counting, we can find a couple of network marketing experiences in our history.

I know for me, I've been involved in at least three of them that I can, maybe two or three of them that I can think of. In high school I got involved with one that featured selling discounted plans for dental expenses. This was a little bit of an ironic exposure, early exposure to the world of health expenses, which I later went into the health insurance business with.

I was involved in a nutritional supplement company that many members of my family were involved in. I had a family member that was involved in a company that made air purifiers. My grandmother was involved with the granddaddy of all network marketing companies, the one that sells – my mom always used SA8 as her laundry soap for years and years.

What else? If I went back through, I had a family member that was involved in a decorating network marketing company, involved in demonstrating or putting up decorating materials for home decorations. I've been to parties for the home goods suppliers that sell that. My wife recently went to a party for the company that does – manufactures silver-infused cleaning materials.

What else? There are so many interesting oddball little companies. So I've got a good amount of experience with network marketing, but I've also done a lot of research on the subject. I was heavily recruited by a company that uses the network marketing approach to sell insurance products and investment products.

In fact, I even maintain a short mental list of a couple of companies that are kind of backups of backups. If all of my business ideas failed, if all my plans failed and I needed to create money, if I didn't have a job, I have a couple of short companies that I've come across that I would keep on my list of – that are on my list of opportunities that I would personally consider pursuing as a way to provide for my financial needs and the financial needs of my family.

So I have a deep appreciation for network marketing companies. I also have a deep suspicion of that network marketing arrangement. So let's explain, starting with a discussion of what is network marketing. I'll usually use this term. Network marketing could also be used multi-level marketing. Both of those words are charitable and I think accurate.

However, there are other terms. For example, people often allege that network marketing companies and organizations are pyramid schemes. Or of course, if you get to the word of pyramid scheme, quickly people will get to the question of a Ponzi scheme. So what are these things? Well, a network marketing company is relatively simple.

You sign up with a company as a distributor. Names of course will vary with the company. But in essence, a distributor license gives you a dealership license, gives you the ability to represent that company's products to other people. Usually you're going to be representing that company's products to people that you know, people within your network.

That's why it's called network marketing. The idea is if you find a product or service that you love, then why wouldn't you want to tell your friends about it? If they love it and they buy some products or services from you, then why should you not earn a commission on it?

That's the basic idea of network marketing. Now network marketing would be very simple if it were kept purely in the realm of marketing products or services to your network. However, let's move into the term multi-level marketing. This term connotes the idea that you can bring other people in underneath you as a level under you.

And if you are selling products to your friends and you're earning a commission on that, what about the idea of getting your friends to sell products to their friends, to the second level of the network? Why not sign them up to represent the products? And if you've gotten them to sell the products to their friends, then wouldn't it be cool if you could also get a commission on their sales activity?

And so that's where we start to get into levels of marketing, the idea here of a multi-level marketing organization. Picture in your mind a pyramid and you at the very top of the pyramid are the first – you're the first person. Can you underneath you recruit a couple of other people to sell this company's products or services?

And then what if you can help and encourage them to recruit some other people to also sell this company's products or services? Well why not share in the commissions from the levels below you? Nothing wrong with that. So this is where we get the term multi-level marketing. However, notice I've brought in the word pyramid.

What is a pyramid scheme? The idea here in a pyramid scheme – and this is where we start to get from accurate to possibly accurate but probably uncharitable at the very least. An uncharitable term to use, a pyramid scheme or a pyramid scam if some people would call it is where you are involved in getting other people to sign up under you and they're involved in getting other people to sign up under them and they're involved in getting other people to sign up under them and everybody is making all down the road – money all down the line from all the people that are under them.

So where does it become a scam? The answer is very simple. It becomes a scam when products aren't being sold, just distributorships. And this cutting right to the chase is I believe the most important thing that you should keep in mind when you are looking at a business opportunity that is functioning according to this network marketing or multilevel marketing approach.

Are products being sold or are business opportunities being sold? If business opportunities are being sold, we start to get into the – primarily, we start to get into the questionable area where it's questionably ethical, which brings me to the final term I brought in which is a Ponzi scheme.

The Ponzi scheme is an investment scheme where somebody comes in and recruits investors to chip in a little bit of money for a great return. Then they use that money and they go and recruit other investors and then they use the money from the second line of investors to recompensate the first line of investors and they keep on doing this down the line, down the line, down the line.

But the problem is there's never an investment actually being made. And so ultimately, the Ponzi scheme collapses and there have been many network marketing organizations over the years that have collapsed because at the end of the day, very few products were ever actually being sold and consumed and seemingly the only people that really got rich were the people who were in at the beginning, who had the biggest networks underneath them.

So now that you understand these terms, I think you should look at opportunities that you see and ask yourself the question, "What type of opportunity is this? Is this a network marketing/multilevel marketing opportunity or is this going over in the direction of a pyramid scheme?" Now in a moment, I'll talk about the benefits and drawbacks of multilevel marketing opportunities.

But I want to lead with the most important factor which is this. You have to ask the question, "Are products being sold?" And is the bulk of the emphasis that you are hearing in the sales presentation, in the training, etc. on the sale of products or on the recruitment of salespeople?

I believe that both are legitimate activities. The whole concept of a pyramid structure of a company wherein people at the top earn income from those who are underneath them and reporting to them is the way that most companies work including any company that I've ever been involved in. If I'm the owner and founder of a company, I go and I have a product or service that I'm trying to get to the marketplace.

I hire employees underneath me and those employees earn wages for their own activities and then I take the excess profit that I get from the sale of the product or service minus the wages that they get and I get to keep that as profit. Now it's a little bit more – it's a little bit not as direct as it is in a sales organization as it is in most companies.

But this is traditionally the way that sales organizations work. For example, the life insurance industry from where I came professionally, the life insurance industry has worked on this principle for a very long time. Generally a life insurance company will grant to an employee or an agent something that's called a general agency contract.

They'll grant a geographic – an exclusive geographic contract to a person called the general agent. This general agent contract stipulates that the person who's signing up as a general agent has the exclusive right to market this company's products or services within a geographic area. They also have a duty to actually effectively market that company's products or services or the contract will be canceled.

The general agent can then go out and recruit – excuse me, and the general agent, the first person, the general agent will, based upon the amount of products sold within their geographic area, they will receive their compensation on a commission rate, a generalized commission rate for all of the products that are sold in the general area.

But the general agent doesn't go out and do all the selling themselves. What they do is they recruit people who are called district agents. So a district agent is also somebody who usually has a geographic – an exclusive geographic contract. I'm just speaking here specifically to the life insurance business.

That district agent is given a smaller geographic agent. The district agent has a duty to develop a sales force of life insurance agents within that geographic area and to report back up to the general agent. And then the district agent goes and they will recruit life insurance agents and they'll also put in place a management structure of some kind over those life insurance agents.

The names for the contracts will vary. But usually, you'll have a sales manager structure of some kind and you'll have a producer structure. Ultimately, most of the production will fall on the actual producer, the life insurance agent, individual life insurance agent out in the field selling something like a life insurance contract.

But all up the way, as they are productive, the life insurance agent will earn a commission. Their sales manager will earn a commission. The district agent will earn a commission and the general agent will earn a commission. But all along the way, each of those people, the general agent, the district agent, and the sales manager all produce service or facilities of some kind to help the life insurance agent do their job.

All they provide is an opportunity, an opportunity for the agent to go out and make a living. But they simply provide training and support of various kinds. And it's up to them to figure out what's the best way to do it. So this structure has been around for a very long time.

And I don't see anything wrong with that structure from an ethical or moral basis. I see nothing wrong with that structure. It's a voluntary association between free people who are voluntarily entering into this contractual arrangement with one another. Nobody is being forced to do anything. And at any point in time, the marketplace will offer competitive opportunities for them to go and do other types of work, for them to go and work with other people, other companies, et cetera.

So I see nothing morally and ethically wrong with this pyramid approach. This is one of the standard complaints that's lodged against network marketing companies. I don't see anything wrong with it. That said, there are a couple of problems that need to be looked out for. Number one, is the management and leadership structure actually providing value for the individual agent at the bottom?

And that's one thing that's unique about the life insurance industry is that those general agents and district agents and sales managers, they have to provide value. If they don't, number one, they're going to lose the agent because the agent is going to fail. And if they're not providing value, then ultimately the company, the life insurance company whose products are being represented is going to say, "This is a very inefficient form of sales.

Let's go and find another sales structure. Let's go direct to the consumer." And many insurance companies have done this and have tried it. The most unique area is where direct to consumer hasn't generally worked has been life insurance. You could compare here something like automobile insurance, Geico. When Geico is marketing with their cheesy little commercials all over the place, they're not telling you to call a Geico insurance agent even though that's what you're actually doing when you call Geico.

They're telling you to call Geico. What they've done is they've built a direct to consumer pipeline where if you want car insurance you go right to Geico. That's different than another company that has a local agency right there in your town, maybe a company like a state farm where they have a local insurance office.

And generally you expect to go into the local insurance office to work with the insurance agent to work out the things that you need. What companies have found in the areas of life insurance is that although direct to consumer marketing is possible, you see ads on cable TV, et cetera, for life insurance sales, generally most people don't on their own decide, "I'm going to go out and buy life insurance." Life insurance is not required by law and it generally will involve the salesmanship of an insurance agent to convince people of the value of life insurance that they'll buy.

So life insurance companies continually find that this agency system provides enough value for them to sell their products at an acceptable rate. So the system has to bring value. But if there's too much taking and not enough producing, then it will collapse. And this unfortunately is what has happened and is happening and will happen with many multi-level and network marketing companies.

And I think you should steer clear of a company or organization that is built primarily on recruitment and not on the sale of product. Because fundamentally the company that's offering the distributorship has to be selling product. Nothing is happening until product is being sold. If all that is being sold is business opportunity and no product is actually moving, then we've got a problem.

That company will in time collapse because there's no value being brought. Now, the couple of things you want to be careful of, some network marketing companies will sell product packaged up with the business opportunity and they'll do it either in an ethical way or in an unethical way. For example, I have a family member who's involved in a company where their distributorship license is based around the sale of a small kit of the company's products.

Well, in that situation, if you buy that complete kit, you have an opportunity to go ahead and order at a wholesale level. Nothing wrong with that. And you have to be careful with the nothing wrong with that. It's a reasonable enough cost to mean that it's not a huge problem.

However, some companies have had such massive amounts of minimum product orders that they expected that it's really caused significant problems and it's gone into a very shady gray area where – can you make the argument? Well, it was done openly and ethically, volunteer exchange between two people. I think you can make that argument.

But with all the information fully understood, it just feels pretty slimy. You wouldn't want to be involved in it. So this is where the reputation of people having thousands of dollars worth of product in their garage has come from. So be careful. My litmus test for whether you should pursue an opportunity or not is based around product sales.

Is the product being sold? Now, product can be sold and people can also work on a recruitment. But you have to recognize that recruitment is in many ways much more difficult and requires much more work than the sale of the product. There's a very small subset of people who are going to be very good at recruitment and very good at training a sales organization.

This is where a lot of the network marketing companies break down because everybody is recruited. Then it leads to very sloppy, very difficult sales organizations. Another white line test that you want to look for is how far down does the compensation go? In the example that I illustrated from the venerable life insurance profession, you notice that you had a few structures, a few levels of compensation.

But ultimately, that level of compensation in my example was capped out at about four – general agent, district agent, sales manager, and company. So actually three levels there – sales manager, district agent, and general agent. That is a supportable structure where you have a few layers of incentive compensation built.

But if you were to go much beyond that number – and I don't know the specific number, maybe three, four, five, six, I don't know. But if I came across a company that was offering compensation on an unlimited number of people underneath me, there's just no way to support that much money.

There's no way that you can earn all down the road, down the line. So if I came across a company like that, I would turn and run for the hills just because there's no way for it to continue. If you get to a point where you have an excessive number of levels, this should also be a major red flag.

What number is excessive? I don't know. I didn't research prior to this show to see if even there are regulation in this industry now as far as how many levels. But I mean to me, ten feels excessive. Five feels – okay, I could see that supported. But much beyond five, I would start getting a little bit nervous.

The fundamental trouble with a lot of network marketing companies is because you're often selling such niche products, there's just not a lot of business that's going to be done with the average normal person. If you're selling a health supplement, are most people going to buy a health supplement that's in excess of – under $50 a month?

Well, your commission rate on $50 a month is going to be pretty small. Now if you set it up on an ongoing basis and they order every month and let's say that you're paid a $10 commission out of their $50 order, you get enough of those people signed up and you can have a really nice residual income, which is the big attraction of network marketing, that can work.

But that's going to be a lot of work. The big thing to watch out for also is those big packages though because what can happen is if you are incentivized with a commission rate that is – let's be conservative. Let's say it's 10 percent of the product sale. If you can get somebody to buy a $500 distributorship package versus a $50 initial monthly order, you're going to be much more incentivized to sell that $500 distributorship package with the initial purchase of all the products.

Now you've got a problem where you are incentivized to try to recruit the wrong people to sell product. Sales is really, really tough. It requires a lot of training, a lot of practice and/or a unique personality. Most people are not cut out for direct sales. Most people are not emotionally wired to be able to exist in that world of constant rejection without it flustering them.

So my biggest concern about many of these companies is the recruitment of people who are ill-suited to the industry. Let me use life insurance as an example. When I was in the life insurance business, I could recruit people to the company that I was working with and I would get a bird dog fee if I recruited somebody in that ultimately wound up signing a contract.

But during the process of recruiting the agents, we interviewed dozens and dozens of people for every person that signed a contract. Those people were put through rigorous tests to make sure that they were a good fit. Even under those circumstances, personality profiles, multiple interviews, homework assignments to weed them out, background checks, et cetera, even under those circumstances, many people would allege that we still hired way too many people, way too many people who were not suited well for the industry.

That gave the industry that I was in a little bit of a bad rap because of the over-recruitment of people who were poorly suited for it. We still had a massive failure rate. Now I had experience with a network marketing company who was also involved in a similar business that I was in.

When I watched their recruiting policies, I was dumbfounded. I was shocked and appalled at the type of person that they were interested in recruiting. I actually take great pride in the fact that I talked a few of my friends who were being recruited by a company in the financial business out of the industry by giving them a little bit of knowledge, a little bit of inside experience because I saved them a significant amount of pain and suffering and problems.

I'm proud of that because I believe it was in their best interest, which brings me, as we continue on to the benefits of network marketing and more of the drawbacks of it. One of the things I love about network marketing is the equality of the opportunity because there are very few screens.

If you want to find a distributor of any company that you got your eye on locally, you just start looking around. You'll find them and they'll sign you up. There are a few things. You probably have to, in some cases, pass a background check. There are certain things, but in general, you can get a distributorship with a network marketing company if you want one.

So there are very few screens. So there's tremendous opportunity. For somebody who is blocked out of other industries, let's say that you don't have a college degree and the industry that you'd like to be in is going to require you to have a college degree. Well, in that situation, go and find a network marketing company.

They're not going to require a college degree. There are many other things. If you have certain things in your history or your past or in your way of living and your lifestyle that make you objectionable to be getting hired by some sales organizations, you can get a sales job in a network marketing company pretty simply and pretty easily.

That is very doable. I love that. I love that. A quality of opportunity for any person. And if you are coachable and if you can find somebody who can give you a plan, you can use the law of large numbers to your good effect, you can hustle and you can build a massive, hugely lucrative business with just a very simple opportunity.

There are so many network marketing companies who have minted so many millionaires, people who came from disadvantaged backgrounds without a lot of knowledge or education, but they came in and they saw the business opportunity and they buckled down and worked. That can work. In the process, you can transform your life from where you are to where you want to be.

I love that. I said earlier that I have a short list of companies that have products or services that I think are unique, that are useful, and that fit well into the direct sales marketplace. So I have those there. But this also brings to the downside. Because recruitment is so easy, it's easy to recruit the wrong people.

And because there can be a financial incentive off of those recruitment packages, it can be very lucrative to recruit the wrong people. In general, it's my opinion that it's possible to do ethically. But over time, this has led to a consistently bad reputation for many large network marketing companies.

That's why today you often hear somebody who is representing a network marketing or multi-level marketing opportunity, you often hear them saying, "Well, this is not multi-level marketing. It's not network marketing. I've been in these presentations or in these conversations." I look at them and say, "Yes, it is. You're just trying to avoid the bad reputation." Now, is there a way out of that?

I don't know. I think the people who are successful just simply ignore that and go after it. And they ignore all of that stuff and they just go and try to bring on more people. Oftentimes great advantages and disadvantages work as the inverse of each other. Network marketing is a great opportunity for anybody because there are no barriers to entry.

But because there are no barriers to entry, the industry is rife with problems. The greatest benefit is also, in my opinion, one of the greatest flaws. If you are going to succeed in network marketing – let me pause just a moment and I'll close with that little encouragement. You need to be careful when you choose the company that you're choosing them and they have a legitimate competitive advantage in the product space that you're interested in.

Many network marketing companies sell expensive products that are overhyped and oversold. Often this is due to the structure of the compensation. If a company has a similar or equivalent product, that company might be able to sell it through a mass direct-to-consumer distribution system. If they can cut out the whole expense of paying all those commissions to all the levels, they can sell it cheaper.

You can buy vitamins at Costco for pretty cheap. You don't have to buy your vitamins from a specific fancy company that sells them to you through an individual person. So you've got to make sure that you're choosing a company that has competitively priced products. The other problem with the products is because companies often know that their products are going to be premium products, very expensive, then they run the risk of having those products commoditized.

And this has happened and is happening more and more. And in order to try to avoid the trap of commoditization, the company can oversell the product. I think there are possibly products that are legitimately unique and fantastic that are sold in this way. So if you're going to join a company, it's my opinion, you had better be a believer, a true, hardcore, committed believer in the product and the mission of that company.

Because as one sales trainer I used to listen to would say, "Sales, successful, effective sales is simply the transference of emotion, the transference of enthusiasm. If you feel the way about my product that I feel about my product, you're definitely going to buy. There's no reason why you wouldn't buy." So the first person to be sold has to be the salesperson.

So you better make sure that you're choosing a product or service that you can sell without any reservation in order for you to be successful. That is crucial. You've got to choose that. I think network marketing opportunities will become increasingly difficult as a larger and larger percentage of the population becomes digitally and internet literate.

Think about this. When you use my Amazon link for radical personal finance and you click on something that I link to in the show, whenever I talk about a book or a product or something that I'm talking about, I'm telling you about something and I put that link in there to Amazon and I put an affiliate link.

I've signed up for an affiliate account with Amazon and when you click on that, your browser puts a little cookie in your browser and whatever you buy after clicking on that link for a period of time, I think it's 30 days, something like that, I will receive a small commission on the sale of the product.

You don't pay any more. I just receive a small commission. It's a few percent. Depends on the product. I don't remember the exact percentages. I make about $15 a month from Amazon commissions in the present circumstances. In essence, what I have simply done there is replicated and what Amazon has done is replicated network marketing.

I signed up for a distributorship with Amazon and then I'm advertising products and services that they have for sale to you, my network. Well, more and more companies can do that going direct through digital means and many network marketing companies don't permit that. My biggest beef, remember I said that I have a few companies that I think I could work effectively in and make a fortune with?

I don't think I'll ever pursue them because the power of being able to do it digitally is so much stronger than doing it one on one that I can't see pursuing them. Many of the network marketing companies, a few of them don't, but many of them refuse to allow their representatives to have any kind of external independent digital marketing presence.

You can have a generic, stupid, corporatized website on that company's website, networkmarketingcompany.joshuasheets.com and if people sign up through that link then you'll get a commission, but you can't do any kind of juicy, really good, powerful marketing with that because they got to protect their brand. That's what they're worried about.

Because of that, it's a huge cost for someone like me who is functional and competent in the world of the internet. Huge cost. I wouldn't give up the leverage of the internet to go after a one on one sales opportunity, but there are many people who are not functional on the internet or who don't have any interest in digital marketing like I do.

For those people, the opportunity to sit down with somebody and do a presentation over a cup of coffee is powerful and can lead to a huge opportunity. One more caution and I'll give you my closing advice. Be careful when you sign up with a network marketing or multi-level marketing company.

Be careful about the products and resources that are dedicated to your business opportunity that you are encouraged to buy or to sign up for. On the one hand, education is incredibly valuable. Buying books, buying audio courses, attending seminars and conferences to help you become a better salesperson, this is hugely valuable.

Hugely valuable. But on the other hand, it's easy to let your investment in this education and information far outstrip your earnings and profit. Many people have made poor decisions. They filled the garage full of stuff, either physically or metaphorically, by making massive initial orders of products and services they didn't need but simply signed up for because of the business opportunity.

They bought mountains of training products at a very high price that they didn't implement into their own life. Now a very small subset of the people who did that pushed through in the face of every obstacle and came out the other side with a massive booming business grateful for their success.

But many people faced those same circumstances and came out the other side with a big hairy credit card bill and a failed business. And I don't want that to happen to you. I think there's a real balance between optimism and prudence. Always be optimistic. Dream big. Look for the huge opportunity.

But be prudent and careful and let your optimism be borne out by careful investigation, careful research and a careful approach to the investment of your hard-earned money. I want you to have access to business opportunities that can help you to make your fortune. But I don't want the only person who wins to be the person who signed you up for a big hairy distributorship contract that was accompanied with a lot of expensive overpriced products and the person who sold you a bunch of educational materials and got rich off of the sale of the info product and didn't effectively show you how to do the business without just marketing the info.

I would be remiss if I didn't point out the value of having something like a network marketing company as a part-time business. I consistently recommend to you that you have some sort of part-time side business in your family. This opens up many opportunities to you to transfer some of your expenses from the personal side of the expenditures, expenses that are made after tax, over to your business where you can pay for those expenses on a pre-tax basis.

Very simple example here would be health insurance. If you have a $500 a month health insurance bill which is not being paid for by your employer and is just simply being paid out of your personal checking account, unless it exceeds the limitation for health insurance expenses, which is about 7.5% or 10% of adjusted gross income now.

Anyway, most people are not going to exceed the health-related expenses of health insurance. You're going to be paying that $500 a month on a post-tax basis, which means that you had to earn money, pay your employment taxes, and your income taxes to pay for your health insurance. Now, if you had a side business such as a network marketing business that was bringing in money that could account for that bill, then that would allow you to pay for that health insurance bill with deductible dollars so that you could save the money that you were spending on the employment and the income taxes, which could be substantial, could be minimal or could be substantial depending on your tax rate.

So there are plenty of legitimate reasons why you should always want to have a business in your family. Without playing games and getting into the shenanigans, be careful. There's a lot of bad advice given in the world of taxes, especially as it relates to businesses. You cannot go on vacation and call it a business trip and expect it to pass muster with the IRS.

Business expenses are those that are ordinary and necessary for the conduct of your business. But you can go to the industry convention that happens to be in a nice place and deduct those expenses. You just can't go on vacation and call it a business trip. So be careful. Obviously, the rule is not that you can't enjoy yourself on a trip.

If your company, your network marketing company is having their seminar in Honolulu, Hawaii, you can go and you can have a good time. You've just got to be there for business purposes. And if you haven't arranged business purposes that are before or after the conference, you can't hang out in Hawaii for a week on the taxpayer dime and list that as a deductible expense.

Of course, you could use some, at least some or all of your airfare would be, even if you did hang out for a week. The point is to emphasize that, yes, there are benefits to having a business and a multilevel marketing company can help in that space. But make sure you're getting good advice there and make sure that you're not being foolish.

You have to actually conduct the business in a business-like manner. If you're just, "Hey, once a year I do a presentation," not going to work, not going to happen. You've got to actually be pursuing it. So as with most things, these things are pretty straightforward. Just make sure that you're going to pursue it.

So here's my advice for you if you're interested in something like a network marketing business. Number one, recognize that it's probably not going to make you financially independent where you're going to have $10,000 a month coming in without your having to lift your finger and work. Network marketing opportunities are not passive income opportunities.

They are residual income opportunities if you're using a company that offers a residual payment structure. For example, if you're selling something like books, a company that sells books or a company that sells physical products, your sale is going to be based upon the initial sale of what's actually sold.

There might not be repeat sales. However, there are companies where the structure is built around repeat sales, either repeat sales where as long as they keep the product in force, such as an insurance product or such as a discount product of some kind, then you receive an ongoing commission, or there are companies that the actual product is a consumable item.

If they order $50 a month worth of product out of the company's catalog, then in that circumstance you'll continue to receive your commission for as long as things happen. But this is residual income. It's not passive income. Over time, if you're not actively building and growing your network, it will atrophy.

People will find alternatives for the products that they used to think were fantastic, but now they think another product is fantastic. Some distributors that you signed up as representatives underneath you will fail. Some of them will go on and join other companies that they're more excited about, etc. So if you don't care and feed your network and your business, it will atrophy and eventually diminish significantly.

Be realistic and optimistic in what you're looking for. Recognize that before you start dreaming of $20,000 a month, you'll first need to get to $200 a month. It's okay to dream of $20,000 a month. I worked with a couple of clients who had multi-six-figure incomes as leaders in network marketing organizations.

I'll get to that in a moment. It's possible, just not probable. It's probably not you. It's very possible to build a business that gives you a few hundred dollars a month on a part-time basis individually. I've known many, many people who've built successful, effective businesses that either allow them to get their products for free, just like I can do with Amazon if my Amazon bill were only $15 a month, so it allows them to get their products for free, or that gives them a few hundred dollars a month because of their efforts.

This is eminently doable with many companies. Start with that. The people who move on to make the tens of thousands of dollars a month are those who are going to pursue this vigorously on a full-time basis. That full-time might come in the future, but maybe you're working part-time now and you want to transition over on a full-time basis, and who have developed significant sales and sales management skills.

That could be you if you apply yourself. Without a doubt in my mind, if I were left without other options that I were more excited about, I could go, I could join a network marketing company, and I could build a massive sales organization that would give me ongoing residual income, control over my time, flexibility of schedule, and a significant amount of money.

I could do that, and you probably could too if you want it bad enough and you're willing to work at it, but don't think it's going to come easy. I listened to a great presentation a couple years ago from a guy who was involved in a nutritional supplement company that was famous for their shakes, and he talked about his work schedule.

This man was making hundreds of thousands of dollars per year, living an excellent lifestyle, and he worked 85 hours a week for many years, 70 or 80 hours a week. He worked early in the morning, all day long, at night, and he used every possible method of getting involved with people.

He didn't get there just by talking to people that were his friends and selling them a few products at a sales presentation. He got there by talking to people who were his friends and then going out and systematically soliciting other people to work in a sales organization, and it worked.

So I don't see anything inherently wrong with network marketing or multilevel marketing, at least nothing inherently wrong with the structure. I see problems in the application, and I see companies that you should stay away from. If you follow the guidelines that I've given you, then there are companies that you will come across and you'll say, "Wait a second.

This is a major problem. Move on." But I do see a lot of opportunity. So if you're excited by that—and by the way, you need to be excited by the prospect of person-to-person meetings, person-to-person marketing. If you get excited by that, then a network marketing company might be good for you.

In many ways, I think they're best served for the person who's going to do it on a part-time basis without trying to make it into a huge, huge business. Why do I say that? Because I think if you were to apply that same work ethic and the same knowledge and the same level of focus to other areas that are not network marketing, I think you could do far better.

Depending on your skills and your interests, I think that you could do far better. In that network marketing example I said, where I said I'm confident I could go and I've seen other people who've built legitimately—I've done their financial planning for them—legitimately a couple hundred thousand dollars a year of income, well, why would I not go do that?

Because I could take those same skills and I can go to the life insurance business or the financial planning business and I could become a general agent and I can make a few million dollars a year. So why would I not go and become a general agent of a life insurance company, make a million or a couple or three million dollars a year instead of making a few hundred thousand dollars a year with a network marketing company?

That would be my perspective. But other people might not have that approach. Many people don't have any interest or knowledge of finance, et cetera, and you've got to weigh your options. So I hope this show has been useful to give you some ideas about some of the opportunities that are really available to you.

I hope that you can take this information and implement it in your own life. Don't run from network marketing opportunities. I like to go to the presentations. I like to learn about the opportunities. It's been a while since I've reviewed one. So I think they're useful. My biggest beef is oftentimes it's going to be restricted to person-to-person sales.

At this point, that's a no-go for me. I can do better with Amazon just because I can sell it more broadly and many people agree. But for you, network marketing could be really, really good. I hope this arms you with the information you need to be an educated consumer.

Be optimistic and prudent in all things. That's it for today's show. I hope you've enjoyed this. This show, I hope, has been helpful to you. If you have additional questions about network marketing, if you think there's something I missed, if you think I was wrong about something, then come on by the show page at RadicalPersonalFinance.com and comment on today's show.

Let me know. If I didn't correctly correct anything I got wrong or if you spotted something, I'd be happy to know about it. Thank you for listening. If you would like to support the show, you can just send me money directly. You don't have to buy a package of products or anything from me.

You don't have to sign up for a business opportunity. You can just send me money. You can do that at RadicalPersonalFinance.com/patron. Thank you to the about 260, 265, 270 of you who do that every month. Thank you very, very much for that. Go to RadicalPersonalFinance.com/patron and sign up for that.

A couple of products. Let's see. I couldn't remember who's on my advertising list for today. Now I'm stammering flat-footed and not knowing what to say. Tell you what, just send me the money directly. Joshua Radical. I mean, Patreon, whatever. I'm out. It's been a long day. Up too early and not thinking straight.

I'll be back with you tomorrow. This show is part of the Radical Life Media network of podcasts and resources. Find out more at RadicalLifeMedia.com.