Lesson 4: The Home Business Model
By now we’ve covered the background for this course, and the summary goes something like this: The business phrase of the day is personal power. The trends that are especially fed by this movement today include financial; health and wellness; personal technology; and alternative fuels / green technologies.
Companies that don’t understand the importance of empowering people are going to see their power and profits slip. Slowly or quickly, but it will happen. This includes companies in the above fields, such as wellness companies preying on fear or ignorance to make sales, rather than educating and providing outstanding value.
Besides the examples I’ve given in previous lessons, personal power and planet friendliness are both supported by the growing number of people working at home, whether they’re telecommuting a couple days a week or working for themselves from home. This promotes family time, flexible schedules (fitting individual needs), fuel savings, etc.
Technology is also allowing for more of this because even those who are working for companies can work from home and have their work tracked remotely with certain systems, allowing the company an objective way to measure and compensate work.
In this course, however, we won’t be talking about telecommuting because that still amounts to working for others, which is simply not the way to wealth. And frankly, we’ve seen that it no longer amounts to a reliable income either. Now we know that jobs are easily shipped overseas and that people who have dedicated years to a company (which is rare these days anyhow) are often let go before achieving certain retirement packages.
But let me step back. Just why is a traditional job a lousy way to build wealth? Because trading one hour of time for one hour’s worth of wages fails to leverage your efforts. To build a comfortable and residual (lasting) income, you have to leverage yourself, which is exactly what a company does when hiring employees. Someone else does the work, and the company owners profit.
It doesn’t mean that you can’t earn money by the hour, and certainly part of your money in this way. In fact, it’s safer for most people to stick with jobs they have while starting into other ventures. But eventually, these "other ventures" have the potential for earning the kind of freedom and income you may be dreaming of. At the very least, they can help protect you from downsizing, reduced pensions or government benefits, or other surprises.
In short, corporate jobs no longer appeal to many of us as they once did. So the number of home-based businesses is growing and will continue to. This is a sturdy trend because it is fueled by the driving force of personal empowerment. We have three types to look at briefly here before getting to specifics of the three big trends and their opportunities in future lessons. The three types to look at are network marketing, affiliate marketing, and “other.” We’ll start with the last of these.
By “Other,” what do I mean? I mean any situation in which you’re still just trading hours for hourly pay — regardless of whether you’re an employee of any company. Among other work, I provide digital marketing services as a freelancer. And while I enjoy the variety, flexibility, and creativity that comes with that, it’s still just hourly cash for hourly work in one way or another. I may even charge by the project, but the end result is the same: a certain amount of pay for a certain amount of work. There’s no way to use this for building a passive, residual income, which is the goal for anyone wanting to retire in comfort or simply add to their monthly budget.
Other examples could include stuffing envelopes, filling out forms online, or doing anything where you’re paid on a one-for-one basis. (Doing something once, getting paid once.)
Yes, there are the home-based advantages I mentioned above (along with the challenges of working from home: treating taxes differently, dealing with home distractions, etc. These are true for every at-home business.) But if you’re looking for the passive, residual income that is so necessary to long-term comfort (as taught by every wealth expert out there), you have got to look to leveraging opportunities. And that brings up topics like affiliate and network marketing.
What is affiliate marketing? This simply relates to systems where you can refer others to a product or service and enjoy “a cut of the action.” Usually this means getting paid once for finding a new customer for a company. But some affiliate programs will pay you as long as that new customer stays with the company. (This is a big thing to look for!)
So for instance, let’s say you refer Jeff to an online software service that charges him $29.95 a month. You might make $10 a month for that referral. So for your effort one time, you might make $10 (if he cancels after one month), or you might make $360 over three years. Or $3600 over 10 years. This is passive, residual income that keeps rolling in as long as Jeff remains a loyal customer.
In a good program, you would earn even more if Jeff started buying other products or services from the company.
And in the best programs, you would earn even more if Jeff also became an affiliate and signed up other people. You’d get paid on his referrals, and perhaps even on their referrals. This is called a “multi-level” affiliate system. This is a little different from “multi-level” or network marketing for the following reasons:
1) An affiliate program is usually free to join, while there are usually sign-up costs involved in network marketing.
2) An affiliate program typically doesn’t require you to purchase anything in order to earn from your referrals. Network opportunities usually require on-going purchases.
3) An affiliate business, however, also doesn’t require a certain amount of purchases from your customers (as network marketing might), and therefore your residual income may not be as steady.
All three of the above points make affiliate programs excellent in terms of personal freedom. There is no system that makes people feel compelled to make purchases; there is no payment for the “privilege” of selling someone else’s products. In some ways, affiliate programs address the problems inherent in most network marketing.
In fact, I believe some affiliate and network marketing companies overcome the problems inherent in their systems, and any time I share one on this site, it's because it's addressed the traditional problems.
The one I see right now is in pre-launch until late 2018. You can read about it here.
As for network marketing, this is such a big topic with so many pros and cons, I’ll devote the next entire lesson to it. Click here.