The best business model for people without capital.
There are people who wish to have more money, and there are people who want to have more money. The difference between the two groups is huge. This post is for people who really want more money.
So let's say that your really want to make money and are ready to work hard for it, what would you do?
First, you should answer the following question before starting anything: how much money do you want to make? Your answer must be quantitative, not the usual 'as much as I can'. A business plan without a quantified objective is just a dream. Having a goal does not guarantee success but it will force some decisions that will help achieve it. In particular, it will force you to think about the scaling potential of your project. It does not make sense to wish for a $100K revenue and embark on a venture which has a high probability to plateau at $70K, does it?
That may sound obvious, but I am constantly surprised by people who do not fully embrace this reality. They usually use the excuse of being passionate about their project to overcome this inconsistency.
Do not get me wrong. Being truly passionate is a good reason to pursue a venture, but its principal driver is not money. It is an all-consuming feeling for that project, whether you achieve your financial objective or not. So you must accept that you may not earn the money you want while pursuing your passion.
The reality is that very few people are passionate enough to forego most monetary gains for a very long time. Even in a sector like martial arts that I know well, people are willing to sacrifice almost everything to dedicate themselves to their discipline... until the reality and responsibilities of life force them to search for some extra income. Once that reality kicks in, they tend to be powerless and clueless about the path to follow. This scenario repeats itself across a wide spectrum of activities.
The best business model
So let's assume that you overcame the argument about passion and reconciled yourself with the fact that money is your main driver, then what do you do?
The possibilities vary greatly according to your personal situation. For example, if you dispose of some capital, more possibilities are available to you. If you have any unique skill, you may be able to capitalize on it.
If you have no capital nor any uniquely marketable skills, yet are ready to work hard to reach economic freedom, I believe the best option is network marketing, also known as multi-level marketing. It is a business model by which a company sells its products through independent distributors rewarded by a commission compensation plan. Often misunderstood, sometimes even demonized as pyramid schemes, network marketing is a powerful model accessible by anybody.
The job as an independent network marketing distributor consists in selling a product to a new consumer and earning a commission on his / her purchases. However, instead of securing a geographical exclusivity like usual distributors may enjoy in classical retail, you get an exclusivity for that customer. That means that you get a commission on all his / her future purchases. Imagine getting a commission of 1,000 consumers.
The scheme is simple, yet not easy. In order to have let's say 1,000 consumers, you need to either talk to many people (hard to do) or sponsor other people who also want to join the business and earn a commission on their consumers' purchases.
This practice is not unusual in business at all. Let's say you are an insurance broker and a third party brings in a new customer through your network, you are likely to split your commission with him. This arrangement is usually ad hoc, the result of a compromise.
In network marketing, the splits in commission are not aleatory. They are totally regulated by the company. Because each company has a different commission compensation plan, it is essential to chose carefully the company to which you wish to be affiliated.
Here are some of the key advantages that the best compensation plans will offer:
- You can build a business without capital.
- You do not need any special skills to start, other than real determination.
- The business starts as soon as you sign up. You can start selling worldwide in a few minutes.
- You only have to deal with sales and networking: research, product development, registration, logistics, invoicing and delivery are taken care by the company.
- Your are independent, yet your sponsor has a vested interest in your success and will provide guidance.
- The business is flexible. You decide your own hours.
- The business nowadays is essentially digital, therefore you are not bound to any location.
- The model is 'democratic': the more you work, the more you make. No boss limiting your progress, no glass ceiling, no politics. It all depends on your efforts.
- There is hardly any limit on how much you can earn. You can do this business for a few hundred dollars or millions.
- The business is inter-generational, meaning your children will continue receiving your commissions even if you pass away.
- You are investing your time in the success of a company. It is important to chose it well.
- You have no boss pushing you, therefore you must be self-disciplined.
- There is no entry cost, therefore it is easy to stop when faced with the first difficulties.
- You won´t succeed if you consider it a hobby. This is a real entrepreneurial venture.
- Building a consumer network takes time. The revenues follow a 'hockey stick' curve.
- Opportunity cost is a potential negative. Do you have a better alternative?
My own experience
A friend introduced me to a company following this business model. At the time, I was active with many other projects, but thought it could be a good idea for my sister who was looking to re-invent herself. Although I was an expert in classical retail, I had never really paid attention to network marketing...
I decided to do some homework before mentioning anything to my sister. I studied its share on the stock exchange, assessed its growth potential and new product funnel, carefully reviewed its compensation plan evaluated the quality of its products by talking to competitors, registered as a distributor and tried the products myself. This convinced me it was the best network marketing company to partner with.
I introduced the business to my sister by taking her to a distributors' convention. She signed up as a distributor. My wife, who I had kept in the dark about this whole evaluation process and was tagging along, also got really excited and decided she wanted to pursue the venture as well.
I have not regretted our decision. I find that the disadvantages I mentioned are common to most entrepreneurial ventures, while the advantages are unique. All start-ups require motivation, commitment, resilience, discipline and willingness to learn, but not all projects can be started without capital, immediately and depend mostly on your efforts and drive.
I have spoken with many entrepreneurs (some really negative about network marketing), I have experimented with many business models, I have yet to find a better business I can start with less capital and higher chances of success. Nobody so far has been able to show me one. If you know better, please share it with me. I would be eager to follow your lead!
In the meantime, if you want to learn more about network marketing, drop me a line and read The Business of the 21st Century by R. Kiyosaki, the author of another cult book, Rich Dad, Poor Dad.