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Why Network Marketing and Direct Sales Works

Guest post by: Cyle Greenwell

Article Overview: Warren Buffet has purchased a number of network marketing and direct sales companies. Many large companies use network marketing and direct sales divisions to get their products to their customers. But why?

Why Network Marketing and Direct Sales Works

This article focuses on two aspects of network marketing and direct sales: The Distribution Model and The Profit System. Much of this information can also be found in Chris Widener's CD titled The Invisible Profit System. Warren Buffet has purchased a number of network marketing and direct sales companies. Many large companies use network marketing and direct sales divisions to get their products to their customers. But why?

Let's take a look at the typical distribution model. The first step in this process involves building large warehouses to store products. Next, a large fleet of trucks, trains, or airplanes must be used to move the product from the warehouse to the store fronts. The store fronts are typically multi-million dollar investments or require very large lease agreements. Lastly, thousands of employees are needed to make this all happen successfully. Just think of how much time, money, and effort is wrapped up in that model.

Now, let's look at the network marketing model. Companies give the money (that would have otherwise been used to operate the typical distribution model) to the people who actually help get the product to the customer. It gives the money to the people rather than the process.

Most people don't think of it this way, but you are already involved in network marketing; you just don't get paid for it. How many times have you seen a good movie and couldn't wait to tell others about it? That's network marketing. Have you ever been to a great restaurant and mentioned your experience to others? That's network marketing. You see, every single person is already in network marketing.

What you need to understand about network marketing is that companies pay you to get the word out on their products. That's all it is.

Network marketing and direct sales are more popular than ever. Corporations are downsizing all the time. People are becoming fed up with the instability of their j.o.b. J.o.b., by the way, stands for "Just Over Broke." People want to work from home. They want to own their own businesses and spend more time at with their families. They want to take more vacations. People want to make more money.

The people who become financially successful get into a profit system rather than a wage system. Profits are better than wages because profits are ownership in one's own financial future. Wages means trading time for money. As soon as you stop trading time for money, you stop getting that wage. Nobody gets rich in the wage system. People get rich all the time in the profit system. Profits can be limitless. Pro athletes, on the other hand, get rich in the wage system. If you can throw an 85 mph curve ball, then maybe you can get rich in the wage system. Corporate execs make a lot of money in the wage system, but most of their wealth comes from the profit portion of their contract. For example, stock options are where they make their millions.

If you look at the Forbes 400 Wealthiest People List, you won't find anyone who is still in the wage system. These people own their own business; which as you now know is in the profit system. Bill Gates started his own business. We all know how wealthy he has become. There is a second kind of person on the Forbes list. These are people who inherited their money.

So, why are there so many people still in the wage system? The wage system is low risk. But, as you know with any investment, low risk equals low reward. You might not lose your j.o.b., but your ability to grow to financial independence is limited. The only way to get wealthy in the wage system is to put some of your money into the profit system; such as investing in rental houses or making stock market investments.

The Leveraged Profit System

Where will you be financially if you stay in the wage system for 10 more years? If you're 40, then you'll probably just turn 50 making the same, or maybe just a bit more than you were at 40. How much more financial freedom will you have? Or, will you just have let 10 years pass you up? That's a question you need to answer now rather than later. Even worse; what if you stay in the wage system the rest of your life? By now, you're saying "OK. I understand that I need to be in the profit system, but how do I do it?"

The first type of profit system is called the standard/traditional/stationary profit. This is where you would own your own local business, such as a coffee shop, sandwich shop or hardware store. This is how most millionaires are created. These millionaires own their own business, pay off their mortgages, and they don't buy a bunch of expensive cars. These people are not flashy. They don't flaunt their wealth. They are not unlike any other person except for that they are millionaires. The standard profit system creates millionaires all the time. It has high reward; but it also has high risk. It's not the low risk, low reward of the wage system, but with the high reward comes high risk.

How much does it cost to open a standard, stationary store? Say you want to open up a franchise sub shop. You have to pay some money to that franchise company. It can cost you upwards of a million dollars. You also need business licenses from the state and city governments. There are legal fees. You have to buy equipment. You have to purchase real estate, hire employees and buy inventory.

This type of profit system is stationary because it is limited by time and space. You can only have so much real estate. You can only hire so many employees. You can only process a limited number of sandwiches per day. Even if you are open 24 hours, you are still limited to that 24 hours. You can make a great deal of money in 24 hours, but then what do you do? You have to do it all over again. What if you open another store? You have to incur more franchise fees; hire more employees; buy more real estate; etc. It takes a lot more money and a lot more effort. Don't get me wrong. It works for a lot of people and it's the backbone of our society. Small businesses make up the majority of commerce in America and around the world. But, is there a better way? Is there a business with low risk and high reward?

It's called the Leveraged Profit System. This is where network marketing and direct sales comes in. Network marketing is not bound by time and space. You're paid on your work and the work of others. As you build your business, you get paid on your work and then again on the work of your network. The more leadership and coaching you give to your network, the more money you can leverage on the work of others.

It's easy to open up your next branch office. You find someone in the country or around the world and ask them if they want to start their own business. They say yes, and you have your newest branch office. It doesn't take a whole lot of effort. There are no huge franchise fees. No real estate to buy. No licenses to acquire. You just pick up the phone, or get someone to come to you. The real beauty of the leveraged profit system of network marketing and direct sales is that you are earning an income even when you are not working. Some people call it the perfect business.

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Article Tags: chris widener, direct sales, mlm, network marketing, small business, the leveraged profit system, warren buffet



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