Money and Finance
Recently, I met up with an old friend from high school for dinner. Over dinner we chatted about our school life, our plans for army and the future. He told me he recently joined a MLM Company called WorldVentures. I was quite shocked, but I refrained from commenting about anything as he was pretty excited about the whole thing.
It's shocking to be approached twice to join this company in the time span of 2 months. I refuse to be a downline however.
Read post on WorldVentures here. WorldVentures
Anyway, he tried to get me to join, but I politely declined of course. Of course, he kept talking about the passive income he would earn. His exact words were "Bro, it's so easy to get rich. I'm earning money while I'm talking to you."
But when I asked him about the full compensation structure, he was unable to answer me. Apparently, his friend only told him he would be getting passive income and that's all he knew.
So essentially, he paid SGD$400+ on a single sentence. That got me wondering. How many joined MLM companies and then realised the compensation structure only after that? Or are they even clear about it at all?
As their distributors, their plan determines how you get paid. So it's extremely worrying that my friend joined based on trusting his friend and not understanding and approving of the structure.
Usually MLMs distributors get their "passive income" by sourcing for new members. Or essentially, their "Downlines".
The problem I have with is this. The concept of "Passive Income" is all wrong.
Tip: If people tell you that you can get passive income from a business opportunity or selling a product or whatever... Run. Run and don't ever look back.
Passive Income - Passive income is an income received on a regular basis, with little effort required to maintain it. It is closely related to the concept of "unearned income". (Wikipedia)
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Money and Finance
Why a Multi Level Marketing (MLM) Company isn't a source of Passive Income
Recently, I met up with an old friend from high school for dinner. Over dinner we chatted about our school life, our plans for army and the future. He told me he recently joined a MLM Company called WorldVentures. I was quite shocked, but I refrained from commenting about anything as he was pretty excited about the whole thing.
It's shocking to be approached twice to join this company in the time span of 2 months. I refuse to be a downline however.
Read post on WorldVentures here. WorldVentures
Anyway, he tried to get me to join, but I politely declined of course. Of course, he kept talking about the passive income he would earn. His exact words were "Bro, it's so easy to get rich. I'm earning money while I'm talking to you."
But when I asked him about the full compensation structure, he was unable to answer me. Apparently, his friend only told him he would be getting passive income and that's all he knew.
So essentially, he paid SGD$400+ on a single sentence. That got me wondering. How many joined MLM companies and then realised the compensation structure only after that? Or are they even clear about it at all?
As their distributors, their plan determines how you get paid. So it's extremely worrying that my friend joined based on trusting his friend and not understanding and approving of the structure.
Usually MLMs distributors get their "passive income" by sourcing for new members. Or essentially, their "Downlines".
The problem I have with is this. The concept of "Passive Income" is all wrong.
Tip: If people tell you that you can get passive income from a business opportunity or selling a product or whatever... Run. Run and don't ever look back.
Passive Income - Passive income is an income received on a regular basis, with little effort required to maintain it. It is closely related to the concept of "unearned income". (Wikipedia)
Little effort is required to maintain it. There's a difference between passive income and earned income.
When you source for downlines, you're making an effort. Not everyone you meet is willing to join. It requires much time and effort just to get 1 downline. Some MLM distributors are doing this full - time.
To make passive income usually requires having assets that generate income for you. So technically the products/memberships you're selling on behalf of the company isn't your asset.
If you stop selling, chances are your income would decrease. Maybe you would continue to receive a commission depending on your downlines. If you stop working, eventually your passive income would decrease day by day. The turnover rate of downlines in MLM companies are tremendous. I should know, having worked in a MLM company before. People are quitting everyday and new downlines are joining.
Think of it this way, can you leave your job for a extended period of time and expect to receive the same income everyday?
Truth is what you get from MLM companies is Earned Income.
You earn this with your own hard work and effort. There's nothing passive about it.
To build a sustainable business based on selling, you would have to sell memberships constantly. And there's only so many people that are willing to join, aren't they?
In fact, do read this post wrote by Lionel Yeo, the Admin of Cheerful Egg.com
http://www.cheerfulegg.com/2014/05/04/why-the-search-for-passive-income-is-a-mistake/
I really like and agree with this quote: "I’m sorry, but there’s no such thing as a magical switch you can flip and instantly watch ten thousand dollars roll in every month."
Signing off,
Teenage Investor
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There's lots of reasons to love receiving dividends from your portfolio. For starters they are a truly passive income source. You don't have to go around making sales calls or doing paperwork for the company. All you have to do is invest...
- Plans For Financial Independence
Most of those that visit my blog are working towards a specific end goal, I know I am. That goal for the majority of us is financial independence. Financial independence can mean different things to different people. To me financial independence...
- The Intersection Of Dividend Growth Investing And Financial Independence
Tired of working under fluorescent lights day in and day out? Well besides winning the lottery the only way to get away from working 9-5 til 65 is to spend less than you earn and invest the difference. Most of the blogs that I follow are focused...
- Interview By Kanwal From Simply Investing
The following is an excerpt from the interview that I had with Kanwal. The full interview can be found at the Simply Investing website. I recently had the honour of interviewing the blogger behind the awesome blog Passive-Income-Pursuit! Passive...
- June Progress
June was a busy month. Kids were out of school for summer. I discontinued working on one of my projects, so it decreased my cash inflow. I wrote why I did it here. I did not buy as many stocks as I planned. I added a new stock to my portfolio - PG....