Understanding "True" Residual Income

When it comes to choosing and having a home business, my advice would be to make sure that there is a "True" residual income.

What exactly is residual income anyway? Simply put, residual income can be defined as any payment system where you receive regular, ongoing payments as a result of a one time effort. Payments that are regular and ongoing with no further effort (except for a little maintenance) once the initial work has been done.

As you surf the net, you will come across a wide variety of business opportunities. Invariably, each one will claim to have the best compensation plan available and many will claim to offer "residual income". However, a quick examination of many of these pay plans will reveal that, although there may be an earning opportunity, it cannot truly be described as residual income.

For example: Let's say you are in a home business that promotes water softeners. Once a sale is made, that customer will no longer require any further water softeners. At least not for a while. It's a one time sale, not an ongoing income.

Now let's look at a cosmetic business or a jewelry business as another example. Although your customers may need cosmetics or jewelry on a regular basis, unless they are signed up as an ongoing member that commits to purchase a certain amount each month, you can only "hope" they come back to you to purchase their cosmetics or jewelry.

Picture this scene. You had several parties during a month where you made $2000 in sales of your cosmetics or jewelry (of which you receive a commission). No one signed up as a consistent monthly shopper, but rather simply made a one time purchase from you. What are the odds that those who shopped from you last month, will come back and shop for just as much or more this month or the next, or even the next? The chances are slim. What is required with this type of home business is a commitment to begin each month searching for new prospects to replace the ones from the month before.

With genuine residual income, the products should be needed and consumed on a monthly basis. With that type of reorder process your current customer base continues to shop every month. So when a new month starts, and you build your business, you are simply adding to your current customer bases, thereby continually growing your business with a true ongoing residual income.


This article is by Donna Stewart the Founder of Internet Ceo Moms. Love this article and Donna explains it well. I hope this has helped you in some way.

Lori

Lori McDowell
Internet Ceo Moms
Helping Families Work From Home Since 1999