The Tale of Two Ladies
Two ladies had been friends for years. Their children were about the same ages so they had watched the same soccer and volleyball games for years.
Both of them had read “Six Steps for Creating Wealth" and learned the secret to creating wealth by paying yourself first. Both had decided to invest $250 per month to create wealth. They reviewed the choices of saving, real estate or having their own home business.
Joyce decided that she would use a savings account that paid 5% per year to take advantage of the time value of money. Her ultimate goal was to have $2,000,000 invested earning at least 5% percent so that she would have an income of $100,000 per year for retirement.
Joyce.being thirty years old, decided to start her account with investing $250 per month into the account. By the end of a year, she would have saved $3,000 plus about $69.00 in interest. At the end of two years, she would have $6,296.48. If she stayed the course for 30 years without increasing the $250.00 per month, she would have $208,064.66. Not bad for only spending 360 times $250 or $90,000.
Joyce knew she would have to increase her contributions dramatically over the years and have the savings interest rates rise to reach her ultimate goal.
Anne, her friend, has also decided to commit $250 per month to her goal of achieving an income to retire or to create a “just in case" income source should something happen to her.
Anne was invited to a network marketing presentation and decided that she was willing to invest 5 to 10 hours a week to learn the business properly. She wanted to have a home business and also have tax advantages. In the presentation, she was told to work with only five people and teach them to do the same $250 per month payment into their business. Her mentor explained that she could only effectively work with five at a time and her goal was to teach them to repeat exactly what she was doing: find five people who wanted a second income and who would spend $250.00 in their business and repeat by teaching their five to do the same thing. This philosophy was very different from what she had heard in other presentations: make a list of all of her friends, sell product to everyone she met, spend hours on the phone, etc. to sponsor as many people as she possibly could.
Anne, as a teacher, was comfortable with that business plan. She knew that with the available tools of videos and presentations that she could educate people on the value of having a business as opposed to selling them on buying a product. The manufacturer paid a 5% commission or override on her purchases, as well as the purchases from all of those sponsored by her five people, and continuing down for nine levels in the company.
The manufacturer that she picked was not a new business but had been in business for sometime. The product was a fruit juice that was consumed each month or could be given away as samples for new customer, or sold to retail customers. She found that some people could understand the business side (and the financial upside) but others simply loved the product and wanted to buy each month, not caring about the business.
After two years, her business looked like this example:
Anne = 1 X 5 = 5 X5 =25 X 5 = 125 X 5 = 625 _ 780 total in her group
Each of them was spending about $250 per month of which $200 was for actual product. The company paid 5% commission on those purchases. With 780 people in the group, the total purchases resulted in monthly commissions to Anne of $7,800 per month! (780 x $200 x 5%= $7,800)
What was even more interesting was there were more customers than that in the group so her monthly check was even more!
Now, Anne worked harder than Joyce but with the same outlay of cash, she was able to achieve a business (with no employees, with all the products delivered directly by the manufacturer, and no liability) that had tax advantages and paid her more than her old job was paying monthly! Anne was also able to fund her savings plan and invest in real estate with the extra income. Her income also was not dependent on her being able to go to a job every day and more importantly, keeping a job every day. Anne has now decided to increase her income and has sponsored directly another five people to start the process again. She sponsored Joyce into her business about four months ago after Joyce saw her monthly check!
Jim Montgomery is a business owner and law firm owner in San Antonio, Texas. He helps people develop exit strategies through their own business to get what they want from life. To find out how you can start a home business, visit http://howtostartabusinesstoday.com or email him at firstname.lastname@example.org