How People Make Money From MLM

People make money from MLM's by selling products and services. The big money comes from the multi-level structure, and from building your downline.

If you are at all familiar with affiliate marketing, then you can think of MLM's as “affiliate marketing on steroids.” Whenever you refer a paying customer, you get paid a commission based on the price of that product. Your commission might be a flat fee, or it might be a certain percentage of the sale.

Now, as you build your downline, they will also be referring new customers. Each time a member of your downline makes a sale, you earn another commission. This commission is smaller than what you'd make from a direct referral, but the impact is cumulative.

To better show you how this works, let's take use the example of a multi-level program with a network going five levels deep.

Your commission structure might look like this:

Direct Referral: 50% of sale
2nd Level: 20% of sale
3rd Level: 10% of sale
4th Level: 5% of sale
5th Level: 2% of sale

Notice that your levels are filled out by your immediate downline building their downline, which builds another downline, and so on until all 5 levels are filled.

You might wonder how the company itself makes any money when there are all these people taking a portion of the sale?

The first thing to realize is that a multi-level network like does not overlap beyond five levels. In other words, your upline will not earn a commission from a sale made by someone in the 5th level of your downline.

Also, notice that if you add up all of those percentages, you don't reach 100% This holds true no matter which level the sale is made on. The company will earn a minimum 13% profit, even when paying out commissions to all 5 levels.

Now, let's take a look at what an average day's sales could bring you if you were to build your downline all the way to the 5th level. We'll pretend that the product the company is selling costs $100.

If you made 1 direct referral ($50), 10 sales on the 2nd level (10x$20=$200), 5 sales on the 3rd level (5x$10=$50), 5 sales on the 4th level (5x$5=$25) and 3 sales on the 5th level (3x$2=$6)......then you get:

$50+$200+50+25+6= $331 total commissions

Not bad for a day's work, right? The size and depth of your downline has a cumulative effect on your income, and this is why MLM programs can be so profitable when you understand how to work them.

The key word here is how.

It is not simply a matter of referring as many people as possible. One of THE single, biggest mistakes made by MLM-newbies is recruiting un-targeted and unmotivated downline members.

In order to succeed, you must learn how to:

1. Target the right market for the product

2. Target the right opportunity-seekers for the business opportunity, and get them into your downline

3. Train and motivate your downline to do these same two things as well as you do!

That's how you get the big pay days in MLM. In future articles, you're going to discover how to accomplish all of this with less effort than you ever imagined.