One can boil it down to: Relationship building, discipline, and people skills are at the core of a successful Network Marketing business, whereas location and the product and or service itself are at the core of a successful conventional business.

Here are more ways they compare:

Financial Investment
Network Marketing: The requirements vary by the type of business, but generally you need to purchase some products, materials, and training materials. In the initial stages, you have a lower overhead as these types of business can generally be operated as a home-based business. The challenge is to balance the initial investment in product in proportion to the size of your initial network that you will be promotion to and recruiting from.

Running a Network Marketing company is similar to running a franchise in that both involve residual income; for the Network Marketer, he/she benefits whenever a sale is made, whereas a Franchisor benefits from the royalties provided by his Franchisee.

Conventional Business: If you have a product-based business, the cost of start-up can be much higher than a NM model, as you need to maintain a steady enough income to support a higher level of operating costs for staff, materials, a place of business, cost of inventory and storage and the cost of money should you need a loan.

Time Commitment
Network Marketing: Relies on a healthy dose of time to build and maintain your network of contacts, and train and support your recruited team members; but, unlike the CB model, if you can't put in the hours for a period of time, you can not only have your other team members handle the business for you, but you can continue to receive income.

Conventional Business: Success in all businesses requires you to heavily invest time in the development and maintenance of your business as you are both the business' leader and its most senior employee; this is especially true of the CB model, as you must be involved at all levels of the business.

Sales & Promotion
Network Marketing: In NM, you essentially get paid for your word of mouth advertising as this is at the heart of your financial return, both with respect to the residual income from the recruitment of team members, but also from the products that that team member purchases.

Due to the residual income structure (where individuals receive income when another member of their team makes a sale), there is less of a competitive energy amongst team members, as, when individual team members are successful, the whole team benefits.

With NM companies, there tends to be a sales and training orientation and culture; as such, training materials are available to you, although, the company expects their model for handling leads and sales within a more strict code of conduct.

Conventional Business: In CB, you invest both time and money to develop and monitor media campaigns to get the word out about your product/service. If you make a sale, you do get the revenue, but have to subtract the wage cost of the sales person as well as all the other overhead in order to determine what your "real" income is.

In CB, you have a business entity which, if a publicly traded company, may put limits and restrictions on the running of your business in order to satisfy their shareholders.

Advantages and Challenges of Network Marketing

Here are some advantages and challenges to running a network marketing business for your second income:

Advantages:

• Low start-up costs
• Can work from home
• You earn from your efforts AND the efforts of others
• No real sales territories, so You can run your business in a variety of locations
• Highly relational - have the opportunity to build relationships with team members and clients
• The Team spirit environment can assist in your personal professional development

Challenges:

• It is easy to not take your venture seriously - it is a business not a hobby
• Requires a high degree of personal discipline
• Need to lead by example and continue to motivate and support your team
• You don't know how many people you are competing with in any one location, and depending on the size of your main location, the area could quickly become saturated with product and with new entrants into the business
• Often times, recruiting family and friends can cause personal tensions and this will impact the long term success of your business
• Integrity is at the forefront so you must be vigilant to follow-through to build and maintain trust
• With the growth of on-line sales, and with the busy lives that we lead, people may be less inclined to engage in a time-intensive in-person
  sales process
• The overly optimistic "can-do" environment can drive new recruits to overspend on product inventory in proportion to their potential leads

Now that you've learned more about the shape of a network marketing business, read our other pages for questions to ask to determine the legitimacy of a networking business opportunity you may come across.

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