This post is 2,200 words. If you don’t have time, just read the last paragraph.

Naomi Dunford at IttyBiz is releasing her Online Business School tomorrow (Wednesday), and I’ll probably write a separate post about that. But since I was planning to write this post anyway, I figured now was a good time, since it ties into Naomi’s stuff.

You have bills to pay, and they require money to pay them. In the U.S., the “normal” way to make money is through a job. But sometimes we forget that’s not the only way. Another way is to have your own business.

What exactly is a business? Well, it depends on who you ask. Some people say there are “businesses” and then there are “real businesses,” but the definitions vary. And some “businesses” are really no different from jobs, like if someone performs exactly the same tasks as the employees they work with but they think they’re so cool because they receive a 1099 instead of a W-2.

There are many reasons not to have a job, but the best one is freedom from a boss, being able to work on what you want, when you want. Of course, there are also several drawbacks, or everyone would do it. In a traditional business, you have to deal with things such as coming up with a product or service to sell, getting financing, managing employees, and dealing with tremendous stress.

Let’s say you wanted to open a Taco Bell franchise. Some people will say a franchise isn’t a real business, but anyway, it should be easy, right? I mean, someone else has already figured out a formula that works, so you just need to connect the dots and color, right?

Well, first of all, there’s a money problem. You’ll need a minimum net worth of $1 million and minimum liquid capital of $360,000, with the ability to secure additional financing to cover the rest of the initial investment, which is estimated to be $1,290,000 – $3,088,000 (source). That’s not feasible for most people. You’d also be working around the clock, and who knows if you’d be any good at it, or even like it? That seems to be considerably less freedom than you’d have with a job.

But traditional businesses involve issues like this. In this example, the main problem was the money. In another business, the main problem could be inventing products that are needed but don’t exist yet. Or the main problem could be convincing companies to dump their professional service providers and take a chance on you instead. People do these kinds of things all the time, but they’re beyond most people, and even if you have what it takes, it’s never a sure thing. And even if it all works out, you may find that because it consumes your life, you don’t own the business, the business owns you.

So a lot of people look to options other than traditional businesses. The idea is that maybe you don’t need to have a building and employees and inventory and such, but you just want something that’s a little easier to manage. Something that a normal person could realistically do and which would actually improve their life. The two business models I’ll talk about here are blogging and network marketing. Which is better?

Network marketing

When people hear about network marketing, they often say, “Wait, that’s a pyramid scheme!” Sorry, but that’s just ignorant. Pyramid schemes are illegal, so they couldn’t operate in plain sight for decades, even trading on the New York Stock Exchange, without anyone noticing and shutting them down.

A pyramid scheme is something like a chain letter, which is basically a game to pass money around. People get a letter in the mail from someone, send money to them, then send the letter to five other people and ask them to repeat the process. Does this sound like a legitimate business? It’s not–there’s no product or service being sold!

In network marketing, as in a traditional business, you make money by selling a product or service. The only difference with network marketing is that you can also sponsor people and get a percentage of their sales as well. For some reason, no one considers an affiliate program to be a pyramid scheme, even though it’s the same thing.

The fact that there’s a pyramid structure is no different from any company that has a president, vice presidents, directors, managers, and peons. What’s the alternative? Having every employee be an equal partner?

The reason network marketing has a bad reputation is because of questionable practices of some people and companies. For example, some companies required people to buy thousands of dollars worth of products in order to join. I agree that lots of bad things happened and still continue to happen, but that reflects on the parties responsible, not the business model itself. In 1979, the FTC ruled that network marketing was a legal business model. In Europe, network marketing is still called multi-level marketing, so I guess that term was never tarnished over there.

It’s kind of a shame that we have to spend that much time just establishing that network marketing is legit, but anyway…

The point of network marketing is that a system is in place, and you just have to run with it. You don’t have to go into the lab and invent a product, you don’t have to worry about payroll for your employees, etc. You just need to market the product. The idea is that as a human being, you can establish better relationships with potential customers one-on-one than the company could do by running ads on TV. And if you bring enough people on board, you can build up a residual income, living off your commissions from the people you sponsored.

There are a few problems here though. One is that there are a lot of dumb products being sold by network marketing companies, like overpriced miracle juice. And if the product is crap, so is the business. A lot of people like that stuff, but I never wanted to be a juice salesman. But there are lots of options. I used to sell financial products (and give away free financial education).

Another problem is all the rah-rah hype that companies love to promote, when they really need to be spending a lot more time on training about, oh I don’t know, maybe HOW TO MARKET THE PRODUCT? But this turned out to be a good thing for me.

I didn’t really go anywhere in network marketing until I stumbled onto Leaders Club. They’re a meta network marketing company, where the customers are themselves network marketers, looking for practical information on how to market their respective businesses. I signed up just because I wanted to try out their leads, but I was really impressed and decided to promote them when I found out they had their own affiliate program.

Once I made that switch, I started doing much better. Because my prospects had already joined a business they liked and just wanted some help with it, they needed a whole lot less convincing. I won the top sponsor award several times (sponsoring 5+ people in a month), and I was probably in the top 2% of all network marketers.

But, as in many fields (blogging for example), the top 2% doesn’t mean very much. I was never remotely close to making a living from it. And you have to deal with a lot of really apathetic people.

People would go to my site, put in their info, say they desperately needed help with [advertising/getting web traffic/finding prospects/whatever] so they could [get out of debt/quit their job/spend more time with their family/whatever]. But then they wouldn’t return my calls or my emails, or if they did they’d usually only be interested in solutions that were really easy and wouldn’t cost anything. Yeah, good luck with that.

I just don’t have a lot of patience for people who have no ambition at all. It’s like, “Dude, this is YOUR business that YOU asked for help with. Do you want to stop wasting money with ineffective advertising, or do you want to go back to watching ‘Prison Break?’”

And the whole residual income thing is nice, but it depends on what other people do. I sponsored 40 people before one of them sponsored a single person.

The verdict:

I wouldn’t recommend joining a traditional network marketing company unless you really like sales. Liking the product isn’t nearly enough, because most of your efforts will have nothing to do with the product. You’ll either be buying leads or generating them on your own, contacting them, finding out what they’re looking for and what motivates them, finding out if they have enough time and money for a business, and convincing them that they want to join with you instead of anyone else. Nobody will ever be serious, and many people won’t even be polite, so you have to be very patient and persuasive, and have a very thick skin. You really need to have superhuman unconditional compassion for all people. How do you know if you have it? If you have to ask, you don’t. Most people don’t. I sure don’t.

On the other hand, meta network marketing companies are entirely different, because your prospects have already been sold on the concept of network marketing, they’re already in a business they like, and they just want it to work better. It’s 1,000 times easier to work with these people, but it will still be frustrating. People will still drag their feet and forget that they’re the ones who need you. But it’s not that hard to make some money, as far as businesses go.

Blogging

Well, that doesn’t sound too encouraging, does it? What about blogging, how does that compare?

When I say blogging, I don’t necessarily mean running a blog that’s monetized by Google AdSense. That’s one possibility, but I’m taking a much broader view here. For our purposes, blogging will mean any venture where a blog is the driving force. It can be monetized by third party advertising, affiliate products, ebooks, coaching, services, whatever. You’re free to swap income streams in and out at any time, because they don’t define the business. It’s not like you have to shut down your “AdSense business” to start your “coaching business” on the same blog.

At some point, a blog that’s a business could shift to being a business that happens to have a blog. There’s no clear-cut place to draw the line, so I won’t be too precise in defining blogging. “Blogging” here will just mean getting paid in one way or another for writing stuff on your site. For that matter, that site doesn’t technically need to be a blog. (Oh, and in case you didn’t know, blogging is legal.)

The thing people like about blogging is that it really lets them be themselves. It’s fun to pick any topic you want, write about it, and discuss it with other people who stop by to comment. And then you get to promote it by finding other people like you with blogs, and commenting on what they have to say. What could be better?

Well, yes, it’s very fun. Maybe that’s why 1.4 new blogs are created every second. But that fun comes at a price. Making money from blogging is much harder than most newcomers expect.

You can’t just write posts on your blog, put up some form of monetization, and wait for the checks to roll in. You need to get readers, and that means you need to spend a lot of time promoting your blog. Commenting on other blogs, writing guest posts, using Twitter, and stuff like that has to be a priority. It’s fun doing that, but it’s also very time consuming, and it could easily be a full time job by itself. And even full time, it would still take a long time to get readers.

How many readers do you need? Lots. Millions. Well, not millions, but it seems like that. And many bloggers will just keep writing posts and wonder where the money is. Unfortunately, it will never be there without lots of readers, and that’s why so few people are making a living from it.

The verdict:

Making a living from blogging is much harder than making a living from network marketing. However, for me, blogging is way more fun. To make up some numbers here, blogging is 10 times harder but 1,000 times more fun, which makes it worth it to me. And so that’s the direction I’m heading in, taking the financial hit in order to do something that I like a lot better.

But how do you actually make a living online? Naomi Dunford is answering that question tomorrow (Wednesday) with the release of Online Business School. That’s her home study course that explains how she’s making over $200,000 this year from six income streams: consulting, services, selling physical stuff, ebooks, niche sites, and affiliate marketing. She’s released some free content over the last few days, and the real deal goes up for sale tomorrow. Am I buying it? Of course. I didn’t even have to wait for the sales page.

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