Before we move on to the definition of network marketing we must understand what are the ways one can make money. There are only three traditional ways you can make money. The fourth one is a relatively new concept of Network marketing.

1. The Work model

This is an age old concept. You work for another business owner and get paid. In this model you do much of the work but you get paid only a small amount which you were contracted for. You have no linkage to the profits you created for the business owner. You also get laid off the job if the business owner believes you are no more useful to his enterprise.

2. Traditional Business Model

Here you are the business owner. You require putting in a lifetime of work, investments and commitment to see good money. Your constant involvement in the business is a pre requisite. All profits are distributed to stakeholders like the financiers, stockholders, employees and whatever is left after taxes is yours to take home.

However the moment you retire, your business may no longer exist or it may not be that well managed bringing to naught your lifetimes of work.

3. Franchise Business Model

The franchisee buys a ready made business brand name and makes a copy of the original business model. Pays a large upfront fee and makes all the investment on infrastructure and stocks etc. He also makes a commitment to pay a certain percent of profits to the franchise owners every year. Though safer than creating a new business, franchise model offers very limited profits on a huge investment.

4. Network Marketing Model

Start anywhere. Even from your home. Even if you are homeless! The business grows organically. Income is distributed by the principal company to all distributors according to a multi level compensation formula that pays you for your sales as well as sales of others in your team down many levels and as wide as you can dream. You earn from your own efforts and efforts of others. As your team grows, your business grows and your income grows. You are not limited to any geographic area and can operate wherever company has a presence.

There is a long list of successful entrepreneurs including president of countries who have subscribed to this new model of business.

However a word of warning. If your knowledge about this form of business is not adequate, you are likely to fall victim to the unscrupulous elements in the business and likely to get ripped off big and land in debt. As in all business there are enough fly by night operators operating through your best friend or relative who are themselves an unknowing victim and may suck you in to the whirlpool of losses and failures.