Explanation of MLM Residual Income


You've heard the term MLM residual income more often than not if you're a representative in an MLM company or if you are familiar with the industry. Residual income is described by most as the type of income where you work hard once and get paid over and over again.  That is the difference between Residual Income and Linear Income.

For example, you sell your products or service one time and you would get paid over and over again because you do not have to keep selling the product.

An example would be:

  • A recording artist who makes one hit record and keeps getting paid for that record every time it's played
  • A landlord who has a renter sign a lease agreement one-time but that renter is paying the landlord month after month and year after year.

About 90% (if not all) of MLM companies list residual income as the main part of their compensation plan. One way to earn residual income in an MLM company is to have your customer purchase the product or service on an ongoing basis.


To make this simple most MLM companies have products that require monthly purchases.  For example:

  • Telecommunications Industry = Require a recurring monthly payment for a utility bill
  • Health and Wellness companies = Offer products on auto pay
  • Service Industries = Require a monthly membership noted to maintain service

In order to receive residual income, products from these MLM opportunities must continue to result in repeat sales.  If a company plans to have you earn a residual income they have to offer viable and consumable products.  What this means is that the product it's capable of working successfully and able to be used up in order to be replenished.

If the ONLY time you make an income is when you physically do a transaction (and the customer is not in a position to pay on their own on a monthly basis) it will be the hardest thing to generate consistent MLM residual income.



Examples of Residual Income

Various examples of residual income include:

  • Payments from dividends or bank accounts
  • Royalties from books
  • Payments from recorded music
  • Income from rental property
  • Royalties from written music
  • Income from movies
  • Royalties from patents
  • Income from advertisements through mass media or online

You may hear the term "Royalty" used previously because that is the phrase that is used in various industries when someone exhibits the ability to get paid continuously for what they do once.

People write one book, record one song, rent out one property, appear in one advertisement, etc.  However, that book, song, rental property, or advertisement is being sought after years after the person did the work.

It is money that you earned while you currently don't have to do anything at that time to earn that money



Importance of Residual Income

The term residual income comes from the Latin word, “Residu”, which means “what is leftover”.  The reason why this is important is that this is also known as disposable income.

Disposable income is money that you have AFTER all your bills and taxes are paid. Therefore it becomes a VERY important decision among banks when deciding to give you a loan.

The residual income you have determines the chances you will be approved for a loan. The residual income also establishes if the borrower can cover the monthly loan payments or not.



Maintaining MLM Residual Income

One misconception people have is that in MLM once you get the residual income you’ll have it forever. This is false. You only have it as long as products are being sold within your downline through leveraging your efforts.You DO continually have to put work into the business to receive residual income. However, you will be putting in less effort to earn that residual income.

When I say less effort, I mean you go from selling products and making presentations full-time (or part-time depending on how often you do the business) to managing or supervising your downline when it grows big enough.  The best way to look at it is you'll be getting full-time pay for part-time work.

When your downline has enough distributors you will start to get MLM residual income from the sales that they generate. Your downline is already involved in the business based on the work that you have done to get them started in the past.

Maintaining MLM Residual Income

You will continue to get residual income based on their efforts. However, you will have to provide occasional training and answer any questions that they have on a continual basis.

A few things you have to realize in order to maintain residual income is that:

  • You have to teach simple duplication among your downline
  • Create momentum throughout your downline
  • Provide continuous training for your downline

It is important that you invest your time and energy into the advancement of other people. By building a downline that works together and helping each other work toward a common goal, you’ll create a long-lasting MLM residual income that'll help you accomplish the goals you set for yourself.



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