In this next installment in my series on evaluating a home business, I want to address the second aspect of Following the Money: the issue of what it costs you in the form of the up front investments.
You can find home businesses to join that vary greatly in their initial investment as well as the price of monthly fees or auto-ship.
Cost to Join
Just because it’s free to join doesn’t necessarily mean it’s a great deal. Nor does it mean it’s a bad deal. Generally speaking, affiliate marketing is usually free to join. You can go to Click Bank to find products to sell. But affiliate marketing has it’s own issues, as I wrote about earlier.
What are the Up-Front Costs of your new home business?
I’ve even seen network marketing businesses that were free to join. Honestly, it was merely a gimmick to get warm bodies, because the “business” was questionable if not worthless! (Not talking about companies that have occasional free or $1 specials here & there. It has to make sense. If not, ask why!)
In this industry, you very often do get what you pay for. Do you really expect to start a business that can change your life in a matter of months (or even a year or two) if it costs nothing to get started? Those companies are shoddy to begin with: products are garbage, compensation is minimal, and it will most likely shut down in a year or so. You’re never going to make the job-replacing income you’re seeking with them.
I hear so many people say, “I don’t want to pay anything. I need to make money, not spend it.”
My answer to that is “get a job,” because that’s exactly what you’re looking for. You’re NOT looking for a business. A business person EXPECTS to invest some personal funds to start a new business. What we’re talking about in this article is how to evaluate whether that investment is reasonable.
And really, a job costs more than you realize…
- You at least have to pay for transportation to get to & from work: a car with gas & maintenance, or public transportation (if it’s available to you). I know people who are “disabled” and can’t drive who are making good 5- and 6-figure incomes from home. No car required.
- You most likely have to purchase (at least) business casual clothing for your job. I know several home-biz millionaires who often say, “I don’t work from home so that I can wear uncomfortable clothes.” They practically live in shorts, t-shirts, & flip-flops.
- If your job requires a uniform, I’m sorry. Because most likely, it’s a physically demanding job and your body can’t do that until you reach the age of retirement. Hope there’s room for advancement.
- The cost of stress on your body due to dealing with office politics, bad bosses, and rude customers is NOT worth it!
Some affiliate or network marketing business are free or only require a small administrative fee to join. A really good and legitimate company will usually be in this group. Why?
- Because they know that most people who are looking for a home business don’t have “franchise” money laying around. And it doesn’t make sense to require a HUGE buy-in when there’s not a brick & mortar business with it’s inventory & high over-head involved.
- One of the things the Federal Trade Commission (FTC) looks at is what people pay to join and what that money actually pays for. We’ll talk about this again in a moment. So a high initial investment is a big red flag that’ll bring unwanted government scrutiny.
Even some affiliate programs require a small enrollment fee. Remember what I said in my article What Am I Paying For? It’s up to you to determine if this is affordable and fair.
When I first got started in the home business industry (in the early 1990s), the going rate for a “biz in a box” buy in was $500. They explained that this price was determined based on basic psychology of the average adult. What people get for free or cheap, they don’t value. Somehow, $500 was determined to be the “just right price” between being perceived as “too expensive” and being perceived as “not valuable.”
Since that time, I’ve seen travel businesses in the network marketing (MLM) industry go for as much as $3000! I said then and I’ll say today – even when I’ve made money in this industry – that anyone who has that much money to blow on a home business “has more money than they do sense.”
Of course, that’s not the norm… The average “high buy-in” company will still cost anywhere from $300 or so, to as much as $1200.
Again, you need to determine for yourself, AFTER you’ve looked at all other components of this business model, whether or not the initial cost is affordable and fair. AND you need to decide whether it’s a fair price for whomever your potential customers and/or partners will be.
But the Federal Trade Commission (FTC) wants to make sure that a company isn’t just making money from, nor paying it’s representatives from, the buy-in payments. If you or your company is making money off the sale of “business kits” or “enrollment fees” the FTC will shut you down as a Ponzi scam faster than you can say… well, Ponzi! The company and its reps must be paid from the sale of legitimate products and/or services, even if they’re digital (online). So, remember that, according to the FTC, profits from the sale of products and/or services is the only legitimate means from which to earn income from home.
That’s why we’ll talk about recurring costs in the next article.