At best "income potential" is a highly subjective metric, at worst it is highly misleading. One could also say that playing the lottery has tremendous income potential.
The best way we have found to look at this is to differentiate between "possibility" and "probability".
How much money it is possible to make is basically a useless statistic in terms of choosing a business. However knowing how much money it is probable to make is essential. Unfortunately getting the real facts is not always easy, especially in home-based business.
Every direct sales company is required by law to publish an "Income Disclosure Statement" that illustrates the average income of distributors as well as the percentages of distributors at different earning brackets.
However for other models, such as affiliate marketing and franchising, there is no such required disclosure. And even direct selling companies have a bad habit of burying their Income Disclosures in hard to reach places on their website.
If you are looking at a direct sales opportunity it is important to know that by law you cannot be recruited if you have not been given a copy of the Income Disclosure Statement, so make sure to ask for it.
That said, it is important to remember one of the inherent problems with most home businesses, the low cost of entry means a low barrier to entry, meaning many unqualified and unserious people will get started. This in turn lowers the success rates and can distort the figures on the Income Disclosure Statement.
One final note on income potential, the franchising industry is notoriously bad for misrepresenting the probable income for new franchisees. Since by law neither franchisors nor franchisees are not required to disclose income and profit information to prospective franchisees it makes it tempting for franchisors to fudge the facts. This distortion is usually done casually and in conversation with prospective franchisees, since these companies would be too smart to put anything in writing that was not true.
The bottom line is that it is up to each business owner to do his own homework and assess the income potential of any opportunity they are considering. The simplest way to make sure you are getting the most accurate picture is to speak to as many people as possible who are in the business you are considering. ( Learn more about how we can help)
Let us take a look at some of the most common business models and compare their "income potential" with some interesting facts and figures.
Business Type
Claimed Income Potential
Interesting Averages & Stats
Multi-Level/Network Marketing
Many people have a negative view of "MLM" due to having been harassed in the past by obsessed friends or family members pitching some wonder pill, or magic juice. MLM is usually positioned as a great opportunity for new entrepreneurs that "anyone can succeed with". Unfortunately the statistics do not support this
MLM distributors avg less that $10 / wk income
95% of MLM income goes to the top 1% of distributors
Avg MLM distributor drops out in less than 90 days
Avg MLM distributor will sponsor 2 peopl
Affiliate Marketing
Affiliate Marketing is promoted frequently as the easiest and least expensive way to get started with online marketin
95% of affiliates never turn a profit
Even successful affiliates usually earn a meager living
Internet Marketing
Internet Marketing encompasses a wide variety of programs and income models. However in general marketing on the Internet has very low success rate
Over 95% of Internet Marketers drop out without making any money
Those who do succeed try on average 7 businesses before turning a profit
Franchising
Trying to identify real statistics on franchising income is almost impossible. No one is required to report it and both franchisors and franchisees have incentives to misrepresent it. In general it seems that whatever a franchisor tells their prospects is probably 10-50% higher than the probable income to be generated.
Up to 7 Figures (with multiple locations)
Avg franchise owner earns bat $60,000 / yr and works between 60 and 80 hours / wk
Data is unclear on whether starting a franchise actually increases your odds of business success
Brick & Mortar
Traditional "brick and mortar" businesses tend to have slightly higher success rates than online businesses mainly because they are more expensive to start so the owners tend to be more committed and will work harder to not lose their investment.
Average start up business fails in 3-5 yrs
