Understanding the difference between negative and positive leverage is crucial to your online business and your potential to make money. Leverage is your ability to multiply your efforts by working with other people. In some contexts, you get negative leverage, meaning that the more people you’re working with, the less money you make. But in other professions, you have positive leverage. In this case, working with more people and utilizing their skills and connections means you can turn a greater profit.

Leverage in the Typical Corporate Environment

When you’re working a regular job, you don’t have leverage. You get paid for investing your time at the company. Even if you work on commission, you’re getting that money in exchange for however long it takes for you to earn it. In the corporate world, you have something that imitates leverage but isn’t the real thing. If your department does especially well, management might get a bonus, but it’s really the shareholders who reap the benefits. If you own a franchise, you won’t experience the rewards of that success. The person who originally started the franchise will.

The Negative Leverage Behind Multi-Level Marketing Companies

In the world of multi-level marketing companies (MLMs), there’s a lot of negative leverage. Eventually, it can benefit you. But you start with negative leverage. If you make a sale, you don’t make as much money as you would have made if it was just direct sales. The profit is divided up among you and all the people in the MLM above you. It’s only when you have a lot of people below you that you can actually start making decent money.

This is a bad system because, frankly, a lot of people are lazy. If your success is dependent on motivating other people, it’s not going to work. Some people won’t perform no matter what you do. It doesn’t matter how good you’re doing in an MLM. If one person is doing bad, everyone else suffers.

When Rachel worked for an MLM, she saw firsthand just how damaging this system was. Although her highest earnings ever in one month was $10,000, her average monthly earning was only about $2,000. After stating with Born to Prosper, she was able to make $2,000 in a single sale to one client. It was then that she realized that if she was able to do that with one client all on her own, she could do even better with outside leverage!

Choose Your Machine

Different jobs will pay you very differently according to what kind of leverage you have. Every business is nothing more than a machine. You put effort into one side and get cash out the other. Not every machine rewards effort the same. A multi-level marketing company will reward you differently than a direct sales company or owning your own business. You have to decide what’s worth it to you.

Highlights From the Episode

• The difference between any job and creating your own business is leverage. 2:50
• Shane tells the story of how he started out in direct sales. 10:05
• Rachel shares about her background in multi-level marketing and how it held her back from her full financial potential. 11:40
• Rachel discusses the difference between an MLM and Born to Prosper and how positive leverage makes all the difference. 18:20.

View the entire Industry Insider episode and learn all about how positive leverage can transform your life!