More threads by Practic


Nov 29, 2022
1. Participating in a “Refer a Friend Program”

“Refer a Friend Programs” (RFP) belong to the category of money making opportunities, which allow people to monetize their “social capital” such as relations with friends, colleagues, relatives, etc. In such programs a person receives a one time or several times payments, gifts or discounts in exchange for referring of a new client to a business with this type of program. The most known example of such program is the Tesla Motors RFP in which it gives discounts, rewards or free services to participants for bringing new customers.

In this analysis it will be used a RFP program from Credible, which gives from $200 to $1,000 (in special promotions) for one reference of a student who wants to refinance student loans. We assume that regular $200 bonus is split equally between you and your friend, so your income from one referral is $100. To get $1,000 per month in such program it will be required to reference ten new customers per each month. It seems not a lot of work, but taking into account that a number of such customers is limited, this level of income can not be sustained in the long run.

What is unfair in “Refer a Friend Programs” from a point of view of a participant?

A) Participants are paid only on a fixed time interval, not regularly. Usually it is a one time payment, not a regular stream of payments.

B) Participants are not paid for indirect references.

2. Participating in an “Income Sharing Program”

“Income Sharing Programs” (ISP) pay regularly to participants from all sales generated by customers who were referred by participants directly and indirectly up to a pre-selected level. Income Sharing Programs, from a point of view of a participant, do not have drawbacks of “Refer a Friend Programs”. Therefore, it is possible to say that an “Income Sharing Program” is a “Refer a Friend Program” on steroids.

Suppose that an ISP rewarding scheme is: 5% on the first level, 3% on the second level, 1% on the third and fourth levels. The ISP organizer pays in total 10% from sales to ISP participants. Let us suppose the average sale (ASale) per customer is $100 per month, and the average reference rate (ARef) is 5 per client. Under these assumptions, a participant has 5 first level participants, 25 second level, 125 third level, and 625 fourth level participants. The first level participants generate $500 sales, and $25 (5% from $500) come to the participant. The second level participants generate $2,500, and $75 (3% from $2,500) come to the participant. The third level participants generate $12,500 and $125 (1% from $12,500) come to the participant. The fourth level participants generate $62,500, and $625 (1% from $62,500) come to the participant. In total the participant will receive $850 per month. In the “refer a friend” types of program this participant will receive only 10% from 5 customers. It will be a one time payment of $50.

Suppose that a student want to earn some income from references to an ISP provider. She/he estimates that to convince a single friend or relative to join the ISP will require her/him about three hours, which is valued at $200 costs. Assuming the time horizon for this student is ten years, a one-time $50 payment will be 25% of return on the initial investment of $200, but $850 monthly payments over 10 years will be 850*12*10/200=51,000% return on the initial investment of $200. The difference is on many orders of magnitude!

In the table below are calculations of income for different parameters.

Table. Regular income of an ISP participant in dollars.
As we can see it is possible to earn $1,000 per month even from participation in a single ISP. In general it is possible to receive the desired income from participation in multiple ISPs.

Desired Additional Income=Average income per ISP *Number of ISP

For example, Katrina needs an additional $2,000 per month in income to have a comfortable lifestyle. Assuming that an average income from a single income sharing program is $200 per month, Katrina needs to participate in 10 income sharing programs to supplement her current income to the desired level.

This making money opportunity is especially appealing to introverts, who in this extroverted world do not have many opportunities to make money outside of employment.


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