Comparing MLM Business

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There are hundreds of Multi Level Marketing (MLM) Companies. The large number of companies makes picking the right one a challenge. The factors listed below may be helpful in selecting a company to represent.

Longevity:
Multi Level Marketing companies (MLM) come and go with dizzying speed and depressing regularity. According to the DSA (Direct Selling Association), only 1 in 327 companies make it thru their first year!!

For this reason in my opinion, the company's age is a strong factor. The management of older MLM companies has been around long enough to have made mistakes and weathered storms. The longer a company has been in existence, the argument can be made it's more likely to continue.

Private vs. Publicly owned:
Generally, the more public information is available about a company the better it is for consumers and representatives. The logic here is similar to having sunlight laws for government. The more visible a company (government) is the less mess they can get away with.

Since publicly owned companies have investors, the Security and Exchange Commission (SEC) add's another layer of regulatory oversight. All MLM companies are regulated by the Federal Trade Commission (FTC). Many State Attorney Generals also monitor MLM companies.

Product / Service:
Obviously, the product or service offered by a MLM company is crucial. By definition, MLM is Word Of Mouth (W.O.M) sales. Nobody tells somebody about anybody unless they themselves are sold. You can't tell or sell anyone else before you are enthusiastic about your product/service yourself. This is the way WOM works.

So, by logical necessity you generally are a customer BEFORE you become associated with a business. (This is the basis of my argument for NOT focusing on trying to sell a business opportunity.)

However, many people are exposed to the business ownership side of MLM before they experience the product/service. For these people, doing due diligence of the product/service is essential before signing up for the business. In other words, you still going to have to be a customer.

Many MLM business owners begin by sharing with family and friends. Occasionally, a few of these become customers and/or business partners. You must believe in a product/service to be able to convincingly tell somebody about it. Absolutely, do not be associated with a company or product, you have questions about. Because W.O.M sales is the primary selling tool, your personal credibility is probably more at stake in MLM than traditional business.

Profitability:
Average or typical profitability is difficult to assess. In part, this is due, to natural reluctance of business people to disclose their income. A bicycle repair shop owner, for example, doesn't go around saying how much she makes from her business.

Also, any statement of income from an MLM business person, even if verified, is considered an advertisement suggesting others can make the same amount of money. A litigious and vigilant regulatory environment make such income statements a potential legal liability.

Each MLM company is required by U.S. and Canadian regulatory agencies to disclose how much an "active" MLM business person profits per month.

The average "active" profit from a MLM business varies widely depending on the MLM company. The difference, however, is usually measured in hundreds, not thousands of dollars. Many are in the low hundreds. (Check the numbers for the MLM you're evaluating)

What constitutes an "active" MLM business person is much disputed. There is more agreement on the likelihood that low start up costs attract many into MLM who simply should not be in any business, whatsoever.

The same people who would not gamble on their abilities and $35,000 to start a traditional business; will take a chance with $500 or less on a MLM start up kit. It's certain that the failure rate for new MLM business startups is at least equal to that of traditional businesses, and may be worse.

Brian Head, Economist with the SBA Office of Advocacy, notes that the latest statistics suggest that "as a general rule of thumb, new traditional businesses have a 50/50 chance of surviving for five years or more." Statistics for MLM business failure are not readily available. Perhaps those who fail don't report it. It may not be a requirement of regulatory agencies. Perhaps it should be.

So we know that new MLM startups are at minimum experiencing a 50% failure rate!

It's also probable that some people getting into the MLM business are content to make a few hundred dollars a month. The additional monthly income; to pay a utility bill, or buy needed medications, may be the only thing keeping them out of bankruptcy and/or foreclosure.

Critics of MLM charge it's impossible, without recruiting, to make a full time living relying solely on sales of the MLM product or service. In some cases, that may be true.

If you don't want to recruit, and your goal is to make a full time living just selling an MLM product/service; than before signing up, do due diligence to find out if selling that company's product/service meets your requirements. In other words online or off, can you sell enough of the product/service to meet your goals.

Some objective input might be helpful. Do a survey. Get opinions about the product/service (not the company or business model) from a number of different people.

In addition to evaluating the Company and the product/service, take a good look at yourself in the mirror. Starting a MLM business is no different than any other business start up. Just because it does not require thousands of dollars to begin, does not mean you won't invest lots of time and money making it go.

Luk 14:31: "What king, going to make war against another king, sitteth not down first, and consulteth whether he be able with ten thousand to meet him that cometh against him with twenty thousand?"

 A Sampling of MLM companies: