Comparing MLM Business
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!! That's a failure rate of 99%.
For this reason, the company's age would
seem to be is a strong factor. The management of older MLM
companies has been around long enough to have made mistakes and
weathered storms. A company that has been in existence
for, 20, 30, years makes a substantial
argument for it's continued existence.
Private vs. Publicly
owned: Generally, the more public
information available about a company the better it
is for consumers and representatives. The logic here is similar
to sunlight laws in government. The more visible a company
(government) is the lower the probability of hidden problems or
downright fraud.
Since publicly owned companies have
investors, the Security and Exchange Commission (SEC)
add's another layer of regulatory oversight. However, all MLM
companies are regulated by the Federal Trade Commission (FTC).
And 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're likely to be a
customer BEFORE you become associated
with a business.
However, many people are often exposed to
the business side of MLM before they experience the
product/service. For these people, doing due diligence on the
product/service is essential before signing up for the
business. In other words, you're still going to have to be
a customer.
Many MLM business owners begin by sharing
with family and friends. Occasionally, a very few of these may
become customers and/or business partners. Don't think you're
going to coast to success on friends and relatives. All of Ray
Kroc's friends and relatives multipled ten times could
not have made Mcdonalds a world wide success.
You gotta believe in a product/service to
be able to convincingly tell somebody about it. Absolutely,
do not associate
yourself with a company or product, you have questions
about. Because W.O.M sales is the primary selling tool, your
personal credibility is more at risk in MLM than in
a 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, may
be 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 likely measured in hundreds, not thousands of
dollars. Many are in the low hundreds. (Check the numbers for
the MLM you're evaluating)
Please be advised that, 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 ought not be in any business, whatsoever.
The same people who would
never gamble on their own 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.
So we can infer that new MLM startups
are experiencing at LEAST a 50% failure rate!
Bear in mind that it's
possible that many people getting into an MLM
business are content just 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 doesn't take thousands of dollars to start, doesn't
mean you won't invest lots of time
and
money making it go.
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