Consider This Before Starting a Multi-Level or Network Marketing Business
At some point in life, you will have been heard of some multi-level marketing (MLM) or network marketing business opportunity.
Although incentives vary between
companies, it usually offers the chance to ditch your 9-5, fire your boss, sell
products you believe in, establish your own business, make lots of money,
upgrade your lifestyle, potentially win a car or free trips, and make new
friends in the process. And who doesn't want these?
People like MLM because its low barriers
to entrepreneurship. You'll access training, an established system, support,
and ample encouragement along the way. And the overheads are low with no large
capital requirements or specialist qualifications required. Being a home-based
business can also provide tax advantages.
Sounds exciting, right? But like any
investment of time, money, and energy, you need to be aware of what you're
getting into and do your homework.
How MLM works
A sponsor or mentor will teach you how to sell the product and earn a small commission from your sales. MLM compensates you for the sales you make, and the sales of others you recruit-this creates a "downline" of distributors and a hierarchy of compensation levels. So, the more people you recruit, the more commission you make.
A sponsor or mentor will teach you how to sell the product and earn a small commission from your sales. MLM compensates you for the sales you make, and the sales of others you recruit-this creates a "downline" of distributors and a hierarchy of compensation levels. So, the more people you recruit, the more commission you make.
Why do companies choose the MLM
structure?
1. No advertising. It's challenging for companies to get their products and services "above the noise" using traditional, expensive advertising. MLM distributors sell the product through word-of-mouth to friends, neighbours, colleagues, and others online.
1. No advertising. It's challenging for companies to get their products and services "above the noise" using traditional, expensive advertising. MLM distributors sell the product through word-of-mouth to friends, neighbours, colleagues, and others online.
2. No staff benefits. Distributors
are a sales force that work without benefits-for example, superannuation and
health insurance. And of course No retail outlets and overhead costs.
Four success tips
1. Keep your current job while slowly making the MLM transition. MLM is not a get rich quick scheme and success is not easy. You need to embed success habits like discipline, hard work, organisation, self-motivation, and daily actions like hard sales. Treat it like a business and listen to those who've succeeded.
1. Keep your current job while slowly making the MLM transition. MLM is not a get rich quick scheme and success is not easy. You need to embed success habits like discipline, hard work, organisation, self-motivation, and daily actions like hard sales. Treat it like a business and listen to those who've succeeded.
2. Believe in the product. Don't
just do it for the money or the chance to create a business. It's
unsustainable. Ask yourself these questions:
·
Do you have a passion for this product
or service? Has it genuinely made a difference to your life?
·
Is the product superior to a cheaper but
comparable retail product?
·
Can you talk about this product in your
daily life such as picnics, the hairdressers, barbeques, and even when you're
tired?
·
Are you comfortable mixing business with
friendship? People may not want to hang out if they think you're always going
to pitch them. (My website is positioned to attract people who are interested
in my offer. I try to build trust and give value by providing high-quality free
information. So I don't feel the pressure to pitch people at social events.)
·
Are you comfortable with the long game?
Many MLM companies promote a three-to-five year plan towards financial freedom.
But it could take ten years. And success is not guaranteed. Are you comfortable
with that?
3.
Have the time and focus on it. MLM won't work if you're busy with young
children, already busy with another business or a demanding career. MLM is
ideally suited to someone without a job or who wants a career change, but has
been unsuccessful in finding alternative work.
4. Running more than one business is not
a good idea. The old proverb says, "If you chase two rabbits,
you'll catch none." Unless you're Richard Branson-who has a huge
team of support specialists-success normally comes from doing less but better.
The difference with Branson is that he has the funds to invest in strong teams
throughout each business.
Buyer beware
1. Before entering an MLM scheme, seek answers to these questions:
1. Before entering an MLM scheme, seek answers to these questions:
·
Can you make a sustainable profit from
just selling the product without having to recruit anyone? (If they prefer you
to recruit distributors above new customers, this indicates that products are
not driving the MLM company profits.)
·
How quickly will you make money and how
many distributors do you need to recruit to make money?
·
What's the average compensation and
failure rate for part-time/full-time involvement?
·
What's the average expense of running
the MLM company and does it exceed the average compensation?
2.
Be aware of ulterior motives. Few people like being "sold to" so
the MLM pitch is often dressed up as "customer service" or
"sharing your enthusiasm" (like recommending a movie). But when money
is involved, it's not innocent enthusiasm. Be honest with yourself and be clear
on your ethics.
3. There are significant upfront fees. Ever
heard of a job that you have to pay a fee to start working? You'll probably pay
significant upfront up-front fees for education and training. Ensure you're
ready to commit or accept the possibility of losing your investment.
4. Expensive products. MLM
companies often sell decent products, but they're usually expensive (to pay for
the hierarchy of distributors) and require you to sell them aggressively to
family and friends.
5. Don't mix with your existing
business. Introducing MLM to an existing business client base is usually a
bad idea. It can make people think you're not interested in your normal
offering. You'll lose focus on what you're probably good at (remember what
happens when you chase two rabbits). You'll also lose some friends and clients
in the process, regardless of your success.
6. You'll probably lose money. Most
people who join an MLM scheme, only a few earn more money than they spend.
7. The tax advantages are overstated. Many
people wrongly assume that losses can be offset against other income in
Australia. The ATO generally only lets you use these losses to offset future
business profits-not other income such as salaries and wages.
In summary
Hundreds of MLMs exist-some good, some bad. So do your research, find an MLM company with quality products, and a sustainable, fair compensation plan
Hundreds of MLMs exist-some good, some bad. So do your research, find an MLM company with quality products, and a sustainable, fair compensation plan
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