Back in the 1990’s, I was working as a special education teacher – enjoying the perceived safety of a “guaranteed income” and a “pension for life.” Then I met my future husband – a self employed contractor who vowed never to let anyone dictate his income earning potential. What I didn’t know about was his affinity for network marketing and his obsession with having a residual income. Unlike a regular paycheck, a residual (passive) income would allow him to get paid over and over again from his initial work even if he was not there physically to do the job each and every time.
The Federal Trade Commission defines a legitimate multilevel (MLM) or network marketing company as one in which individuals sell products to the public — often by word of mouth and direct sales. You earn money not just from your own sales, but also for sales made by the people you recruit (downline). So many are attracted to MLMs because of the seemingly easy money to be made, low start-up costs, and the ability to be paid through the efforts of your recruits. With the siren song of having more discretionary income and a lifestyle of your own choosing, the reality is that few remain with an MLM business after six months.
In the beginning, it is heavily dependent on you sharing the products and business opportunity with people in your circle of influence (network). What those remaining realize is that network marketing is a business just like any other business. Your time has to be spent on not only selling products but also on finding new leads, retaining your existing clients, recruiting, managing and motivating your down line (those you recruit), and understanding the financial aspects of the business.
So if you are considering signing up as a distributor or independent representative of a network marketing company you may want to have criteria to evaluate the suitability of the opportunity for you. Before signing up here are a few things to evaluate:
Product. Is it a product you would normally buy and use even if you weren’t compensated? Is there a high demand for it and will it generate reorders monthly from your customers? The FTC warns distributors to be sure that the marketing materials and any claims that you make are truthful. That is to say, there must be solid evidence to back up the claims you or the company make about the products.
Compensation plan. How will you be compensated? Find out how many customers and/or independent reps are needed before you can be paid. According to the FTC if the money you make is based on the number of people you recruit and your sales to them – it’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.
Start-up costs and monthly recurring costs. What will be your out of pocket expenses every month? Minimum order size each month?
Reputation of the company. A great company that will stand the test of time. At least 5 years of increasing sales and profits, preferably debt free or a high income to low debt ratio, little complaints with the Better Business Bureau AND Fed/State authorities.
Company’s refund policy. Get their refund policy in writing about returning any unused products.
Marketing system. Does the company provide you with leads or do you have to get your own customers? How does the company support your marketing efforts? How much do the tools cost?
Training System. How frequent are the training sessions? How are they done? Where?
For further info about evaluating network marketing business opportunity please visit:
http://business.ftc.gov/documents/inv08-bottom-line-about-multi-level-marketing-plans
As for my husband, he got over the appeal of MLMs many years ago. My sweetheart realized that his time, money, and energy would be better suited working on his trade construction business and creating additional value for his existing clients. However, he did manage to transfer two MLM concepts he learned to the sprinkler industry. What he learned allowed us to create a successful referral program which compensates clients for referring their friends and family to the sprinkler business and a continuity program.
Sherry Daniels manages a 20+ year Orlando based sprinkler system company. She’s developed a Done-for-you monthly newsletter service that just about any business owner can use to get new clients and improve client retention and have them return to you again and again and again. It’s for the business owner who’s too busy, or doesn’t believe she has the writing skill to create a newsletter from scratch can use. She is the author of “Working Moms: How to Quit Your Other Job – Secret to getting Paid for Working in Your Husband’s Business ”- available for FREE (while supplies last). Sherry can be reached at [email protected]
