I found a lot of people who have no idea on how to evaluate a business in my prospecting. There are a lot of good and bad companies out there.
There are certain things that must be understood. If you don’t join the right company, you could miss out on millions of dollars of income; if you choose the wrong company, you could waste resources (time, money, credibility, etc).
I am going to give you FOUR PRINCIPLES for evaluating an MLM company.
What is MLM?
Simply put, MLM is an acronym for Multi-Level Marketing, sometimes called Network Marketing.
As the name suggests, multiple levels of people are marketing a product to consumers. A sales representative (also referred to as a distributor, member, affiliate, partner or associate) gets customers and recruits and trains another sales rep to get customers.
Principle # 1: Hugh and Expanding Market
Is Beef Industry a huge and expanding market?
Does a Record/VHS Tapes company in the Music Industry have a huge and expanding market?
The answers to the above questions are examples that will determine whether the company is going to last long term?
No one can be successful in a company that fails.
For a life of excitement and above-average income, you must join a HIGH Growth industry (Right Place) at the Right Time.
For Network Marketing to be a major growth industry of the future it needs to be driven by Primary Trends (aka Revolutions). The primary trends are:
A. What makes people happy?
B. How do we make money?
C. How companies sell?
D. How people buy?
In short, you make money from production that makes somebody life easier. If you cannot be of service to make someone life better, that person will not buy from you.
Sure Network Marketing is a relationship business but still if your products are of no use to them, it is unlikely they buy from you.
Look at the Trends and Timing
Although we can't predict the future but we can probably see the likely trend in the future. You may have heard many times that 'Timing is Everything'. You can have the best product or the company in the world in the cutting-edge industry but if your timing is wrong, you will struggle to succeed. Getting in at the right time is important for the momentum of the market place will create growth opportunities where even an ordinary person can achieve massive results. Massive action gives you extraordinary income.
All industries have their lifecycle stages. The best time to join is at the start of the Growth or Shakeout Stage. The successful products and business systems will lead the growth to the Shakeout Stage. Network Marketing is no longer a new industry. It has experienced its Growth Stage. The next stage is the Shakeout Stage.
What created a trend which leads to a major event?
Three major changes that are happening in our world today that contributes to a trend:
A. Technology.
It creates global customers, off-shoring and out-sourcing.
Today, millions of people have been tutored in front of their computer screens by expertise's living on the other side of the world. A tutor can communicate with many students on computers at one time. This is leveraging on the tutor's time to create wealth and the satisfaction of a job.
Businesses move off-shore because they get cheaper wages and tax advantages which mean it costs less to produce the products and thus to gain higher profit margins.
It is too far down the technology path to stop off-shoring and out-sourcing.
B. Global Financial Meltdown.
The last recession lasted 6 years, the one before that took 10 years and the one before the 10 years one took almost 40 years to recover.
Nobody knows how long this current recession will last, let alone how deep is this recession. All we know is this is a very stormy time but we will eventually come out of it like the last decade before.
Global financial meltdown forces many people to look at entrepreneurship full time or part-time. Jobs lost and high debts are the two main reasons high on the list that make people to think of ways to do better for themselves and to care of their families well. It will spur the largest growth in the Network Marketing industry that we are now in.
In the past, the Network Marketing industry has been 'ridiculed' and 'violently opposed', only to see that the industry grew and grew. With millions of people involved and almost reaching a trillion in sales, it is safe to say that there is sufficient evidence that network marketing's method of distributing products to customers is working and can make money to give sound financial opportunity for individuals.
Network Marketing offers an alternative to job insecurity. Smart people looking for financial freedom and a better way of life have turned to network marketing. There are many reasons why network marketing offers a viable alternative to working in the corporate world.
First, a network marketing business can be developed in your spare time while you continue working in your jobs and etc. Often wives build successful network marketing organisations while their husbands continue to work in the corporate world. Over time, the network marketing business grows large enough to support the whole family. In the meantime, it offers an additional stream and decreases the risks associated with corporate downsizing.
Second, most network marketing businesses require little start-up capital. For many organisations, this is less than USD 500. Starting your own business or buying a franchise can cost hundreds of thousands of dollars. (And there's no guarantee that the business will generate sufficient income to repay the money borrowed)
Third, network marketing generates an ongoing stream of residual income. This is especially true for organisations marketing a product that gets used up and needs to be purchased regularly like the nutritional supplements.
Despite that, you may still hear a high failure rate of new people joining Network Marketing. The problems are more associated with the many reasons of the individuals who joined the business with expectations of making money fast and did not and thus nothing to do with the Network Marketing industry itself.
I strongly believe in order to succeed in this home business you need to be coached well until you are competent enough to run by yourself. Therefore look for successful sponsor who are successful in this business and you yourself be willing to be teachable and work. We have global online alliance platform where we could coach our worldwide associates weekly on their PCs and leverage on many successful leaders from this company for multiple skills and expertise.
Most good Network Company has already placed its strategies for global expansion success, differentiate and increase its product lines, and enhance its high tech marketing tools to raise its distributors' productivity levels. Once you are in, you can take off exponentially as the company expands.
C. Baby Boomers
Who are the Baby Boomers?
A person born between 1946 and 1964 is commonly known as a “Baby Boomer”. They were born post World War II and many countries experienced an unusual spike in birth rates, a phenomenon commonly known as the baby boom. These people are in their forties or older and most of them are in their prime earning power. Although they consist of about one-third of the world’s population, they account for about two-thirds of the sales and they have about 65% of the world's wealth.
The other equally large population is the Generation Y and X. The Generation Y is people between 30 to 40 years of age and Generation X is between 18 to 30 years old.
If you look at what all these groups of people want and don't want, it will set the trends.
Never in time have we now had all these 3 major groups with Baby Boomers leading and Generation X tailing wanting the same thing. That is FREEDOM. Freedom can be interpreted as having a LIFESTYLE that you want.
For example, a baby boomer may say "If I know I live that long, I would take better care of myself. I would like to know how ".
Another group of people may say "I don't want to work as hard as my parents did for they did not see much of their kids growing up and they sacrifice much to have their future generations live better lifestyle than they had"
Family group may say they want to reduce debt as much as possible or want to earn extra income to send their children to better or higher education institutions.
The list goes on and on.
Principle # 2: Unique and Consumable Products
Does the product sell outside the network? Meaning, are there consumers who will buy the product that are not going to join the MLM business?
The product got to be unique in the sense that they need to go there to get it and no where else.
If the product is not unique, you are going to compete on convenience and price. That is a very hard barrier to overcome for a home business. Large companies market on convenience, price and product differentiation. You would have a tough time competing with them.
Does the product get consumed every day? Meaning, would the consumers be automatically shipped with another month worth of products directly from the company without further involvement on your part? That leaves you time to recruit and train more associates to earn more leverage.
A one-time purchase and then wait for so long for that customer to purchase again is not so great a consumable product. For example, a sleeping bed. How many times do you buy beds in your life time?
Principle # 3: Compensation Plan
Will I be rewarded well for my efforts?
In order to create an incentive for people to 'catch and get on' with entrepreneurship, the business must create a situation where everyone has the same amount to gain. That is, everyone has the same opportunity to create leverage which is the mechanism to generate wealth. I will expand on this for my subscribers.
Principle # 4: The Company's Business Development and Training System
Does the training produce a successful distributor?
Training is extremely important as it sets in motion the activities of your group or organization.
There is a saying:
"Wealth is hidden from those who must do it all by themselves. Wealth exposes itself to those who are patient enough to train others to do the same".
It is vital to understand how money is made in network marketing. It is in TRAINING.
MLM business is about training others to do the same as you do the job patiently. You are rewarded for training others well.
When you do that correct repeatedly, you will have good answers to your business for these questions:
A. How many new people join my organization this week?
B. How much product volume my people and my customers made this week?
C. How many products were sold through retailing?
It is like hiring someone to work for you and you earn some commission on what they earn.
For example, if you work 24 hours a day x 365 days a year = 8,760 hours per annum.
Let say, you have 56,000 distributors in your organization and they each work just 1 hour a year, you get 56,000 hours a year.
That is equivalent to you working alone for 6.4 years.
So it makes sense to put in your effort to PATIENTLY TRAIN your people well.
It is not easy but as you can see, it is worth your effort.
Has the MLM company got an effective training system? Some company's training systems are better than others. If you come across a business that is good for you but the training system may be inadequate you must then create your own for your groups.
"Success in business never comes from inaction" - Richard Branson
Some additional areas to consider:
1. Structure of the MLM Company
The MLM Industry was proven a legal form of distributing goods and services by the U.S. Federal Government in 1979.
A MLM company can still be illegal in the legal MLM industry.
A good or a bad company is ranked against these four criteria
1. The intention of the company owners.
2. The product (or service) they sell.
3. The compensation plan they use to reward production.
4. The type and effectiveness of the training
Good Intention:
Good company intention is where the owners have a long-term vision of helping people with their products and a long-term vision of providing a valuable opportunity for their distributors. MLM companies should view their distributors as their greatest asset.
Ask how the company got started and who started it. Has the company been sold to investors? If yes, it’s not a good sign unless the purchaser has a similar or greater vision for the company.
Ask if the company is solvent (capable of meeting financial obligations).
Ask if the company is growing (more sales than last year). Also, just because a company doesn’t have more sales this year than last year doesn’t mean it’s not a great company - but if it does have increasing sales, that’s a plus.
Does the company listen to and implement suggestions from leaders? The company doesn’t have to implement all suggestions - the important thing is that the marketing arm (the distributors) must communicate with the product arm (the company) to create strategic plans and better products. Most good companies have a “leadership council” of some kind that meet quarterly or semi-annually.
If the company is over 10 years old, does it reinvent itself by opening in new countries and creating new products? A “single” product company will find itself running out of customers after a given period of time, just like any company does.
Product:
Your first step should be to buy the product (or the service) and use it. Do you like it? If you don’t like it, don’t join the company.
Are there a lot of customers who will want to buy the product or use the service?
Identify what “niche” of buyers you will be dealing with. A niche can be viewed as a group of buyers. You need to ensure that the MLM product or service you will be selling is in a niche you want to be in.
Is the product (or service) effectively priced? Personally, I’m not one who wants to sell the cheapest product on the block. I much prefer to do business based on quality. I also love to have patents on the products I sell. But to be competitive, you need to have a product that is price-competitive. You must understand your product well on how it benefits your customers to justify the more expensive price for your product.
Compensation Plan:
The commission plan should allocate approximately 40-50% of every profit dollar to the commission plan.
The commission plan should reward at least 30% profit margin for wholesale to retail mark-up. This rewards the person for selling the product directly to a consumer for instant profit.
The commission plan should be difficult to achieve - but it should be achievable.
The top level of the commission plan should pay out a minimum of USD 500,000.00. This amount is based on the current income level it takes to attract strong leadership.
The company should not allow people to bypass developing leaders by buying positions in the compensation plan.
Training Activities:
Does the training produce an effective distributor? The only real test of training is, “Does the MLM training create success?”
Does the training include selling the product to consumers?
Is the training specific and does it teach you all the skills necessary for MLM success?
Do they promise you enormous sums of money for little or no production?
Do they violate laws by claiming their products do things like cure cancer or heart disease?
Are they interested in you?
In conclusion, find a company whose owners are committed to products that actually help make people’s lives better, a company whose owners see their distributors as their most important asset. Also, make sure the compensation plan pays its leadership very well and that there are leaders who have achieved the top level.