MLM.com

Wednesday Jul 22, 2009

Brenda Wellington

Wednesday Jul 22, 2009

It’s always an exciting time when choosing an MLM company and starting a new, home-based business. Each of us in the network marketing industry has looked forward to that adventure with all of its twists, turns, and endless possibilities. If you’re looking into embarking on that journey, before rushing into anything, please carefully research the positives, negatives, and the legitimacy of any company you’re considering.

Let’s start by taking a look at this online ad. We’ve all seen ads like this before. Sounds enticing doesn’t?

 

 

 

You can almost visualize yourself doing the minimum amount of work, no investment, no risk, having your downline practically built for you while you collect that $10,000 check—30 days, 10K— not bad, not bad at all!  I bet you can even picture yourself marching into the office to tell the boss adios, you’re quitting your J.O.B.; heading out to the beach—pina colada and sunglasses in hand—to celebrate your financial freedom while someone else is working for you and the dough just keeps rolling in.  Wow!  I can feel it! Can you feel it?

Emotion is a very important aspect of an MLM business, but it can get you into trouble if you jump into an opportunity based on feelings only, so take your time and do your research. Then, when you have found the best choice for you based on solid information, that’s the time to get really excited!

The first step in your research is to rule out the scam factor. Scam, pyramid scheme, ponzi—we’ve all heard those terms, but what exactly are they and how do we avoid getting sucked into something like that?  I don’t want to be negative, but there are people and companies out there under the guise of reputable MLMs, that are only out for one thing and one thing only— quick buck!  

So how can you tell a scam from a reputable company? We’ve put together a few scam 101 fundamentals for you to peruse through.

 

Scam 101 Fundamentals

While the majority of MLM companies are completely legitimate, there are MLM scams out there just like there are scams in every other business. And, just because someone you personally know introduces a network marketing opportunity to you, it doesn’t mean the company is legitimate or even the right organization for you.

As anyone that’s been in the industry for any time at all can tell you, there are many opportunities that are spawned by companies that are only trying to make a quick buck. And, their top priority is not their distributor force, the existence or quality of a product, or the duration of the company. The sole purpose of this type of company is to keep the doors open long enough to rope in as many people in as short a time as possible, take the money, and run only to open their doors again under a new name to sign up even more unsuspecting distributors. Cautious prospects will keep their eyes wide open, balance logic and emotion, and ask a lot of questions.

There are basically two types of MLM scams to watch out for as you do your research—ponzi and pyramid schemes. Become familiar with their traits so that you can readily identify them.

 

 Ponzi Scheme

 A ponzi scheme is where you only get paid if you recruit new members into your organization. It pays returns to investors from their own money or money paid by later investors rather than from actual earned revenue. They use the “rob Peter to pay Paul” method as did Bernie Madoff in his investment scam. His company diverted money paid by new investors to pay off the old investors. Usually it’s not a matter of “if” the company will crash and burn but a matter of “when.” When the supply of new investors runs out, the entire system collapses. A great article with more information related to ponzi schemes and scam artists was written by Jason M. Kays, an intellectual property attorney with hands-on experience debunking con men. “Investor Fraud - Anatomy of a Con - Identifying a Ponzi Scheme and Scam Artists.”

 

Pyramid Scheme

 A pyramid scheme is where the entire focus of the organization is on recruiting new members. There is no legitimate product being sold other than the business opportunity. It’s referred to as a pyramid because the organization looks like a pyramid as that person signs up multiple people, and then those people sign up multiple people. While most successful corporations and businesses are built in the shape of a pyramid, the difference here is that people are being paid without any real product being sold or paying a high-dollar amount for a product that is not worth the money.

In the end, the people that invest in these two schemes lose their money either way. Basically, the difference between the two is simple. A ponzi looks like a real investment. With a pyramid, individuals are required to pay for the right to recruit others, which they receive money for.

 

Scam Red Flags

• Outrageous claims about company methods or products.
• So-called "miracle products."
• Claims of outrageous income or opportunity to earn instant cash.
• Claims of an instant downline or that the company will build it for you.
• Emphasis on recruiting while not suggesting that commissions are based on sales.
• No legitimate or tangible product being sold other than the business opportunity.
• Cost of the product to the distributor far exceeds its tangible worth.
• Any notice or gut feelings of shady, dishonest, or unethical behavior.
• Pressure to "stock up" on inventory that you may never be able to sell.
• Opportunity or sales meeting pressuring you to join right now!
• A large, upfront fee to get started because the company’s revenue is coming from the wrong place.
• A lot of money with little or no work.
• Buying your position.
• No physical address, contact numbers, or offshore address.
• Executives with a trail of short-lived or closed companies behind them, or vague bios.
• Minimal or non-existent refund policy.
• Websites or company/product brochures that promote hype with no information on the compensation plan, management, products, etc.
• Founding distributors that excessively push tools of the trade—CDs, DVDs, books, website, magazines, etc. to pad their own pockets.

 

No Such Thing As Something for Nothing

MLM companies on the up and up (and there are lots of them) will be the first to tell you there is no such thing as something for nothing—no free rides on someone else’s back, no getting rich quick. A reputable MLM company has its distributors’ interests at heart and wants to see them succeed. In order to make money, network marketing requires investments from distributors, whether they be investments of time, effort, or money. The distributors’ success is the company’s long term success. Legit companies love these three magic words—retention, retention, retention and they will do what it takes to treat thier distributors right! 

 

What to Look for When Choosing an MLM Opportunity

Now, on to the good stuff! You’ve checked it out and the company you’ve chosen is a reputable MLM company. To make absolutely sure this company is a good fit for you and promises the greatest likelihood for success, there are more things to consider:

 

• How long the company has been in business. There are pros and cons to joining a start-up company, which is less than three years old. Likewise, there are pros and cons to joining a stable company that’s been in business for 8-10+ years.   

 

If you join a company at the time of launch or pre-launch and the company does well, there are advantages. You have a virtually untapped market of prospects. There is momentum, energy, and excitement surrounding a newly launched company that keeps you and your downline pumped. Other benefits may include free registration, working more closely with associates, and building a personal relationship with corporate and the founding distributors. And then, of course, depending on the compensation plan, there could be financial advantages of getting in on the ground floor.

But if you don't like change and a little risk, this may not be for you. As a new network marketing company grows, it goes through different phases of growth. And, change is a given. The compensation plan may be tweaked, product ingredients and packaging may change as problems are discovered, and training materials may be developed on the fly. Many times, everyone is learning as they go, including corporate.

A stable company offers you just that—stability. Their products and processes have been in place for while. There’s a history to research and people you can talk to that have company and product experience. It is unlikely that the compensation plan will be radically modified.  Unlike a new company, an established company will most likely already have gone global, and training and marketing materials are well established.

The down side may be that unless you become a star, you may not have the opportunity to know corporate or founding distributors on a personal level. The market may be more saturated with distributors, product, and social media. Depending on your compensation plan, you may not have the financial edge you would have with a successful start-up company.

Again, there are pros and cons to consider with either type of company so this boils down to a personal decision. Weigh the options and figure out what works for you.

 

• Company background. Look at the background of the company and its corporate officers. What are current and former members saying about the company? Search on Google, join MLM forums, and ask for feedback. People are more than happy to tell about their experiences—good or bad.
  

• Company financial status. The company that you choose needs to have enough funds to grow and eventually expand internationally. Will their funds allow them to maintain a good infrastructure, attract experienced management, keep up technologically, and develop new products and materials? Will they be able to pay their commissions on time?

• Initial investment required. It is possible to join a company for as little as $35 or even for free, since most companies offer sign-up with no kit. However, most companies know that distributors who are serious generally invest in their business, so they don’t like to advertise the non-kit option. How much you are willing to spend on your company is up to you. Some MLM companies cost thousands of dollars, but you can find great MLM companies that cost only a few hundred dollars to start. Regardless of how much you are willing to pay, the most important things to consider are: 1) how quickly you can earn your initial investment back, and 2) if you purchase a large amount of product up front, can you consume it or resell it before the expiration date? A good rule of thumb is to invest only as much as you can earn back within your first month.

• Product. A good company is based around a product with genuine demand and they know that customers are crucial to long-term sustainable income! Is it unique? Is it consumable so that you can build a long-lasting residual income? Is the market for this product large or only a small niche? Think about this time of economical downturn...we are all defining needs vs wants.  Will your product be the first to go when customers are budget cutting?  And please don’t assume you are going to sell the products at a marked up “retail” price to others. Typically products at “retail” are overpriced. Does your product sell outside of your company? Many times your customer can buy virtually anything they need elsewhere, for less than they can get it through you. For that reason, most companies offer a “personal customer” program. If your friend signs up as a customer they generally recieve 20% off suggested retail and your likely hood of making money through a “customer” based program is much greater than selling straight retail.

• Compensation plan. Do you understand it, or is there someone that does that is willing to explain it to you? What do you have to do in order to be paid? Will you be rewarded adequately for your efforts? What can you make in retail commissions? Is there a Fast Start Bonus? Are there commissions for sponsoring new members? The plan should be balanced between quick retail profits so that you can make money in the beginning and then significant and sustainable, long-term residual income. It's essential to understand the compensation plan. Your compensation plan will determine how you will build your downline. Only want to work part time and make $500 a month?  then find out what you need to do to make that amount and how many people you will need to enroll to make the amount that you require. Each compensation plans requirements will be different.  If you aren't familiar with the ins and outs of it, you could work harder than you need to and spend more than you make and leave alot of money on the table that could have been yours!

• Sponsor and Support Team. Choosing a good sponsor may be even more important than the company you choose to join. Talk to others in the downline and see what they have to say. Look for a sponsor that understands network marketing, whose personality is a good fit with yours—someone who returns calls and emails, and be willing to mentor you if you are willing to put the work into it.

  Here are a few other things to consider when choosing a sponsor: 

1. If your sponsor is new to the business, he/she may not have MLM experience. If that’s the case, how is that individual going to support you?
   
2.  Some sponsors and uplines are so busy with the “heavy hitters,” that training a new distributor is not a priority.
3.  In this new era of social media, a sponsor that knows how to use and can teach you to use Facebook, Twitter, and YouTube, etc. Lead generation can be a very valuable asset to your new business.
   
4. Choose a sponsor that can help you achieve your full potential in your business. Your success depends on a good sponsor or supporting team member, so don’t give up looking.

• International expansion. Choose a company that has plans of opening markets internationally. A company that doesn’t have plans to expand globally will eventually stop growing. Global markets are a necessity for a company and its distributors to reach their full potential. 

• Duplication. In a duplicatable system, everyone on your team is provided with the same training, tools, and system for prospecting and presenting. Your sponsor teaches you the method taught to him by his upline, and you in turn teach your downline that same process. It is nearly impossible for everyone in your organization to be efficient and create leverage for expanding the organization without a duplicatable system.

• Philanthropy. Does the company give back to the community or support a worldwide cause? One statement you hear quite often in this industry is, “By helping others, you will help yourself.” It is a law of attraction that when we give, we also receive. Does the company live the same philosophies that it teaches its sales force?

Here’s a checklist of things a reputable MLM company should provide for you:

• All the training you need to get started.
• Low-cost start-up.
• Distributor website with a backoffice to manage your business.
• Tools to grow your business- lead generation tools, conventions, recorded "sizzle" messages, opportunity calls, fax-on-demand systems, training calls, webconferencing etc.
• A product line or service for you to sell where the cost is equal to its value.
• Marketing materials to help you get started.
• Continual effort to improve or add to the existing product line.

One company will not offer it all or excel in every area, but look for the options that are most attractive to you. The more an organization offers, the better chances of your success.

In the end, if the company you’re researching has passed all the tests with flying colors, you just might have found a legitimate business opportunity. But, there is one final check that you should rely on—the “gut” check. I trust my gut instincts and if something doesn't feel right, even though it may have passed all the tests, I would still hesitate to jump on board.

In conclusion, there are two truths to remember as you search for the right MLM company:     1) there are no shortages of MLM opportunities, and 2) there is something out there for everyone. Remembering these two things takes the urgency out of rushing in on a ground floor opportunity, or jumping into something because the sign-up is free for 10 more days, or to help your best friend make it to his next level by the end of the month. Take your time. Do your research. Protect your precious time, effort, and money. 

The up side of spending time choosing the right company is it will pay off in the end. If you use the simple guidelines above to assist you in your research, you will find a reputable MLM company and business opportunity that fits your requirements and goals. Write down exactly what you are looking for so that you stay focused and are not distracted by other opportunities. Once you find the ultimate new MLM business opportunity just right for you, then let the adventure begin! -- You will most likely find success that will last a lifetime.

 

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