Anyone who was born in the past half-century has at least a friend or a family member involved in MLM before. Chances are, you have also been invited to join this business opportunity, but you are probably unsure if it is the right thing. What does the business plan have to offer? How does it really give you that so-called ‘financial freedom’? Here are 6 things you need to know about an MLM company before joining.
Things to Know About MLM Before Joining
(1) What Niche Will You Be Involved In?
The wellness niche is very popular among most MLM companies, followed by beauty products and household ware. Why do they focus so much on health and beauty? Well, these are some of the niches that will never go out of the trend, right?
It is almost as good as a necessity and at some point in your life, whether you are a man or a woman, you’ll need to use either one of them, if not all of them. A big part of MLM business activities will make you eat, sleep and talk about these topics so you really want to make sure that you have the passion or at least try to develop one in order to run a sustainable business.
However, what if you have passion for something else like pet care, craft-making or electronic stuff? Chances are, there aren’t many MLM companies selling these kinds of products because they are ‘optional’ rather than a necessity in life. Hence, they have a less profitable sales force in an MLM business structure.
Question to ponder – What type of niche do you like to get involved as an entrepreneur?
(2) Who Are The Sponsors?
To join an MLM business, you’ll need a sponsor. If you don’t have one, the company will assign someone within the same locality to you. A sponsor is responsible to help you – the distributor – kicks start your business, improves on your product understanding and motivate you to become the next sponsor.
He or she will also act as your main adviser in most of the marketing plan, hence, establishing a good relationship with this person is vital for your success in an MLM business. Under the wings of a sponsor, you’ll get to meet other members within his or her network, rub shoulders with some top achievers and encouraged to attend meetings/training/talks (which you have to pay sometimes) to help develop the skills of a stellar distributor.
Question to ponder – Networking with new people face-to-face is the core of running an MLM business. Are you a people person?
(3) What Is a Start-Up Kit?
Purchasing an MLM start-up kit is similar to a business start-up cost and the fee varies according to the company that you join. Some kits are of a lower price range (between $20 to $50) while others can be slightly more expensive (between $100 to $200). Some kits come with product samples while others have to be purchased at a separate price.
From the kit, you’ll be able to gauge how serious the MLM company will treat you as their ‘business partner’. An established MLM will provide comprehensive product information, company details and sometimes even the code of ethics for direct selling. In other words, they are pretty transparent with the company’s background so that they can gain your trust and confidence as a distributor.
A less established company or an illegal one, might not display that much information and if they can’t provide more upon request, that should raise some red flags.
Question to ponder – Look at every aspect of a start-up kit. How do you think it will help you build your business?
(4) How Will You Be Selling Products?
Most MLM products are backed by scientific claims hence giving it an outstanding feature. However, the best way to sell them is to use them yourself because that will help to create more personal testimonials when talking to a prospective customer. If the MLM has plenty of product choices, you may need to buy 2 to 3 items every month to try them out.
As a distributor, you’ll also be ‘taught’ to investigate the troubles/concerns of a customer and then plan on how to promote product A to help solve their problems. If they are happy with the results, then they should also consider buying products B and C for their husbands, children or parents. The more products you sell, the more profit you make.
Well, if only things were that simple. In reality, you should ask yourself some of these questions before promoting an MLM product;
- How much can I spend on health supplements and beauty products every month? Do I even need them in the first place? Can my prospective customers afford to pay for these products?
- How true is the product claim? Which professional institutions support these statements? Where is the proof?
- If the product is a hoax, wouldn’t it be unethical or harmful to promote it to other people?
Not everyone is a nutritional or a beauty expert, but owning a start-up kit doesn’t automatically make you one either. So do your due diligence before selling products with unknown details to your family and friends.
Questions to ponder – Whether you like it or not, there is going to be a lot of upselling in MLM because that’s how profit is made. Are you comfortable with this kind of marketing tactic?
(5) How Do You Actually Make Money?
Every MLM has its own unique payout system. Some are straightforward, but the majority aren’t. The compensation plan is what determines your profit as you reach higher levels of distributorship. In the legal sense, a direct selling income should derive from product sales to the end customers and NOT from recruitment.
However, relying on product sales alone can be a very slow process. Hence, there’s always a tendency for distributors to lean towards more recruitment so that people can buy more products at a cheaper price range. If an MLM is signing up new members far more than offering their product values, then you are most likely involved in a pyramid scheme.
However, unearthing a pyramid within an MLM business structure is not easy as it involves an in-depth analysis and understanding of the flow of the compensation structure. Many masks themselves for years before they are exposed in the media, in which by then, many would have lost their hard-earned money.
So always ask your sponsor, what do you have to do to earn money in the MLM. Challenge his or her answers until you are convinced that the company isn’t operating a pyramid scheme behind the scene.
(6) Is There an Online Trend?
MLM is traditionally a face-to-face business. They have very little popularity with the online audience. Most social networks banned the promotion of these companies and some well established MLM even prohibit their members from recruiting through websites. In other words, you depend highly on the cold market for business opportunities without having much access to the hot market which is the internet.
To prove my point, here’s the online trend for ‘MLM business’ worldwide.
Those companies that are trying to penetrate the online market aren’t getting a lot of success either if you look at this trend.
And much less if you try to incorporate MLM into the home-based business trend.
As you can see, these are all DOWNWARD marketing trends as not many people search for them online.
MLM has no doubt made many people rich, but at the same time, it is also one of the most controversial business models that are heavily debated for decades. So make sure you review the company to save yourself time, money and most importantly, stay out of trouble.
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Do you have an opinion or a question about this topic? Let’s hear about them in the comment area.