Evaluating Opportunities in Multi-Level Marketing

You’re familiar with the rags-to-riches stories of big winners in
multi-level marketing. More often, you’ve heard from friends, family
members and acquaintances that couldn’t quite make a go of MLM.

If
you’re considering your own investment in a multi-level marketing
venture, there are some important things to take into account before
making your decision.

Evaluate the MLM opportunity – thoroughly

Make
sure you perform due diligence on any potential multi-level marketing
opportunity. The Federal Trade Commission and state governments have
guidelines for MLM companies to prevent “pyramiding,” which is the
payment of commissions for recruiting new distributors. Also check with
the Better Business Bureau and with your state’s attorney general
office for any complaints about a multi-level marketing operation.

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Startup
costs are another key indicator of whether you want to get involved in
a multi-level marketing operation. Required buy-in to get started
should be limited to just a few hundred dollars, says Peter Koeppel,
president of Koeppel Direct, a Dallas-based marketing firm that does
some work for MLM clients.

Also beware, if Independent
Business Operators – MLM lingo for agents – make a lot more money by
recruiting “downliners” than they do from selling products and from
facilitating the long-term success of their networks. Downliners are
recruited by an IBO, and a portion of proceeds from their sales is
credited to the IBO.

Another important indicator is the
availability, variety and costs of various training and motivational
tools and events that the company offers. With many multi-level
marketing operations, it’s easy for you to spend hundreds or even
thousands of dollars on such things before you know it – all of which
flows as revenue to the company, but doesn’t yield any immediate
benefits to you.

Be quick to judge the opportunity by
the people who are recruiting you or are involved with a particular MLM
venture. “If you don’t respect the people recruiting you, you probably
don’t want to join them no matter how ‘lucrative’ the opportunity
appears,” says Robbie Kellman Baxter, head of Peninsula Strategies, a
business-consulting firm in Silicon Valley.

Be willing
to confront the hard realities. If most people involved in MLM
opportunities end up spending more money than they make, why will it be
any different for you? “I haven’t seen a lot of success with MLM,” says
Bruce Fenton, a financial advisor in Norwell, Mass., who knows the
intimate financial details and entrepreneurial tales of his firm’s
3,000 or so customers. “I see a lot of initial excitement because of
the rah-rah meetings and so on – but then it usually dies out after a
year or so.”

Decide if you have what it takes to succeed in multi-level marketing

Experienced multi-level marketers underscore that some types of individuals can
succeed in the MLM realm. Characteristically, like most entrepreneurs,
they tend to be people with strong egos, lots of energy, a capacity for
hard work, great selling skills, and a determination to shape their own
futures.

“I know a ton of people who’ve succeeded wildly
in MLM,” says Ellen Ornato, a marketing consultant who recently turned
to conventional entrepreneurship after several years of being a
multi-level marketing agent. “The ones who succeed have a singular and
unique focus and are able to stay in for the long haul.” They have
personal resilience – an ability to weather the numerous rejections
they get as they try to land some takers.

“Sure,
everyone could succeed if they applied themselves consistently over
time and with the right training,” says Ornato, a Middletown, Conn.,
resident who quit being an agent for the online-MLM service, Quixtar, a
few years ago. “The challenge for most people is that ‘life happens,’
or they get blown away by simple things: I’ve seen so many people just
throw up their hands at this because someone doesn’t show up to meet
them at a Starbucks like they said they were going to.”

Address the crucial “friends and family” question

For
so many IBOs, the moment of truth comes when they must begin recruiting
and retaining “downliners” for their enterprise to really become
something lucrative.

Because it’s easiest to reach out
to and rely on people you already know, you quickly and inevitably
arrive at the thorniest decision for anyone involved with this business
model: Do you really want to bug your family members and friends about
this? Every adult in America has probably been pestered at one time or
another by a cousin or an old college buddy who’s found out about this
“great opportunity” through multi-level marketing and wants to get you
involved.

Of course, the reality is that you’re probably
going to have to be able to recruit at least some of your friends,
acquaintances and cousins in order to succeed at MLM. But if you do so,
be prepared for lots of polite refusals, cold shoulders – and even some
backlash. Most people simply feel taken advantage of if they must
politely sit through your multi-level marketing pitch just because
they’re in your personal orbit.

There are alternative
approaches that save you, your family and friends from this fate. Some
IBOs actually succeed by networking with strangers in various social
settings and leaving their loved ones out of it. But limiting your
circle of prospects to strangers is a big additional hurdle to impose
on yourself in a pursuit that’s difficult enough as it is.

Our Bottom Line

Those
who succeed in multi-level marketing have done a good job of
researching the credibility of a specific MLM opportunity and have
matched the particulars of it with their own background, personality
and motivation. If you can’t make such a match, be wary of multi-level
marketing. There are other ways to be your own boss!

  ABOUT THE AUTHOR:
StartupNation Writer
StartupNation Writer

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