MLM, Network Marketing, Affiliate Marketing, Direct Selling, or Referral Marketing, no matter what you call it, it’s a marketing strategy employed by thousands of companies. According to Wikipedia: “Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant’s “downline”, and can provide multiple levels of compensation.” For some companies, and their sales force, this strategy has been very successful. For others, it’s been a disaster for the individuals involved and a smoke screen for illegitimate businesses.
Unfortunately, the disasters get much more attention and media play so the concept of MLM frequently elicits a negative knee-jerk reaction from the general public. However, if you take the time to do your homework, there are opportunities out there that can be a meaningful source of cash flow, either part or full-time, and largely from the comfort of your own home using the internet.
Perhaps the most important gating event is your personal relationship to the product. Do you believe in it? Do you use it and have you achieved the desired, visible benefits? Any legitimate MLM is based on selling the company’s products and that’s a tall, if not impossible, order if you don’t believe passionately in the products’ benefits or if you, personally, are not an obvious representative of those benefits. For example, a bald man would have a difficult time selling a hair replacement product if he were still bald after using it. On the other hand, if a man you knew as being bald for his entire life came up to you with a new full head of natural hair, he’s already sold the product. You would be asking him how he did it.
The next investigation should be into the compensation structure, making sure that most, if not all, of it is coming from the sale of products and not from recruiting new distributors. The company should also have an easily accessible report of compensation ranges at every sales level within the company, including the average, highest and lowest amounts paid. Another financial consideration is the up front cost relative to a reasonable projection of when and what your cash flow will be.
Other steps you can take to insure against getting caught up in a disappointing MLM “scheme” include:
- Do a background check on the company with the Better Business Bureau and even read any complaints formally filed against the company.
- Only consider doing business with a large, financially successful company with a long track record.
- Speak to other distributors already in the program about their experience vs. their expectations.
- Use an independent adviser to give you an unemotional perspective on the opportunity.
- Be brutally honest about whether the products, the selling process and the corporate philosophy are an appropriate match to your skill set and temperament.
Once again, MLM has taken a public beating, but if you’re a Baby Boomer looking to supplement your income or even launch a new career. There are some real opportunities out there.