MLM BUYER BEWARE: QUESTIONS TO ASK BEFORE JOINING
Which MLM is right for me
1. Is there a product actually being sold at retail to the general public?
2. Is there a head hunting fee?
3. Who are the owners and what is their track record?
These first three questions are what State's Attorneys look at in order to decide whether the plan is a legitimate MLM or an illegal pyramid scam. If you don't get the right answers to these three, then proceed with extreme caution.
4. What is their experience with MLM? Do they have sufficient capital?
5. How much to join? If more than $100 they want your money rather than your success. They may be boot-strapping their finances using OPM (including yours). Remember that if you pay by credit card they may keep your number on file thus opening up the possibility of more charges later for things they conveniently didn't tell you up front.
6. Is the plan clear and easy to explain to others?
7. Who makes the product? If it's the MLM company, then they can control the quality. If it's some foreign company then the quality may not be consistent, spelling trouble in a potential warranty action. You could be found liable and have to take back or pay up!
8. Is the product backed by a solid money back guarantee? After all you may want to keep your friends! Which do you value more?
9. Are you required to keep up a minimum sales level in order to keep your downline?
10. Do you have to buy a minimum of product each month in order to keep your downline? Beware of these two factors, you may end up with a garage full of unwanted stuff.
11. If you decide the plan is not for you, will they buy back your product and sales kit provided that you have kept your stuff in good saleable condition?
12. Do they drop ship or do you have to physically heft all this stuff into your garage?
13. Will there be a lot of people coming to your house, especially after hours? Your Home Owner's Association could get complaints from your neighbors and they could shut you down. I recall a successful dealer who moved to an upscale area because he could afford it. There was such a lot of traffic to his house at all hours the neighbors complained to the H.O.A. He was pressured into having to choose between giving up the house or scaling back the business.
14. Is the price competitive? Most MLM stuff is overpriced compared to retail stores. Where do you think those big bonus checks come from? Oftentimes a big name company sees the potential in a new product and through economies of scale produce it at a lower cost. We bought an air purifier through MLM, it worked okay, but six months later we bought a better product at less than 1/8 the cost at a well known retail store and it was more effective.
15. Is the product so new that nobody knows about it? You may have to develop the market which takes special skills. I knew someone about 18 years ago who tried selling water purifiers. The idea was ahead of its time and was a real hard sell. Today there are many such gizmos on the market at considerably lower cost, due to a rising public awareness of health issues along with the need for clean water.
16. Does the company back you up with ethical and appropriate advertising?
17. Is your sponsor personally interested in giving you the needed training and attention to properly develop your business?
18. Are there any territory restrictions or can you sell anywhere to anyone?
19. Are there any house accounts bypassing the downline and dealing directly with the home office?
20. Can a wealthy prospect buy into a downline at a high level or is everyone required to start at a true ground floor level?
21. Does the company tell you who they are RIGHT UP FRONT instead of keeping you guessing? This tactic has backfired on companies that should have known better.
COMMENTARY
This study was done in the mid 70's before the convenience and speed of the internet. By selective outsourcing it is possible to reduce the workload involved in operating a successful MLM, but the choices you have to make usually require a level of business savvy not found in the typical new recruit. After all you will be revealing details about your business to total strangers...something to think about.
There are some good MLM's of long standing, but you'll have to work much harder than ever before by putting in a lot of time in the evenings. Your family home life may come under considerable strain.
A general observation shows that the early birds tend to get the worm, the ones that get in later may find that their prospects have already signed up. I recall one former distributor, highly successful in reaching the very top in a well known established MLM, who claimed 60,000 in his downline. When his marriage broke up, the emotional toll resulted in neglect of his business and his downline fell apart. MLM absolutely must have constant attention to offset the dropout rate and to be continually recruiting without let up.
Recruiters for MLM seldom mention the enormous amount of time and effort expended by the few who make it big in MLM. You must continually recruit because of the high dropout rate. You eventually join the "NFL" (no friends left). Simple math also imposes limitations, ie: if you get just two new recruits and they in turn get two then with each level gets just two to join, by the 33rd level with no dropouts along the way you would have the entire world population in your downline, over 8.5 Billion in fact. Realistically MLM does have built in mathematical boundaries.
Those who make it big in MLM are a rare breed, with the energy, drive and ability to wear the many different hats needed to successfully run a business. Inventory, tax records, bookkeeping, marketing, sales, recruiting, motivating and being able to learn from set backs. More importantly, they have a balance between task and relational skills, something not found in everyday situations.
It basically comes down to a choice of either "sweat equity" or having enough financial capital to hire employees to perform all these activities. In today's internet environment , the ability to outsource can offer a potential for reducing the work load. This requires careful, time-consuming research. After all, you are opening up intimate details of your business to complete strangers. (Think identity theft, one every 3.5 seconds!)
