Last updated on 14 November 2020
There is much positive and negative publicity about Multilevel Marketing and its effectiveness as a business model. In this blog I am going to examine MLM as a method of creating wealth and suggest some of the benefits and pitfalls that might be considered before taking on a MLM business.
1 What is MLM anyway
MLM is a means of shifting products and services using a group of generational distributers to do the selling. Typically the company will not own high streets shops or promote main stream advertising. The money they save is redistributed to a network of distribution agents who are recruited by other members and go on to recruit others through their normal social connections. However the parent company will usually own a warehouse of their goods for distributers to sell.
2 Issues of selling
When I first got involved in MLM I was approached to sell a cosmetic product which I had purchased at a discount price. I then put an ad in a local paper saying “Earn Money from home part time.” The telephone rang continuously for three days. I had a prepared speech that I read out and by the end most people had put the phone down. They discovered that they would need to sell something and lost interest.
After a while I ditched the script and said ” This is a selling job, selling product and selling a business opportunity are you interested” If they were still on the phone after 30 seconds I had a customer. It saved massive of time and selected the truly interested.
Point 1 Be upfront , be brief , be clear.
3 Issues of Understanding.
One of the biggest turnoffs of MLM for newcomers is they can’t understand the programme. It often involves complicated mathematical models and wording like the Binery method or generational discount. Make sure you understand how it works properly before you get too involved. Many newbies get dazzled by huge amounts of on target earnings without fully grasping how the system works
Point 2 Ask your introducer to explain the system and do not go any further until you comprehend it properly. If they can’t explain, go to their sponsor and get them to explain it to you. If you have to ask 50 times go no further until you grasp the tasks and the figures completely.
4 Asset and Liability MLM.
One of the most important considerations when joining a MLM programme is to study the product. If the product that you purchase has an asset value it is probably a good scheme. For example if the programme includes the monthly purchase of gold or silver, no matter how the MLM business progresses you will still end up owning the precious metal. It would be the same with cryptocurrency. On the other hand if your model is a food supplement or cleaning materials you could end up with stock you can’t sell. This stock would lose value and be regarded as a liability.
Point3 Make sure the MLM product has an asset worth that is likely to increase in value over time. This protects you from unsalable stock.
5 The Training Scam
One of the greatest benefits of MLM is good free of inexpensive sales training. Some companies and even MLM styled Religions charge a differential price for training. The project is simply there to take money off distributers rather than help them make money.
Point 4 Check how, what and how much the training meetings cost before you invest in a MLM scheme.
6 Breadth verses depth
I know of many MLM distributers who have recruited hundreds of people down line yet they are not making any money. The reason being that none of them are selling anything. The best model is known as the five generation matrix.
Once you are established and comfortable with the business model you start looking for others to bring on board. These people will be downline from you and therefore you will earn a commition for anything they sell. Typically this would pass through up to 5 generations. In other words, the person your recruited, recruited someone who recruited someone who recruited someone who actually sold the product You at the top will still earn a commission.
The mistake people make is to try to recruit to many themselves. What they need to do is focus on their best 5 downline members and teach them the art of recruitment and stick to just motivating those five, The matrix consists of a total of 25 people that is 5×5 five along and five deep.
Point 5 Focus on a few people and build deep business connections with them.
Finally many MLM programmes have a lifespan a few are limitless. Try to join a programme fairly early on in its evolution. Make sure you have access to the founder and make sure you fully understand what you are recruiting people to sell and the scale of your potential earnings.