Saturday, May 4, 2013

The Three Types of People Looking Into MLM: What You Should REALLY Know

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Business Sign X
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Richard Bliss Brooke is one of the pioneers in network marketing, and still heads one of the smaller (but long-living) companies today (called OxyFresh). He recently penned an essay: "Failure Is Your Option (In Network Marketing or Any Part of Your Life)"

He brought up some very important points, such as the three types of people who are looking into MLM. However, I have a little problem with his failure mode analysis, where he basically said that if you fail in MLM, it's probably because it's your fault, that you didn't give it all you got.

There seem to be three types of people who are looking to join MLM

1) "Wholesale Customers"
2) Part-timers
3) Full-timers

Let us discuss them each in turn.

The "Wholesale Customers"

The "wholesale customers" don't want to join the sales force. They just want "in" to get the "wholesale" discount on the product. So technically, as long as they got the discount, they can't "fail". They are also called "self-consumers", as they buy just enough every month for themselves.

The problem is accounting on the company side. These are obviously CUSTOMERS, but they signed the affiliate agreement. So do they count as customers, or affiliates? The LOGICAL solution is to count them as customers, and KICK THEM OUT OF THE AFFILIATE program (but let them keep that "wholesale" discount, as a "preferred customer".)

Several companies already do that. The companies that do NOT do this (Herbalife, you listening?) are in trouble because they can't prove these are actually customers, not affiliates. (They signed the affiliate agreement!)

The "Part-timers"

The part-timers just want some part-time income, as they contemplate whether they want to got at it full-time, and/or just want some extra $$$.

According to Mr. Brooke, you almost can't lose in this stage, because any DSA member MLM would allow return of unsold inventory for at least 90% of the price originally paid, 6-12 months from original purchase.

However, Mr. Brooke did not count the time spent as well as any expenses incurred in doing that part-time, as well as consider a different possibility. The proper question whether this is a win or a fail is... Did I make MORE money doing this MLM part-time, vs. any other part-time work I could have done instead?

Remember, there is a $7.25 per hour US minimum Federally mandated wage. You have to beat this figure (dollars per hour) for MLM to be considered lucrative.

To be fair, you can do MLM almost anywhere in the US of A with almost ANY sort of background, while a job usually has geographical limitations and/or further background and/or experience requirements. But then, almost anyone can do simple manual labor, but not all people can sell.

But the point is a "part-time" job should NOT cost a lot, and let you lose a lot of money. (And if you don't join a DSA member MLM, you risk further loss due to bad refund policy.)  So you need to set yourself a deadline... the deadline when you need to decide whether you should cut your losses and quit.

If you want part-time income, and the MLM did not generate enough profit (considering all the sales effort, prep, sales meetings, expenses, and so on) for the amount of time spent vs. a potential job you could have gotten, then MLM is a failure.

The "Full-Timers"

Mr. Brooke gave one of the more realistic appraisals of chances succeeding in MLM:
This process (building up your MLM business by selling and recruiting downline sales "empire") requires 2-5 years of dedicated and successful efforts. It requires working capital for inventory, travel, entertainment, individual marketing, lead generation, and company events. A person might earn a net profit during their first year and they might not.... The failure rate is certainly the highest for those people looking to build a fortune … as it should be.
In other words, expect to work for FREE for the first year, and maybe more. And that's going all in, doing it full time, spending your own money. AND that's assuming the business you joined is a real business, not a scam, assuming the company survives, AND assuming you know how to sell (or can learn very quickly, in a few weeks), AND assuming you can find suitable people to recruit, AND product that people want and all that.

Can you afford to do so? Because this is a FULL BUSINESS INVESTMENT, even though you'd still be working under someone else, i.e. your upline and the company. It's NOT a franchise (no territorial protection or such).

Mr. Brooke said so. If you go full in, you have to treat it as if it's a startup business. You have to show up every day, 8-5 (and more), and you have to give it your full commitment. It's not a game, it's not a part-time thing, and it's not an ego trip.  AND you need to have cash on hand for your living expenses for a FULL YEAR (and your family) because you cannot expect profit in the first year. 

AND YOU CAN STILL FAIL. Remember, treat this like a business, and most startup businesses DO fail in the first year. Well over 90%. 

THAT is the odds you are looking at.

Yes, you *can* make money in MLM.

And it *does* depend on the amount of effort you put in.

The question is... can you AFFORD such effort, and what are the risks doing so?

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