Test Questions Teach You How To Choose The Best MLM Company
Learning how to choose the best MLM company is vital. Most people unfortunately don’t know how to find a top MLM company, they think they know, but they really don’t, and they pay the heavy price of failure.
If there are 10 steps to MLM success, this would have to be # 1 or 2 on the list. Finding a top MLM company company is important because if you’re in an MLM program that causes you to have to constantly work at overcoming its deficiencies instead of just concentrating on attaining MLM success, you're fighting a losing battle before you even begin.
These Are Just Some Of The Things You’ll Learn Below
Finding out whether your MLM company can pass the "test" and warrant your consideration has to be a priority in your Network Marketing business plan. Some of the most popular, or what appear to be the best MLM companies, are not usually the wisest choice in most instances.
- Why is the long term viability of the MLM Company important, and how to know?
- How do you determine if the MLM Company has a good financial profile?
- Why should you know what total percentage of sales is paid to distributors?
- What is the importance of early compensation plan earnings?
- Why is it important that the MLM Company manufacture their own products?
- How can product uniqueness or similarity impact your success potential?
- Why is it crucial that you would buy the products without an income opportunity?
- What is the importance of the MLM Company advocating retailing of its products in their literature or training?
You need to be skeptical, analytical, and critical, and arrive at your decision based solely on the merits, not on your emotion, when it comes to choosing the best MLM company for you. You have to remember that this is a business, and if you don't treat it like a business you can lose your shirt.
By conducting an MLM company review, getting answers to the questions on the check list below, and following the guidelines given, you’ll be better able to determine which are the best MLM companies, and be more likely to achieve long-term MLM success.Here's The Check List. Can Your Company Pass The Test?
What is the long term viability of the MLM Company?
Why is that important? Because it is an unfortunate fact of our Industry that a majority of the Companies that enter the marketplace, go out of business in a relatively short period of time, leaving behind a bunch of disappointed distributors who have lost their business.
In case you were not aware of the statistics, here are the facts. Approximately 83.7% of ALL new Network Marketing Companies are no longer in business after 2 years. Approximately an additional 6% are gone after 3 years, and approximately an additional 9% are gone after 5 years. It’s frightening, but almost 90% of ALL new MLM companies are out of business after 3 years, and here's a real killer, LESS THAN 1% of ALL MLM Companies actually survive longer than 10 years.
If the purpose of building your Network Marketing business is to generate residual income, (and that's TRUE, isn't it?) don’t you think it’s important that the Company be around to pay you that residual income?
Don’t be fooled by the typical “ground floor opportunity” pitch. If the opportunity is a good one today, it’ll be just as good 3 years from now. If you’re told that the opportunity won’t be as good then, what they’re telling you, among other things, is that it’ll be really difficult for you to convince people to join down the road, but you should jump on board now. Does that make any sense? Of course not.
Statistically speaking, even with the best of intentions, honesty, integrity, and sizeable financial backing, like I've mentioned before, almost 90% of all new MLM companies will be out of business in less than three years. Those are the odds, and even a gambler knows it’s financial suicide to bet against the house when the odds are that much in favor of the house. If you're smart, you won’t bet against those odds either.
No MLM Company goes into business expecting to gone in a few years, and most sound like good bets to around a long time when they start out, so you can be easily captivated by their chances, but once to take a look at the real life statistics, stated above, you need to let reality prevail. Don’t be hypnotized by the promise of potential riches from a “ground floor opportunity”. It’s usually just hype, the facts don’t lie.
You should also be aware that most “ground floor opportunities” are heavily promoted by what are called the “MLM Heavy-Hitters” in the Industry. These are very successful people, sometimes MLM millionaires, who have a huge following and reputation, and are able to put together a large group of distributors in a short period of time. They of course want the Company to survive, but if it doesn’t, they’ve already made a substantial profit for their efforts, whereas the “average” distributor is left with nothing.
Stay away from ALL “ground floor opportunities”, no matter how great they sound. NEVER join an MLM Company that has been in business for LESS than 3 years. Let some other person take the risk that the Company will still be around a few years from now.
Does that mean that an MLM company that’s 3 years old can't fail? Of course not. But it probably means they have a decent product at an acceptable price and that people are buying it, and that the company is being run fairly well. They're not just saying it, they're proving it. They've demonstrated they have some staying power just by the fact that they’re still around. Before you spend time, effort, and money to promote an MLM business, you need to know the company is at least in the game.
Despite this advice, there are those reading these words who are confident their MLM start-up is different. I hope you’re not one of them. They may be right, but the chances of that are not very good. Do yourself a favor and stay away from companies younger than 3 years.
Does the MLM Company have a good financial profile?
Why is that important? Because even if you take the prudent route and only join Companies that have been around for at least 3 years, you still need to make sure, as best as you can, that the Company has a good financial basis.
The first and main thing to look at is the debt load of the Company. You would prefer a Company with no debt, and a lot of Companies promote the fact that they are debt-free, and that is good, but a little debt is OK, as long as it is less than 25% of the value of its assets.
The other important things to look at are, in order of importance.
Does the original creator, or his/her family, still own and run the MLM company?
- Does the Company have a positive cash flow after expenses or are additional funds required?
- Does the Company have sufficient cash reserves to handle growth?
- Does the Company own its own computer and software system or contracts out that work?
- Does the Company own its own office quarters or just rents their space?
- Does the Company have a live and efficient customer service and order department? .
Why is that important? Because if the original Company owners have sold the business to other investors, it is very likely that the manner of operation will change.
Instead of a person whose heart and soul are in the business, and whose very existence is wrapped up in its success and reputation, you now have a person, or group of people, who will more likely be looking at the “bottom line” to determine how they can maximize their investment return. It’s very common to have periodic changes in the compensation plan and changes in the product line when “investors” have taken over from an original owner, and these changes are usually for the worse.
Who are the owners, do they have a failed MLM company in their back-ground?
Why is that important? Because there are a small number of people, thankfully it’s not too many, that make a career of starting up Network Marketing Companies, making as much money as they can, then walking away when things get tough financially, only to start another MLM Company not too long after. If the current owner of a Company was involved with one previously failed Company, I would have to find out about why it failed, and give it serious thought before joining his new Company. If they were involved in more than one failed Company, I would not personally ever consider joining their current Company.
What percentage of product purchases are actually paid to distributors?
Why is that important? Because most Companies only publish the “potential” total pay-out of their compensation plan, but very few publish the “actual” pay-out. You need to find out what the “actual” pay-out is, because if the potential pay-out is say 60%, but the actual pay-out to distributors is only 40%, that will tell you that the compensation plan is made up more of cleverly structured “smoke and mirrors” than of reality. It’ll be a lot harder for you to earn money with such a compensation plan than with one that “actually” paid out 60%, or at least closer to 60%.
Does the compensation plan allow sufficient early earnings?
Why is that important? Because one of the main reasons so many distributors drop out of theirNetwork Marketing program after just a few months is that they are not making much money and spending many times that amount.
It is very important that distributors you recruit have the opportunity to at least offset the cost of their product purchases with the commissions they earn within the first few months. This can be accomplished if the compensation plan provides high enough commissions on the first few recruits your new distributor brings in, or on the first and second level of the compensation plan if your are using a Unilevel or Matrix plan. Without this availability, you’ll lose most of your recruits after just a few months, and be on a treadmill to nowhere.
Does the MLM Company manufacture their own products?
Why is that important? Because if the Company contracts out their manufacturing to another company, that company also has to make a profit on the products. That means that is extremely difficult, if not impossible, to price the products competitively. In today’s Internet world where information is so readily available, if your products are over-priced, compared to products of a similar type elsewhere, your chances for success are greatly diminished.
Having your products manufactured by another outside source instead of by the MLM Company itself, creates these other potential problems:
Does the MLM Company have consumable products?
- It increases the likely hood that someone will get hold of the product formula and try to market a similar product.
- It takes the very important issue of product quality out of the hands of the MLM Company, and puts it in the hands of someone with no vested interest in providing the best quality product, other than that of keeping one of its many customers happy.
- It creates a situation that puts the MLM Company at the mercy of the manufacture when it comes to making sure that sufficient product supply is provided. If the manufacturer has a choice to make as to whether to provide a certain product order on time to your Company or to another of its customers, and chooses the other Company, that could have a very negative impact on your sales.
Why is that important? Because without consumable products, that is products that are used up fairly rapidly and have to reordered, you and your downline will have to continually seek out new customers or distributors in order to produce any sales volume. I’m sure I don’t have to remind you that without sales volume, NO commissions can be paid.
If the products are consumable, once you find a customer, if your products are good, they will continue to reorder those products and create new sales without any effort on your part. You cannot create residual passive income if new product sales have to made every month.
There have been several companies that have tried to enter the Network Marketing field with non-consumable products like electronic home security systems, air purifiers, etc, and they ALL have had to add consumable products to their product line in order to survive more than just a short time. Stay away from any Company that does not offer consumable products.
Are the Products unique or are similar products easily available elsewhere?
Why is that important? Because, especially in today’s information revolution with access to the Internet, if a product like yours is available somewhere else, it is likely that your prospect will be able to find it, and if the price is much lower, they’ll obtain it from that other source.
Many Network Marketers have been embarrassed when their recently signed-up distributor comes back from a trip to the health food store to inform them that they saw the same product their Company has at the store for half the price. It doesn’t matter that you think your product is better, because they perceive it to be the same product, just with a different name and a different manufacturer. And to top it off, they found it at a much cheaper price.
So stay away from Companies that offer common “me-too” products, unless those products can compete in quality and price with similar products from other sources.
Would you or someone else buy the products without an income opportunity?
Why is that important? Because if the main or only reason that anyone would buy the products is to participate in the income opportunity, you’ll never have “retail” customers, which, if you’ve read the "Avoid Illegal MLM's" section of this web site, you’ll know how dangerous this can be to the long term existence of the MLM Company.
Also, any distributors you sign up that do not continue to pursue the income opportunity, will immediately stop buying any products and cut your own income tremendously. It is very common for many Companies with good products, to have a sizable amount of some distributor’s income derived from the continued product purchases of inactive distributors.
If the products cannot “stand alone” as a viable product in the marketplace, without any promises about the ability to make an income from them, you’re headed down a dead end street.
Were you pressured to buy large amounts of inventory when you considered joining?
Why is that important? Because being required to purchase an unreasonable amount product upon joining an MLM Company, a practice that is called “front end loading”, is illegal in some states under their anti-pyramid laws, and is definitely unethical in every single instance. This practice serves one purpose, and one purpose only, and that is to generate more commission for the people in the distributor’s up-line, at the expense of the distributor.
Stay away from any Company that requires you to make a large product purchase upon joining, or from the person recruiting you who tries to persuade you to do it, even if it is not required.
Does the MLM Company advocate retailing of its products in their literature or training?
Why is that important? Because if you read the "Avoid Illegal MLM's" section of this web site, you would discover that many Network Marketing companies have been shut down by the State or Federal authorities for not having sufficient “retail” sales taking place. I don’t want to restate all of that information here, so if you have not yet read that section of the site, please do yourself a favor and read that vital information.
I can’t emphasize enough how important this point is, so please don’t take it lightly. If you work your rear end off and build up a good residual income, only to have your Company shut down in the future because of this omission, you will have done all that work for nothing and have to start over again from scratch. So, be very prudent when selecting a company, and make sure that the company not only advocates product sales to non-distributors, but also has a reasonable amount of such sales on their books.
If you follow the above guidelines when selecting an MLM Company, it will dramatically increase your chances of short term and long term success. Some of you I know will look at all the criteria for selecting a good company, and try to rationalize why some of them should be ignored when considering a potential company to join.
If you are tempted to ignore this company "test", you will significantly reduce your chances of MLM success, so I must warn you that there are certain rules that you should NEVER ignore, otherwise you are literally begging for failure to find you. Here are those rules.
Armed with this valuable information, you’re now ready to find the best MLM company, or at least one of the genuinely top MLM companies. But you'll need more than a great MLM Company to succeed, so click below to continue your MLM education.
- NEVER join a Company that has been in business for less than 3 years!
- NEVER join a Company that has debt of more than 25% of its assets or a negative cash flow!
- NEVER join a Company whose owners have 2 or more failed MLM companies in their past!
- NEVER join a Company that does not manufacture its own products!
- NEVER join a Company that does not have consumable products!
- NEVER join a Company whose products you wouldn’t purchase without an income opportunity!
- NEVER join a Company that requires unreasonable “front-end” product purchases!
- NEVER join a Company that does not advocate and have product sales to non-distributors!