There’s a lot of different opportunities out there which fall in the classification of Franchises, Direct Marketing, and Multi-Level Marketing.
I believe that there’s a couple of reason why these things seem to be going through explosive growth right now. First, a lot of people have been affected by the recession. Second, those people are feeling a bit burned by putting their careers in the hands of a large company, and are thinking about “taking control of their destiny.”
Heck, that includes me too. It’s why I do what I do.
But I’ve learned some useful things about this space that I’d like to pass along – because there’s a lot of people who are losing their shirts (and perhaps life savings) by not understanding what they’re getting into. I’ve been publishing a webinar series which talks about this somewhat, but I’d like to go into more depth here.
1. Understand that these kinds of businesses are regulated by the US Government to a certain extent. So if you don’t see legal disclosure statements and financial reports, just walk away. And those reports are important because they disclose critical information for you. So if you’re betting your future livelihood and career on this information, you need to understand it all. Contracts DO matter. Financial statements ARE more than a bunch of boring numbers.
2. If you’re doing this as a one-person operation, then your primary job is going to be SALES. Sorry, that’s the brutal reality, but think about this: The reason the company needs you is because it will increase the income to their business. Your primary value is to bring in revenue. Despite the fact that they make big claims about the product or service “practically selling itself,” if that were true they wouldn’t need you.
Most people aren’t good at sales. Sure, you can get your mom to buy that bottle of hand cream, but she’s doing it for the relationship rather than the product. To make a living at it, you’re going to be selling lots of stuff to people you’ve never met, and you have to get good at it. Do you want to be a full time salesperson?
3. You’ll actually have two or three jobs:
- Selling the product or service
- Managing your business
- If it’s an MLM, you’re also actively selling the business opportunity to other people like you.
If it’s starting to sound like a huge job and learning curve, then you’re getting the idea. Sure, their marketing materials will have pictures of people sipping fruit drinks on the beach while the money rolls in, but that’s not the result for 99+% of the people. Do you have the dedication, skills, and persistence to make it to that top tier? Be honest with yourself.
4. Pay attention to the dropout rate and average income of people who participate in the company (you fully understood the disclosure document, right?) This tells you whether the business has a structure where people can succeed. Unfortunately, many companies appear profitable because of the money they’re taking for signup and monthly fees, while most participants never experience success themselves.
5. Go on Google and read the independent reports from people who have been customers, participants, even managers. Search for the name of the company followed by the word “scam” to see what comes up.
Yes, you’ll find some disaffected and bitter people, but don’t expect them to give you an honest viewpoint. They may be mad because of factors that aren’t related to your situation. What you’ll learn from these people is what questions to ask – of that company, and of similar offerings. Before joining Small Fish, I talked to franchisees of various companies and former franchisees, and it made a huge difference in how I thought through the decision. I looked at factors that would have never occurred to me otherwise.
I ran across an MLM offer yesterday, so I spent about 15 minutes doing Google searches and reading testimonials. A clear picture started to emerge that this company had some real deep issues about five years ago, but has made progress more recently. I also found out that the MLM company was not the one actually delivering the services to customers – an interesting situation which would deserve deeper investigation.
6. Really understand what your goals are here. Yes, you want an additional stream of income and want to be out from under the thumb of oppressive bosses. But you need to think more about the hours you’re willing to put in, the dedication to building new skills, and the monetary investment you can afford. When making those projections, don’t assume you’ll do any better than the average. If that starts to look scary, then imagine what the impact will be if you do worse than average.
7. Give yourself time. Many companies are expert at pushing you – HARD – to sign up today. They’ll talk about how the opportunity of a lifetime is slipping through your fingers.
But if you’re making a serious decision, you don’t want to be associated with a company which is good one day and bad the next. If it takes weeks and months to make your decision, fantastic. Most importantly, give yourself time to come down from the emotional excitement they gave you. It’s much better for that to happen BEFORE you make the decision than a month later, after you’ve made a huge commitment.
Now, it may sound as if I’m screaming at you to run away from every one of these opportunities. Not true. There are some interesting gems out there, in a variety of industries. I’m not going to recommend specific ones, because you need to do the investigation for yourself.
When something comes your way, spend the time to really think through it. Do your homework, because it’s going to be a serious decision. Assuming you don’t want to be part of the failure statistics.
Business Coaching Northern Colorado 
2 comments
Comments feed for this article
11 August 2013 at 4:37 pm
Merna Dwyer
You’ve got some good points here, weighing up the pros and cons of MLM. And a great tip to check them out. There is a website http://www.npros.com, that lists all of the new and old mlm’s and what their performance is like.. it may be useful to those doing some research.
MLM’s are not for everyone, I have come to understand. Some people prefer the “security??” of a job, and being told what to do. Others are prepared to tackle the learning curve and push themselves out of their comfort zones for the long term rewards. The hardest thing for me was the shift from employee mindset (being told what I can and can’t do) to entrepreneur – (taking control) – thats one of the reasons people drop out… and its also one of the reasons why business owners and manager types are successful in their mlm business.
The other mindset to get your head around is that when you work – you get paid for the exchange of hours – regardless of the effort. In MLM.. at the start you get little reward for the effort (depending on the compensation plan, and how quick you work) – but overtime the effort decreases and the rewards increase. So having a bigger vision than the money is something to work on also.
11 August 2013 at 5:47 pm
Carl Dierschow
Thanks, Merna! And you’re exactly right. It’s really a big mindset shift.
We can poke fun all we want at the “security” of having a paid job, but I personally believe that it does, indeed, provide more security than being out on your own. I say that because the career workers I’ve seen who work as hard as it as someone in their own business – they see huge career success as well. The big problem is that most people think that the “job security” is owed to them by the fact that it’s paid job. If that was ever true, it sure isn’t now.
Whatever your career, job, business is – You have to work hard at keeping it and looking for your future employment/business. When you lose sight of that, you tart experiencing failure.