Evaluating Direct Sales/Network Marketing Opportunities.

Over the past few years interest in direct sales/network marketing has flourished. Wealth building gurus are now touting direct sales as the best way for the average American to build wealth. Many Americans now see it as a way to supplement their income and have a “Plan B”. Busy professionals are flocking to direct sales/network marketing as a way to replace their income and create time freedom. Warren Buffett has purchased a number of network marketing companies. Donald Trump is now launching his own network marketing company.

As with any industry there are good network marketing companies and bad. With more and more companies popping up and more and more people joining network marketing companies; it is more important than ever to know how to evaluate a network marketing company. If you are considering starting a network marketing business I hope this guide will be helpful in choosing the right opportunity.

I. The Company

A. How long have they been in business? Many people are under the impression that getting in at the very beginning is the only way to be successful. This couldn’t be further from the truth. The newer the company the more likely they are to go out of business. Many people suggest that you look for companies that have been around at least 5 years. I would recommend at least 10 years.


B. What are others saying about the company? Of course the company is going to tell you good things and so are the people trying to recruit you. What do people who have no financial interest in the company say? Who is endorsing the company and are they paid to do so? Are you familiar with the publications that have published articles about the company? Stick to national publications that you are familiar with. Check their Better Business Bureau rating at BBB.org. If the company is publicly traded on one of the major stock exchanges you can view their financial statements and annual reports to verify that what they are telling you is true. Be careful when visiting “scam” websites. You never know if the person posting is being genuine or if they are just a competitor. There are also a number of these websites that allow anyone to post anything about a company and won’t remove the post even if it is proven to be untrue. They charge businesses a membership fee to respond to the posts and offer real facts to prove the posts untrue. They are nothing more than a scam themselves. There are also official sounding organizations who claim to protect consumers, but they really just take a short position in a company’s stock and bash that company hoping the stock price will go down so they will profit. Well meaning friends or relatives my have strong opinions. If they are not living the lifestyle you dream of then they are not the people you want to be taking advice from. Do your research, but be careful who you listen too.


II. Product, Need and Marketplace


A. Do people actually need the product being sold and would you buy it if there were not a business opportunity attached? Fads come and go, but if there is a need for what you are selling you will always have a market. If you would not buy the product if you weren’t in the business then most other people won’t either. You end up just selling a business opportunity. It’s a lot easier to market a product than an opportunity. If they need the product they will still buy it even if they are not interested in the business.

B. Is the market saturated with that product? I constantly see and hear companies bragging about being part of a multi billion dollar industry. That’s great for the industry, but if there are already a lot of companies in that industry then you’ve got a lot of competition. Most of the products out there are “me too” products that people can get at the mall or at Wal Mart. Do you really want to compete with Wal Mart or lots of other people from lots of different companies selling the same products? That leaves you having to convince people that your product is better or cheaper than what they are already using. If you are not a great salesperson, that can be difficult. Find a company with a product that people need, but don’t already have.


C. Is there value in the product? If the product doesn’t give people a greater benefit than what they pay for it then you are once again in the convincing game. If you come to me with a one hundred dollar product that gives me fifty dollars in value I don’t even want to hear about it. If you come to me with a fifty dollar product that gives me one hundred dollars in value then we need to talk. There are a lot of products with an inflated price to cover the commissions paid and you can get the same products cheaper elsewhere.


III. Compensation.


A. How are commissions earned? Commissions must be earned from the sale of a product or service. If you can simply recruit someone into the business and get paid a commission, even if they don’t buy a product then stay away. Also be wary of companies who pay you a commission on marketing tools or websites purchased by your recruits.


B. How much will you get paid? We all want to get paid and get paid well. Why take on the headaches of owing a business if you are not being paid well. A lot of companies out there pay very small commissions and require to buy a lot of product the to be eligible to receive those commissions. How many sales will you need in your organization to cover your expenses and recoup your initial investment? Look for a company that allows you to earn large commissions upfront and also earn commissions on the backend without having to sell or personally buy tons of product.

C. How and when will you get paid? Cashflow is crucial for any business. Does the company pay daily, monthly, quarterly…? Do you have to wait for a check or will they direct deposit commissions?

IV. Timing. Timing is everything. A great idea at the wrong time won’t be successful. A bad idea at the right time won’t be successful (not very successful anyway). A great idea at a great time will be incredibly successful. If you get involved at the beginning of a trend you make money even if you’re not very good. If you get involved at the end of a trend you’ll spend money. If everyone already has what you are selling then you are at the end of the trend. Look for a company that has been around for a while, but has a unique product that most people don’t already have.