Creating a flow of residual income is a key goal for any network marketer. The central philosophy of network marketing is leverage. Let me explain.
How hard can you work in any job? Let’s assume you’re not lazy but neither are you a workaholic. You are willing and able to work for, say, fifty hours a week. If the return on your labour is $10 per hour you will make $500 a week. You can increase your earnings by working longer but you are limited by the number of hours in the week.
Suppose you work in network marketing and you have ten people in your down-line who you have personally recruited. They each work fifty hours a week and make $500. On average, you spend ten hours a week supporting them and take 5% commission on their earnings. You make $250.
Suppose they have each recruited ten people and you take a further 2.5% on their sales. (10 x 10 x 500) x 2.5% = $1,250. You make a total of $1,500 (1,250 + 250) for ten hours work. That’s $150 per hour!
Obviously this is an over-simplification of the process but it illustrates the principle.
The concept of residual income arises from the successive layers beneath the people you personally recruit and the contribution they make to your income without any further effort on your part.
Don’t be under any illusion that this happy state of affairs can be achieved over-night; it will probably take between five and ten years. Once you have achieved it, however, you can choose your own balance between life and work and, more importantly, have a “pension” style income for when you can’t, or don’t want to work at all.
Many people come into Network Marketing because they have been approached by a person, often someone they know, and invited to join the company that person belongs to. Others have used products that they like and want to share the benefits with others by distributing them. A third group is attracted by the concept of MLM and seeks out a suitable opportunity.
Regardless of how the seed was sown it is vital that it is provided with fertile ground, with all the right conditions to allow it to flourish. Only you can judge whether one company offers a greater chance of success than another; but what criteria should you use to decide? This article is an attempt to make the task easier by suggesting what you should look for. I hope you’ll find it helpful.
Company History
Look for a company with a significant track record, at least ten years in business. Twenty years would be better, and longer, better still. Look for evidence of year-on-year growth in sales, even during periods when the wider economy has been struggling. Find out, if possible, how long the senior figures in the company have been in place. A consistently growing company, with a worthy track record and a stable management team is more likely to offer the opportunity for you to be successful too, not only now but for years to come.
Company Structure
Is the company privately owned or is it quoted on the stock market? A publicly quoted company, however large, is always a potential target for take-over, with all the uncertainty about its future that follows. Does the company have much, or any, debt? Large debts have been a major cause of company failures, including some famous names. Look at the company’s assets; a strong asset base provides further assurance of a company’s long term future.
Company Reputation
Here we have a problem. Network Marketing is the target for much negative criticism. Some of this is justified but, most often, is based on the behaviour of a few companies, or even a single company. Then again, every company comes in for some criticism some time. We don’t condemn the auto industry as a whole because Toyota had to recall millions of cars. At the same time we still buy and use cars despite their contribution to Global Warming. All industries produce “costs” and “benefits”. Within those industries some companies behave better than others. It is important to take a balanced view and look for the company that is doing the best job overall. There is no such thing as the perfect company. One good indicator is the trade association(s) the company belongs to and its standing within them.
While on the subject of reputation, and this may surprise you, don’t automatically go with the company you’ve heard of. Some companies are big in your country but global pygmies. Some companies are big in their home country but may only just be getting off the ground where you live. Also, a company whose name is widely known in a particular country may be so because it is close to saturating the local market. Market saturation is a potential problem, although it takes much longer to achieve than many commentators would have you believe. My advice would be to pick a company with an impressive history but one which you, and or most of the people you meet, haven’t heard of.
Product
From a strictly commercial standpoint you don’t need to be selling the best product, or range of products, to be successful. I will be put my cards on the table, allow myself to insert my value-judgement here, and assert, firmly, that you do need to be selling the best product. Leaving aside values for a moment, selling the best product will give you more confidence, and probably make you feel better. Speaking for myself, however, I could never be persuaded to sell the second best product, even if I made more money that way.
The company you associate with must be committed to selling product. If little or no product is reaching the market the company is operating a scam. It is an indication of good faith if the company requires its distributors to sell, to consumers, a minimum amount of product each month to qualify for the rewards they receive for recruiting and supporting new distributors. Also, in my opinion, the company should not reward distributors for “selling” product to other distributors, a form of pyramid selling.
Training and support
When you start in this business you are a rarity if you already know what to do and how to do it. You need training, coaching hand-holding and support in varying degrees throughout your career as a network marketer.
Check out the training offered by your company. Does it cover all the bases? Is it close enough to home that you can attend mostly without a night away from home? Are there online, audio-visual and printed training resources to supplement face to face training? Does your chosen company have recognised accreditation for its training? In the UK this would most likely be the Investors in People award.
At least as important, if not more important, is your sponsor, the distributor who inducts you into the business. Here you have to make a judgement. Is he or she committed and will you be properly supported. This is a difficult call to make but the wrong sponsor with the right company is far worse than the right sponsor with the second best company.
The Compensation Plan
This is how you get paid; just a little bit important then? These vary greatly from company to company and I would not presume to comment on the plans individually. In a subsequent article I will describe the broad alternatives and attempt to provide some insights on how you might appraise them.
Network Marketing, or Multi-Level Marketing (MLM), is a system for distributing products from the manufacturer to the consumer.
Traditional forms of distribution employ “middle men” (or women) such as wholesalers and retailers. Sales are encouraged by advertising, usually designed by specialist agencies, communicated through media ranging from TV to leaflet dropping. All of these contributors incur costs which, together with their profits, form part of the price to the end consumer. These distribution costs can easily amount to 60% of the final price.
Physically transporting the products from manufacturer to consumer also adds to the cost but this is common to all systems of distribution.
Network Marketing replaces the “middle men” with independent distributors or representatives. Each distributor sells a small amount of the product to a modest number of customers. These customers are approached through personal contact and are encouraged to try the products based upon his or her personal recommendation. Repeat business, the mainstay of any enterprise, depends upon the product matching the promises made and on the standard of customer care given by the distributor. The distributor’s reward for this is the difference between the retail price to the customer and the price to the distributor, the retail profit.
The business grows by recruiting new distributors. New distributors are introduced by existing distributors, who coach and support their new recruits in order to help them sell more product and recruit more distributors. The reward for this support is a “commission” or “bonus” paid on the value of sales made by those they have recruited.
A distributor’s income is, therefore, in two parts; the RETAIL PROFIT and the COMMISSION. In addition, INCENTIVES are usually available to reward particular levels of performance. These may include holidays, cars and profit sharing, amongst many others.
A distributor who recruits a new distributor is the first level in the new distributor’s “up-line”. The new distributor is the first level of his/her recruiter’s “down-line”. The commission may be paid for members of a down-line through several levels. So, for example, suppose commission is paid through three levels, and suppose A recruits B, who recruits C, who recruits D. A will be paid commission for B, C and D at, say 3% for B. 2% for C and 1% for D. If D recruits E, A will receive nothing for E but B will receive 1% for E, and so on.
The advantages for the up-line are obvious. Less obvious but equally important are the advantages for the down-line. Because the up-line has a financial interest in the success of his or her down-line, in this case to three levels, there is powerful encouragement for the most experienced distributors to coach and support the least experienced, to their mutual advantage. The transfer of experience is self-sustaining because by the time A no longer has a direct interest in the next level of his or her down-line, i.e. E, B has quite sufficient experience to provide the required support.
This article does not describe a particular company’s arrangement. Rather. It attempts to describe the broad principles of MLM as I understand them. There are many variations, some of which I shall attempt to explain as this site expands. Unless you are merely curious, and are considering Network Marketing for yourself, please read “MLM – Qualities Needed for Success”. If you are put off by what you read there you could save yourself some valuable time!
For every 100 people who enter Multi-Level Marketing (MLM) 97 fail!
There are many reasons but the most common causes lie within the people who fail. If this message puts you off, good. I don’t want you to fail; it’s not a pleasant experience. If you don’t believe you can be one of the 3% who succeed you will fail.
OK, now the odds have improved because some of you have already dropped out. Those of you that have stayed in the room have SELF BELIEF, one of the key ingredients for success.
What else do you need?
PATIENCE: Whatever you may have heard MLM is not a get rich quick scheme. You can make a lot of money but you won’t be a millionaire within a year. With consistent effort you may replace the income from your day job within 2 to 3 years and, if you want it and work for it, be earning a six figure sum within, say, 7 to 10 years. This is not a promise; it’s still mostly down to you.
I guess the room seems a little emptier now, but those still here have two things in common, patience and an even better chance of success.
WILLINGNESS TO WORK: My dear old Dad, God rest his soul, often used to repeat the old saying, “Success in life is 5% inspiration and 95% perspiration”. If you’re looking for easy money, buy a lottery ticket!
The good news is your efforts enrich you, not your boss, and the harder you work, providing you’re doing the right things, the more money you’ll make.
ABILITY TO LEARN: You can’t know the right things to do, you have to be taught. If good training is available take advantage of it, it’s essential.
STICKABILITY: If you’re the type of person who gives up at the 1st hurdle, or the 101st, leave now, you’ll never make it.
A CARING AND RESPONSIBLE ATTITUDE: This applies equally to your customers and to those whom you recruit into the business.
A key concept of MLM is superior customer service. Treat ‘em right and keep ‘em happy!
While customers provide a small part of your income, your bread and butter is the people you sponsor into your business. Train them, coach them, support them…one might even say love them. They are not just your main source of income; they are your responsibility and your duty. They can also be a great source of support for you.
SOUND ORGANISATIONAL SKILLS: If you’re forever losing things, and tying knots in your handkerchief, you’ll struggle. Buy a small filing cabinet and use a diary! Don’t panic about this. If you can organise your daily life and family budget you have most of the skills you need.
Are you still here? Not many left, I’m sure, but that’s good. I bet you think I’ve been trying to put you off? Well, you’re dead right. If I was recruiting distributors I would be wasting time with those who have left the room, both theirs and mine. It is irresponsible, unethical and pointless to sponsor people who are not suited to, or not yet ready for, this type of business. If you’re still here, I can’t guarantee your success. I do know, however, that you have a far better chance now than when the room was full.
What you don’t need
On a more positive note, I’ve told you, pretty much, what you need. In case you’re wondering, it doesn’t make a jot of difference how old you are (as long as you’re over 18), what sex, race, colour or religion you are, or what job, if any, you do. You don’t even need to be good looking, which is lucky for me!
