Conclusion
There is a reason we highlight Network Marketing as a ladder to climb. Although the industry has a stigma attached to it we believe it is an extremely viable route to take as an Entrepreneur. We especially suggest this route to people who are starting a business for the very first time. The training and personal development you will receive through an MLM program is invaluable, not to mention the skills you will learn for the money spent is unparalleled in business. Considering the amount of risk compared to the potential reward, Network Marketing is a logical choice to start your own business.
Risk: Low
Reward: Low-Moderate-High
How we Got to Our Conclusion:
The Controversy
Let’s address the elephant in the room. Network Marketing or Multilevel Marketing (MLM) is a business model that people have formulated very strong opinions about (good and bad), while others remain completely in the dark or undecided.
When we say strong opinions… We mean it. Because of the model’s pyramid looking structure, people go as far as to liken Network Marketing to Pyramid Schemes also known as Ponzi Schemes.
Network Marketing is one of those things like politics, religion or working out that people have a love/hate relationship with or just can’t agree on.
If you LOVE Network Marketing
It’s probably because you are already part of a company. This article is NOT for you. Congratulations! You have found your ladder to climb. Having said that, keep reading if you are just getting started with MLM, haven’t quite decided if it’s your cup of tea, or haven’t 100% decided on a company to invest your time in.
If you HATE Network Marketing
This page may help you better understand the industry, but don’t anticipate it will sway you in support of the industry. We aren’t here to convince you or change your mind one way or the other.
If you have never heard of the terms Network Marketing, Multilevel Marketing or MLM:
We will give you the real pros and cons of this business model. Keep in mind- Makers Ladder is not for or against any ONE type of business model. We are FOR business, its up to you to find the right ladder to climb.
What is Network Marketing?
Keeping it light
Network Marketing or Multilevel Marketing (MLM) is the only true business model, that people who have never participated, believe they are experts… I hope you caught my sarcasm there but if not, maybe this story will help.
About 4 years ago, I met a very successful man in the MLM industry named Eric. When I met Eric he was 27 years young. Over the years we have stayed in touch and become close friends. I got to asking him some questions.
“Eric, when you first started building your Network Marketing business, did your family and friends jump on board and support you?”
[He laughed]
“Far from it! I remember my first week. I drove 4 hours in the snow to meet with my brother in-law in northern Minnesota. I was so excited to show him what I was working on. I knew he needed an opportunity in his life and I believed I had the ticket to get him out of his situation… He was broke. I showed him my company and explained how we could make a lot of money building a business together without spending a lot of money.”
“Ok, That’s simple enough” I replied, “…so what did he say? Did he join?”
Eric laughed again and said, “Haha not exactly…
I remember it like it was yesterday. We were sitting across from each other at his little kitchen table, in his little house. He looked across the table and told me, Eric not only do I think you are an idiot for doing this… but you are probably going to go to jail.
The reality was I hadn’t made any money yet, I had just started, but I remember immediately thinking to myself [I’m going to make a million dollars with this deal with or without you]. I was furious because he tried to steal my dream and worst of all, I was trying to help HIM out! All I could do was leave, drive 4 hours home and prove him wrong”
Day one, Eric knew where he was going. The picture he had in his mind for his success in Network Marketing was clear to him and no one, not even his brother in-law, was going to stop him.
So I asked Eric, “What did you learn from that experience?”
“Simple… it’s something I teach everyone- If you are going to buy someone else’s opinion, you must be willing to buy their lifestyle.”
Needless to say, Eric did not buy his brother in-law’s opinion that day. He started his Network Marketing career 7 years ago at the age of 24 and is now a $1 million annual earner with the same company he started with. Currently, he lives in Florida, while his brother in-law continues to live in that same little home in Northern Minnesota. And as Eric recalls, ” he still has that same little table”.
Eric is just one of thousands of success stories created through Network Marketing.
So what is this Network Marketing thing all about and how do people achieve massive success like Eric?
Let’s take a look at the business model itself and how it works.
Due to the controversy surrounding this business model we believe it’s important to debunk the unfair claim comparing legitimate Network Marketing companies to Ponzi schemes. We will address this before moving forward in laying out the pros and cons of choosing such a business model.
The Litmus Test
Business at its core is an organization or economic system where goods and services are exchanged for one another or for money.
On the contrary- A Ponzi Scheme (Pyramid Scheme) is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources. Meaning there is no real product or service being sold. Flat on its face -a Ponzi scheme cannot even be considered a business because goods and services are not being exchanged.
The simple litmus test when looking at a Network Marketing company and determining if it is a pyramid scheme or legitimate business is asking the simple question… Does this company sell a REAL product or Service?
If the answer is no, stay away- you have discovered a Ponzi scheme. The sad reality is that Pyramid schemes do exist. However if your answer is Yes to the question- then the company your friend is probably showing you is a legitimate Network Marketing business.
Now that is out of the way, how about we take a fresh look at Network Marketing.
Brief Explanation of the Business Model
How about we keep this super simple. Every business is made up of 3 components:
- Concept – Develop an idea for a product or service. This is the thing you are selling to the marketplace.
- Sales & Distribution – [hypothetically] We came up with the coolest new product! Now it’s time to find the people who also think it’s cool and sell it right? After all… the point of a business is to make money. We can do this a number of different ways but for sake of time, let’s just call this a strategy to move product.
- People – We have a product, we set up sales and distribution channels, but nothing works without plugging people into the machine to make the engine run.
The brilliant thing about Network Marketing is the fact that an individual has the ability to start a business for practically nothing without having to build the Concept or design the Sales & Distribution model. Wow! “Two of the three components to building a business are already done and we just started our Network Marketing business! Only problem is… We need to find the people to make this engine run. All we have to do is find 2 different kinds of people, customers who will buy our products and distributors who will help us sell the products and build a business of their own. This is a piece of cake.
Think about that. The only responsibility a Network Marketer has is to find people who love the product as much as they do. May we suggest finding a product you are truly in love with. This one little piece of the puzzle is often overlooked. If a business owner invents a product, they have this innate love for whatever it is. Its much like the love a parent has for their own child. As for Network Marketing, since the business owners don’t develop the concept, it is crucial they love the product so much that they actually feel a sense of ownership. You gotta own this sucker like you invented it. This can sometimes be difficult to overcome.
Traditional businesses and franchises spend billions of dollars annually on traditional advertisement such as as TV ads, online marketing, billboards and print advertisements. Having said that, it has been proven that the most effective form of marketing a product or service is through personal referrals.
In a nutshell, Network Marketing is merely a business where all of the advertising dollars that are typically spent on traditional channels like TV and print are re-allocated to people who are personally referring a product to other people in their network who then purchase the product or service.
Wow- that’s actually extremely simple.
So what’s the problem with this model? Seems pretty logical doesn’t it? Well let’s investigate the good and the bad that come with building this type of business. We have already talked about a few, but let’s take a closer look.
Pros and Cons of Network Marketing
The Negatives
The Stigma
We found it important to spend a good amount of time on this page legitimizing Network Marketing due to the fact that people still call these, very real businesses, Pyramid Schemes. The shear fact that we spent half the article addressing this notion explains why its the first negative on our list. Although Network Marketing has been in existence for well over 100 years, the stigma remains and creates a barrier for people attempting to build a legitimate Network Marketing business. In cases where people “fail” in this industry, many people attribute their failures to various forms of rejection, this being one of them.
Low barrier to entry
In some ways this is both a positive and a negative. Let’s first investigate the negative side. Network Marketing start-up and overhead costs are extremely low in comparison to most Traditional and Franchise businesses. In fact, the average startup costs range between $100-$1000 and ongoing Overhead ranges between $0-$1000/month. Because of this- millions of people each year try their hands and join an MLM, another reason why some purists don’t like considering an MLM a legitimate business. Furthermore- we placed this in the negative column because due to the costs being so low, many people participating in an MLM don’t treat the business like a real business that can generate millions of dollars in revenue. If you choose this path, don’t fall victim to this common pitfall.
Low initial sales commissions
Due to legal restrictions mandated in countries like the U.S. for MLM companies, upfront commissions are often regulated in order to keep business owners from the temptation of enticing customers and recruiting other sales people to join their sales organization. Simply put – most MLM companies don’t pay a lot of commissions up front. However, a substantial income can be earned after building a large organization with a combination of sales people and customers.
Volatility of companies
Finding the right company is extremely important and we will talk more about that later, but due to the volatility of the industry- people quit, products lose their luster and companies fold. Over the past 100+ years Network Marketing has been around, thousands of companies have popped up but less than 200 have ever reached the 10 year mark in their company’s histories. We consider many companies “fad companies” because sales will be hyped for a few short years and then the leaders of the company move on to another venture. Look for companies that have been around at least 10 years and trending up to stake your claim and build your business.
The Positives
Low barrier to entry
Now it’s time to talk about the positives of a low barrier to entry. Your cost to start a business that can potentially lead to millions in profits is extremely low, especially when comparing it to the costs of starting a Traditional business or Franchise. What does this mean? Well, there is little to no risk in starting an MLM business and your exposure is minimal. Without having to be concerned with covering overhead costs to keep your business running, your time can be spent focusing on revenue generating activities.
Go with a proven concept
You don’t have to spend thousands of dollars on research and development or market research making sure your concept is viable. In Network Marketing, you have the luxury of piggy-backing onto a proven product or service. Jumping on board with a company with a proven track record makes things easy. You just show up, build a salesforce and find customers. It doesn’t get much easier than that.
Built-in customer support
The best companies in MLM are essentially businesses in a box. They come with full on customer and tech support. You are your own boss and you didn’t even have to build your company’s infrastructure.
Training and personal development
Not only have the established companies in MLM come up with great products or services, built an infrastructure, provided a compensation plan and provided you with ongoing customer support, they provide high end personal development to you and your sales organization at extremely reasonable cost. Compared to sales and corporate training seminars that cost traditional and franchise businesses thousands of dollars, MLM companies often offer similar training for a fraction of the cost. On top of that, they are committed to providing training tools for every day development.
Payroll
You may be your own boss, but you are not responsible for paying your organization. The compensation and payroll is taken care of the MLM company from the corporate level.
Small time commitment
Network Marketing was not designed to be a full time gig even though it is possible to generate better than full time income. As a rule of thumb, in the beginning it is not suggested to rely solely on your business to generate enough income to cover your living expenses right away. It is suggested to dedicate minimum 3-5 hours a week on a part time basis until your business generates enough revenue to operate it on a full time basis.
Passive Income
For many, this reason is the #1 reason why people started their MLM business. Passive income is an income received on a regular basis, with little effort required to maintain it. Many Network Marketing companies offer a form of passive income in their compensation plan for people building organizations. It’s the dream life – Make money while you sleep.
6 Keys to building a successful Network Marketing Business
- Find a product or service you are IN LOVE with and can STAY IN LOVE with. Since you didn’t invent, develop and produce the concept with your own blood, sweat and tears, it can be difficult to take ownership in a Network Marketing concept. However, the people who do, are the ones who thrive and enjoy massive success in this industry.
- Treat it like a business. Since the barrier to entry is so low, like we discussed, most people who get started with MLM don’t treat it the same as if they had invested $1,000,000 to open a brick and mortar store.
- Give it your all. Like in any business, your success will be directly tied to your efforts. If you joined a gym and you never showed up to work out, can you blame the gym for you not getting fit? No, that would be silly. It’s the same in Network Marketing, you must put in the reps to become financially fit.
- Attend the trainings offered by the company you join and/or attend industry related training. Not only attend the trainings by yourself but bring your organization to the trainings with you so your whole sales team operates in synergy.
- Find a solid company with leadership you can trust. Look for a company with a proven track record of success and consistent growth. We suggest companies that have been around for at least 10 years. It is a sign of stability and strong leadership at the top. For reference- refer to the list of Top 100 Direct Selling Companies by the Direct Selling News.
- Stay consistent. Nothing great happens over night. Most people over estimate what they can accomplish in a year but underestimate what they can accomplish in five years. Stay the course 3-5 hours a weeks until… [whatever you want to get out of it]. Stay committed for a minimum of 3-5 years and you should see results.
