There are tens of thousands of people that get involved in MLM/network marketing on a yearly basis. Here is my expanded list of criteria that you should use while evaluating any MLM program:
There are tens of thousands of people that get involved in MLM/network marketing on a yearly basis. Some join because of the product,
as they are told that it is going to be “the next breakthrough product”, one that has “never been seen in the industry”. Some are taken in by the lure of “making big money with this revolutionary pay plan”. In most cases, these people have never been given a way of evaluating these companies to see if they are actually “worthy” of us to promote.
One of my mentors, Michael Klimek, once gave me some advice on how to evaluate any MLM program. He gave them to me as 5 different criteria, but I am going to expand them out to 12, as I feel that there are additional criteria that should be taken into consideration as well.
Here is my expanded list of criteria that you should use while evaluating any MLM program:
1. Company track record – Do your “due diligence” on the company. Check out the company by going to the Better Business Bureau in their local area. See if there are any complaints filed against them, and see if any have been resolved.
2. Financial strength – Even if all factors seem to check out, this is one of the key factors to why many MLM programs fail: not enough money to keep it afloat. Remember that 95%+ of all MLM companies never make it past its 5th year.
3. Strong management – Check out the names of the people running the company (i.e. the CEO, CFO, President, etc.) to see what experience they have had in running other companies:
a. What have they previously done?
b. Were they successful?
c. Do they have solid business credentials?
d. Do you get a good “vibe” from them?
e. Do they seem to have “integrity”, and is it someone you can trust with your future & the future of people you want to introduce your business to?
The last question is of utmost importance, because I’ve seen it where some companies have terminated “sloughs” of distributors for the most ridiculous of reasons. Usually, it’s only because the company has created some “loophole” so they don’t have to pay them that huge paycheck.
For example, one of my good friends was in a “not-to-be-named” juice company. She was making in the “mid-4” figures on a monthly basis, and was suddenly told that she would be terminated since she was ranking #1 on Google when people searched for that particular company. Is this fair? No, I don’t think so! But it didn’t matter to them. She couldn’t fight the company’s decision, and she was terminated anyhow!
4. Unique consumable products – Does the company produce an unrivaled product? Is there competition for that particular product, and how do they “stack up” against each other? What kind of market niche is there for that product?
5. Competitive pricing – Do the products “stand well” in comparison to products currently in the marketplace? Don’t become “garage-qualified” just to meet the minimum requirements to be given a paycheck by the company.
For example, there was once a company back in the 1990’s that sold water filters. To qualify for a paycheck, you had to buy thousands of dollars of these water filters. Thus began the term, “garage-qualified”, which seems pretty self-explanatory.
6. High reorder rate – Is there a real “perceived” value in the product? Does this product get ordered over and over again on a monthly basis? It’s quite simple to understand that if there is a low reorder rate, there will be low residual income. Conversely, if there is a high reorder rate, there will be a high residual income.
7. Low attrition – This, in layman’s terms, is the number of people that stay on as customers every month. This just means that if a business builder is making money, he/she will continue on with the company. If they are continually in a negative cash flow, usually the average period of time given for this is approximately 90 days. If they go beyond this period of time in a negative cash flow, they will quit the business.
8. Low personal production requirement – This is where you have to analyze what the monthly product purchase is to qualify for a paycheck. After this has been established, you must ask yourself if the “Average Joe” can also meet these requirements.
9. Low entry costs – As in our previous example with the water filter company, it did cost several thousands of dollars to just “get started on the right foot”. If these costs are too high, then the “Average Joe” can’t afford it. Thus they will never quite get started.
10. Timing vs. trends – Never believe the “Get in on the ground floor”, “Be first”, or “Pre-launch starts now” hype! Timing to join a company is bad when you observe their growth has stopped. Conversely, timing is good when you observe consistent growth in the company. You also have to look at the changes that are happening in that particular market niche. How will they have to adapt to maintain profitability?
11. Legal, fair, balanced compensation – This must reward everyone in a win/win fashion, and build a “network” of “many people doing a little bit of the same thing”. As with the teachings given by one of my previous mentors, Michael Klimek, he taught me to analyze a compensation plan based on a small, attainable number that the “Average Joe” can reach. Look at how much you & every person has to order every month, and see how you are compensated for this.
12. No risk – You should always evaluate the risks of the business versus the possible gains. Where the number of risks is smaller than the gains, it would almost seem prudent to move forward. Please be aware of any companies that offer a “shadow business”, that is one that would appear to make more money with the sales of motivational materials (i.e. tapes, books, CD’s, etc.) than they would with actual product sales within their organization. These companies should be avoided at all costs.
If you use the following 12 criteria that I have provided you in evaluating any MLM/network marketing opportunity before getting involved, your chances of success with that program will be greatly increased.
