A year ago, I started reading about real estate and residual income. My desire to become an entrepreneur was born. As I read, the term network marketing and its synonym multi-level marketing (MLM) kept popping up. The authors of these buzzwords didn’t bother to explain or define them. They assumed that I, their avid reader, knew its meaning.
I asked around, but no one had a clue what network marketing was. Thus began my quest to find out what I could about MLM, as its proponents boast that anyone can start a business for as little as a few hundred dollars.
Finally, I found gold. I stared open-mouthed at my computer screen. The name of the network marketing company refreshed an old memory. In high school, he had met a young man who belonged to this company. A couple of times, he came to pick me up for a date, and before we left, he would clean my mother’s stove or refrigerator, showing her the miracles of his product. I guess his goal was to make money and dazzle me with his entrepreneurial qualities. I felt humiliated because my mother took advantage of him to clean the kitchen and because this boy embarrassed me: he wanted to go to the movies or a party, and he was cleaning my mother’s appliances.
He had the holy grail in his hand, but he was apprehensive. I told my colleague what I had discovered. He shrugged and said, “It’s a pyramid scam.”
But I found that the lure of residual income far outweighed my apprehensions. Today, I am a proud network marketer, ready to give anyone, who has no idea what network marketing was like, my fledgling experience. Here’s the scoop.
DEFINITION: Network marketing is a business that markets a product line or multiple product lines through independent vendors. An independent vendor is hired; she, in turn, recruits other people; these people recruit others, and they do. Each rep builds her own business with her recruits and her recruits under her, and earns a commission on the turnover of her team. The people who depend on the independent seller are called the downline. The potential to grow your downline and make money is exponential.
SCAM or LEGITARY BUSINESS: When I was in high school and young people in love cleaned appliances, many fawned over these companies. Let’s be honest. There were many jokes. Most people didn’t make a lot of money; They annoyed their family and friends, and horror of the horrors, they had garages full of disused products that they had to buy to meet their quotas (a certain amount of products that a salesperson or team has to buy). The time has changed. Today, major Fortune 500 corporations and companies, such as AT&T, MCI, Citigroup, and IBM, have multi-level sales forces.
The difference between network marketing and a pyramid scam is easy to explain. Network marketers sell products; they run businesses. A pyramid scam is a scam. People give money to someone in the hope that they can get other people to give them money. The claim is that anyone can get rich simply by finding other people to do the same. There is no product, there is no business. The people at the top make a lot of money. The scam falls apart. This is illegal. People are arrested.
THE GOOD, THE BAD, THE UGLY: Not all network marketing companies are created equal. There are some great, some good, and some really horrible and ugly. If you are looking for a network marketing company, you need to do your due diligence and make sure you find a great one. Remember that you are investing in your future.
RESIDUAL INCOME: What network marketing offers is a way to create residual income, while working part time. Network marketing is not a “get rich quick” scheme. Those who are successful work hard, but they are creating something magical: residual income.
You go to work and get paid. If you don’t go to work, you don’t get paid. This is a linear income. Residual income does not depend on you working. Think of an author who writes a book and receives a royalty check year after year. Residual income, like royalty checks, keeps pouring in, allowing people to retire, have the freedom to travel, and do other tremendously enjoyable things.
MY 12 SUGGESTIONS FOR NEOPHITES FROM ANOTHER NEOPHYTE:
1. Don’t rush into network marketing. Look around you and find a good company that suits you and your needs. Don’t be pressured at all. Ask the network marketer you are talking to a lot of questions. Avoid people with a lot of pressure.
2. As soon as you finish reading this, run and buy Wave 4: Network Marketing in the 21st Century by Richard Poe. I don’t know Richard Poe, but I know that this book explains everything.
3. Find a company and product that you are excited about. It’s hard to sell something you don’t believe in. Ideally, you want a product that people buy over and over again, month after month, year after year, and a company with values that are consistent with your values.
4. Look for a company that has been around and has proven itself. Someone who has been in network marketing and has experience could take a chance on a new company, but a newbie needs to be more careful.
5. I suggested publicly traded companies. Their financial statements are public and you can request their financial portfolio. Go to www.morningstar.com, or www.nasdaq.com, or www.valueline.com, or your favorite place and do some research. You just need the ticket number of the company and you are good to go. If you don’t feel safe doing it yourself, find a friend who knows something about stocks and financials, and ask her for help.
6. Review the compensation plan. Is the commission fair? How often do you pay? Does excess money accumulate from sales? Does your team have to meet a quota? This could be a huge inconvenience. If there are large fees, you may find yourself buying products that you don’t want. Poe’s book is priceless here; explains the different commission plans.
7. Do you have to buy, store, deliver products? Most network marketing companies don’t do this anymore. Most companies offer ordering online or by phone, and the company distributes its products. You place an order and they do the work.
8. Training is very important. What type of training program do they have? In network marketing, team members help each other build their businesses. In network marketing, if the people on your team are successful, you are successful.
9. How does your business work? Face to face with the people you know? Do we have internet? Or a bit of both? This is important. Are there hidden costs in marketing? Ask for the details.
10. See if you can find dirt in the company. Check with the Better Business Bureau. Are there complaints against the company? What kind of complaints? You can do this online. Know what you are getting into.
11. IMPORTANT: Make sure you are willing to spend time and energy building your business, 10-20 hours per week. If you have a family, make sure they agree to this.
12. Don’t quit your day job! At least not until you make more money in network marketing than in your nine or five.