As the reputed author Robert T. Kiyosaki (“Rich Dad Poor Dad” fame) mentions in his book “CASHFLOW Quadrant”, one of the avenues to accumulate wealth and become rich, (particularly meant for the middle-class people), is to join a good MLM / Network Marketing Company.
There are thousands of MLM / Network Marketing (NWM) Companies, operating in many countries. Hundreds of such companies came and vanished. If you are a newcomer, without prior experience in NWM industry, it is difficult to know which company you should be associated with.
Here are the 20 aspects you should look into, before joining a NWM Company:
1. Industry Growth Prospects:
You should know in what industry the NWM Company is operating. If the Company is operating in brick & mortar industry, the growth prospects may be limited, say less than 15% per annum. But if the Company operates on Internet Ecommerce, then the growth will be faster, as Internet growth is over 30% per annum worldwide. That is, any business done through internet has got the potential to grow twice or three times faster than the business done through brick & mortar industry. In fact, a majority of NWM companies are operating in the slow growth brick & mortar industry.
2. Promoters – Experience in NWM industry:
Find out about the main background of the Promoters of the NWM Company. NWM industry is a unique industry, where there are no well documented management literature are readily available for the Promoters. If the Promoters are well experienced in NWM industry, then the chances are that they may know the nitty-gritty of successfully managing and operating the Company in NWM industry. If the Promoters have come from the traditional manufacturing or other services industry and have no substantial experience in NWM industry, then the chances are that they may be going through a learning curve and may not have gained proficiency in successfully managing and operating their NWM Company.
3. Whether the NWM Coy is Debt-Free?:
If the Company is debt-free, the chances are that it may stay longer in the business. Most of the companies have accumulated debt while going in for expansion and if there is a slowdown in the business growth, many of such companies may not survive.
4. Physical vs. Virtual Products:
Find out if the products being promoted by the NWM Company are physical products or virtual products. The selling of physical products encounters additional problems of logistics and delivery. Many people do not want to carry the physical products for door to door selling. Further, the NWM Company also may face problems in logistics and timely delivery of the products in new markets / geographies. These logistics problems may slow down the growth rate and expansion plans of the Company. But if they are virtual products, say internet products or services, then there are neither logistics nor delivery problems. As internet e-commerce is growing faster, there are better chances of higher growth for virtual products or services, provided they are need based and reasonably priced.
5. Value for Money Products / Services:
The price of the products offered to the networkers by the NWM Company should be far less than the normal market price. Suppose, the price offered through NWM is higher than the market price. (This is the case with majority of NWM companies, as they have to factor in the large amount of compensation payable to all the eligible uplines and downlines). If this being the case, then how you can persuade a new prospect to buy your Company’s product? Your prospect may prefer to buy the product in the open market that through NWM. The critical aspect for the success of NWM is the product pricing – it should be the value for money product.
6. Monthly Purchases vs. One-Time Purchase:
Many of the NWM companies make it mandatory for its distributors (networkers) to buy their products every month (particularly FMCG products). In some companies, a new member can join by purchasing the products / services only once in their lifetime (and pay a nominal renewal fee at the end of every year). You have to calculate the total cost of membership on per annum basis. It is always preferable to pay one-time cost, rather than paying every month.
7. Geographical Limitations vs. Global Markets:
Most of the NWM companies operate in the brick & mortar industry, dealing in physical products. Because of the logistics and delivery problems, there are geographical limitations by which you will be required to promote the products only in certain areas / states. As these are physical products, you can not seek prospects outside your country, as any sales outside your country are subject to your Government laws and regulations and on many occasions, you may be required to obtain a regular Export – Import Code from Govt. agencies. But if they are virtual products or services, they can be sold through Internet ecommerce, where most of such Govt. controls are relaxed. So, the entire world would become your market, instead of confining yourself within your local area / state.
8. Timing – Momentum vs. Stability Stage:
Every industry / Company goes through at least 4 Stages – Formulation, Concentration, Momentum and Stability. Anybody entering the industry / Company, before the onset of Momentum, stands to gain a huge advantage. Once the company gets into Momentum, the growth becomes exponential. However, once the company reaches the Stability stage, then the growth rate tapers down.
9. Future Trends – Saturated or Emerging Markets?:
If the NWM Company is operating in the traditional brick & mortar industry and where the market is already saturated, then the growth prospects may not be attractive. But if the Company is operating in an Emerging market, where say, the market penetration is less than 5% and if it is a mass consumption based market, then the future growth prospects will be phenomenal. For example, when mobile phones were introduced in India about 12 years ago, only a few people could afford them, due to steep tariffs (say at Rs. 16 / minute for outgoing calls and Rs. 8 / minute for incoming calls). But with the market opening up to competition, the tariffs fell drastically and millions of people started using the mobile phones. Currently, India is ranked 2nd in the world (after China), in terms of number of mobile phones. Those who entered the mobile phone industry about ten years ago have largely benefited and amassed huge income and wealth. But now there is intense competition, and it is difficult to make huge money in this industry now. Hence, any communication product or service, which has future potential for mass consumption, will have exponential growth.
10. Quality of Leadership Teams – Good Mentors:
It is popularly known that in the NWM industry, people join people. Find out the Profiles and the Quality of your Leadership Team. In reputed NWM companies, many of the top leaders have high academic qualifications and held top / senior management positions in big corporates (traditional companies). Once they build sizeable teams in the NWM Company, they would resign from the corporate sector and become full time networkers. Because of their experience in the corporate sector, they would have been exposed to the corporate discipline & commitment, the well laid out systems & procedures and the leadership skills. Such high profile leaders will naturally become good mentors in the NWM industry.
11. Training & Support Systems:
Look at the Training & Support systems that the NWM Company has. Timely and proper training of new members are absolutely essential for achieving success. Only a very few NWM Companies have established well laid out Online Live Learning / Training Systems in the world. The topics covered in the training should not only be on network marketing, but also aimed at imparting Personality Development, Communication and Leadership Skills.
12. Network Structure – Sunflower vs. Binary Models:
About 50 years ago when the network marketing industry was started, the Network Structure mainly comprised of Sunflower Model. In Sunflower Model, the upline leader can have over 100 members directly under him. Many a times, it is difficult for a leader to look after and mentor 100 plus members. Over a period of time, as the NWM Industry expanded, new Network Structures were introduced. The recent structure is the Binary Model. In Binary, the leader will have two teams – one on his Left and the other on his Right. The Binary Model is preferable as it is one of the fastest growing structures and also easier to mentor the team members, as each side will have adequate no. of emerging leaders, who can take care of their immediate downlines.
13. Pairs vs. Asymmetric Cycles:
In Binary plans, there are different methods of determining the Commission Cycles. Some NWM Companies stipulate a Pair as the Cycle – that is one person on the Left-side and another on the Right-side. As soon as a networker recruits a Pair, he will be eligible for the Cycle commission. But in reality, in most of the networks under Binary Plan, one side will grow faster than the other. Generally the faster growing side is called the Powerline. As an upline leader cannot place more than 2 persons immediately under him directly (one on Left-side and another on Right-side), he keeps on placing additional recruits on his one-side (either Left-side or Right-side), one below another. This is called Powerline. In actual practice, it is difficult for a new member to match the Pairs, as his one-side will be growing faster than the other. Hence some NWM Companies stipulate a ratio of, say 1:2, 2:4, 3:6 or some other asymmetric ratio, for determining a Cycle. Such an asymmetric ratio is preferable for the new members, as it will ensure that even if he can match only half the numbers of his Powerline, he can get his Cycle commissions.
14. Differential vs. Uniform Compensation Plan:
Some NWM Companies have Differential Compensation Plans, particularly under Sunflower Models. The commission payable is the maximum for the First Level and as the downline levels keep on increasing, the commission rates keep on decreasing. Under such a differential compensation plan, the upline leaders are prone to be self-centered – as more direct recruits placed under them in the First level, the more commissions they earn. There is no incentive for the upline leaders to place their own prospects under their downlines, as it will reduce their commission rate. In Binary Models, many companies have Uniform Compensation Plans, wherein all the upline leaders are entitled for uniform commission rate for every new member joining the team, irrespective of at which level he is placed. The Uniform Compensation Plan promotes team spirit, as the upline leaders go on placing their own prospects under their downlines (which is sometimes called the Powerline). This model motivates the new members, as they are confident of active support of their upline leaders.
15. Monthly vs. Weekly Payouts:
Some companies pay the commissions on Monthly basis, based upon the Monthly targets achieved by the respective members. Nowadays, many companies have adopted the Weekly Payouts system. It is always preferable to receive the eligible commissions on weekly basis, instead of waiting for the whole month.
16. High Compensation Package & Prompt Payment Record:
The foremost aspect to be considered is the amount / rate of compensation the distributor gets per sale. Higher the compensation, better it is. It is also critical to look into the compensation payment records of the NWM Company. If the company has a good track record of atleast Five years of prompt payment of commissions to all the eligible distributors without undue delays, it is worth considering.
17. Ceiling Amount of Commission:
All the NWM Companies have fixed a ceiling on the amount / rate of commission payable per cycle per member ID. Many companies have fixed the ceiling amount in the range of US$ 2,200 to 5,000 (INR 100,000 to 200,000) per Week per member ID. Only a very few companies have got substantially higher ceiling of US$ 35,000 to US$ 36,000 (INR 1,400,000 to 1,700,000) per Week per member ID. Higher the ceiling amount, better it is.
18. Targets vs. No Targets:
Some of the companies set upon Monthly / Weekly sales targets for their distributors. In some companies, if the distributor fails to achieve a minimum cut-off percentage (say 75%) of the sales target, he will not earn any commission. Such a target oriented system is particularly harsh on the new members, as most of them struggle to achieve the targets in the initial months.
19. Flush Outs vs. Carry Forward:
In some companies, (particularly where the system of monthly / weekly sales targets are in force), all the sales a distributor has done below the minimum cut-off percentage of the target, are flushed out and not carried forward to the next month / week. Imagine the plight of a new distributor! Many new distributors get depressed by such a target oriented system and quit the company within a few months. In some companies, there are no monthly / weekly targets and none of the sales is washed off, but carried forward indefinitely till the member achieves the commission cycle. It is always beneficial for the new members if there are not sales targets and no-flush-outs.
20. Large No. of High Income Achievers:
Another critical aspect to look for in a NWM Company is the number of high income achievers (say over US$ 2,200 per week). If there are hundreds of high income achievers in a NWM Company, it is preferable to choose that company, as the probability of you also earning such a high income increases.
Source by Pandu Rangan V