How to Evaluate a MLM Company

What are some good ways to evaluate a MLM Company, before you join? I’ve found that most people evaluate a MLM Company AFTER they’ve joined the company.  And that’s a huge mistake.  Most prospects get so excited about the new business opportunity that they don’t spend a few days (or even a few hours) evaluating the company first.  As a result, they really don’t know what they are getting themselves into.

Let me ask you, if you were going to start a traditional business, or franchise, wouldn’t you do some research before you invested your time and money? Wouldn’t you research the company, the market in your local area, the products, and your competition? And wouldn’t you read all the fine print before you signed your name to any type of contract? I hope you would.

evaluate a mlm company

How to evaluate a MLM Company

Network marketing is a real business. Unfortunately, most people who get involved don’t treat it that way.  My goal today is to educate you about how to evaluate a MLM Company, so you can make an informed decision. I’m going to teach you several things you should do before you join any MLM Company.

1) Policies and Procedures: In my opinion, this is the most important criteria, when you are evaluating a MLM company. Before you join YOU MUST read the policies and procedures to find out what the rules are. For instance, some MLM Companies won’t allow you to use their name in your online marketing campaigns. And other companies don’t want you promoting their business opportunity on the Internet at all.

Other companies have crazy rules such as “minimum monthly purchases” in order to get your bonus. Or they have minimum customer sales, just to get your bonus check.  And other companies have a no compete clause and prevent you from having other income streams while you are a distributor with them.

The rules vary significantly by company so make sure you do your homework first.  I’ve always found that it’s better to know what you are getting yourself into BEFORE you get yourself into it. Does that make sense? So do yourself a favor and read the company’s policies and procedures before you join. Make a list of questions. And get answers to your questions before you sign anything.  You might just find out the company isn’t all that it’s cracked up to be.

2) Track Record: In addition to evaluating the company’s policies and procedures, it’s imperative that you research the company’s reputation and track record. Personally, I believe it’s much wiser to partner up with a company that’s been around at least 5-10 years, than it is to join a start-up company. Obviously, this is a personal decision. And I know that all companies were start-up companies at one time.

But most companies fail. Few MLM Companies stick around for the long haul. Many go out of business in a year or two. And if you are going to form a long-term commitment with a company, you need to make sure it will be around in another five, ten or twenty years from now. When you join a company that is already established, you improve your chances of success.

More importantly, you need a company with a good reputation online.  If you do a search for your company online and find thousands of negative pages and websites about it, run the other direction.  I understand all companies have some negative stuff online, but if your company has lots more negative stuff than other companies, stay away from them.

3) Products: There are so many different types of MLM products. My only advice to you is to pick a company with a product that people want and will buy, even at the retail price. In other words, your products and services must have good perceived value. If it isn’t a good deal for your retail customer, at the suggested retail price, don’t join that company. Remember, all companies need customers. If you can’t sell the product to anyone, you won’t make any money.

Also, if you can find a similar product or service at the Wal-mart, or the vitamin store, stay away from that company.  It’s hard to sell a product that a competitor offers for ten times LESS the cost.

If I could recommend anything for products, look for a product line that is unique.  Find something other than the vitamins, pills and magic potions.  Look for something you can’t get anywhere else.

You should also check to see how many distributors (or former distributors) are trying to sell the product on Amazon, Craigslist or eBay.  If everyone is selling their inventory online, this makes competition for you even harder.  It’s hard to convince someone to pay full price from you when they can buy it online for a fraction of that cost.

4) Compensation Plan:  When it comes to compensation plans, you need to learn everything you can about them.  Take some time to calculate how you get paid.  Check to see how many customers or how many distributors you need to earn $1,000, $5,000 and $10,000 per month.  Find out what percentage of the total sales the company pays pack to the distributors.  This information will be very powerful.  By the time you compare two to four different companies you will see some major differences.

The bottom line is that you want a MLM Company that rewards you fairly for your efforts.  Ideally, you want a company that doesn’t require a team of thousands of people just to make a few thousand dollars per month!

5) Number of Countries it Does Business In: To some people, this might not be a big deal, but I believe it is a wise move to join a company that does business in multiple markets.  In fact, the more countries it does business in, the better off you will be.  Look for a company that is in at least 10 different markets, preferably 30 or more.  Do some research to see how much the company has expanded during the past five years and what its future growth plans consist of.

Final Thoughts

In conclusion, these are my five most important criteria for evaluating a MLM Company, before you join it. Obviously, there are other important things to, such as training tools, company websites, training systems, etc. Please conduct your research before you join a MLM Company. Spend as much time researching the company as you would if you were buying a franchise for $1 million.  That way, you know what you are getting yourself into, and you won’t be unpleasantly surprised about an “unknown rule” later on.

What are your thoughts?  What do you do to evaluate a MLM Company?

Disclaimer: I am not a lawyer and this article is not providing legal advice.  The views in this post are simply my opinion from my own personal experience.  All businesses come with risk.  Please use your own discretion when evaluating a MLM Company.

 

 

Comments

comments

9 thoughts on “How to Evaluate a MLM Company

  1. Jackson

    To me, the most important thing about a MLM Company is how many different countries does it do business in. Ideally, you want a company in 50 or more different countries so you can build a team internationally. If your company only does business in America you are leaving lots of money on the table.

    Reply
      1. joey vegas

        This article memorializes that I made the right decision. Truth be told, WorldVentures is not even MLM, but I was afraid it was. Plus, it has millions of members worldwide. After reading this article, MLM’s aren’t even that bad of a business. Especially when selling a product that everyone in the world wants; travel.

        thanx much,
        joey @ joinWVtoday.com

        Reply
  2. James B

    The no compete clause might dissuade prospects from jumping on board with a network marketing company but it isn’t always a bad thing. Besides, none of those clauses last forever; you can typically find work doing the same thing within a year of quitting your previous company. Before signing anything, make sure the terms are favorable to you as well.

    Reply
    1. chuckholmes Post author

      To some extent, I can see why the network marketing companies have a no-compete clause, so they can protect their company. However, these same companies will galdly let people join their company who are already in another company. So it’s like a double edged sword. As a distributor, I would want nothing to do with a MLM Company that had this type of clause in it.

      Chuck

      Reply
  3. Diamond Grant

    Taking the time to evaluate a MLM ahead of time before signing up to be on board is a necessary step to take. You can’t let the hype of the idea sway you into making a hasty decision that could go on to bite you in the butt later on. I would think that a thorough evaluation would take at least a few days so that all aspects can be analyzed. It may also be beneficial to get another person’s opinion on the matter. Other people can sometimes see risks and problems that we don’t and they could end up saving you from making a crucial mistake.

    Reply
    1. chuckholmes Post author

      Good point, Diamond. I tell people to never rush into a business. Don’t let a bunch of hype convince you of instance riches. No business is easy. The best thing you can do is do your due diligence and make an educated decision.

      Chuck

      Reply
  4. sandy

    From my experiences in the past with MLM seek out those who have done well in the business. Go to some of the seminars and local meetings, introduce yourself and plainly ask: Who is doing at least 500.00 per month in business over (give a time period) and ask if they will talk to you about their strategy.

    When you meet with them: get the low down on how they feel about the company. If they are making money consistently over a year, they are sure to have some opinions. Because they’ve been in it a while this may indicate they aren’t just a whiner and complainer, but someone who is serious about making money.

    I loved this article as all the ones I’ve read so far. Keep up the great work.

    Reply
    1. chuckholmes Post author

      Thanks, Sandy.

      It always amazes me how many people never do any of the research for their particular network marketing company. Once you find a good company, I suggest you find someone who is successful and pick their brain. I don’t see much benefit from counseling with people who aren’t doing well with the company. Sure, you can listen to them, but don’t take their advice. Always listen to people who are doing well. It will help you that much more.

      Chuck

      Reply

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