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Sunday, October 19, 2014

108. MLM (Multi-Level Marketing) – Part 3 of 3 – Questions To Ask Yourself And Your Potential MLM “Up Line”

Let me first say re-iterate we have friends who involved in MLM businesses and have done quite well with this business model. Some make tens of thousands of dollars a year or more, get bonuses, have earned fancy new cars, earn free vacations, etc.

On the other hand others, the vast majority of those of us who gets involved in this type of business model, seem to spend a lot of time and effort for a couple hundred a month at best. A majority of those who get involved with a MLM business model will never make a profit. In fact, most people lose money on this MLM business model from my experience. 

See the data/links in Part 1 on my experience with MLMs and part 2 lessons learned from MLMs

My last post on this subject will be questions to ask yourself and your potential recruiter (or “Up Line”) to a MLM. This started out as one post but quickly has developed into multiple posts. So let’s get started. Since I've been involved in 3 MLMs here's some questions I'd ask: 

1. Do I have the personality, will power, commitment, self-motivation, human network, patience, and is this the right time to pursue this opportunity? 

2. How long has the company been in business? Of note the older the company the harder it will be to make money at it due to market saturation.

3. How much was the average income for your company’s representatives, consultants, or distributors last year and the year prior to that? 

4. How much does my potential "mentor", "up line", or "coach" make a month? Ask them to show you the last 6 months check stubs, automatic deposits, and/or last year's tax return to back up their claims. 

5. How often does a representative get paid?
 What percentage of the sales does the company retain or how does the commission system work?

6. How much is the initial fee or investment?
 What is the monthly fee (if applicable)? How much inventory do you have to purchase and how often? 

7. Can I afford the initial fee, monthly fee, and required inventory purchase(s) every x months in my budget? Will this money take away from me paying off debts? Will this fee keep me from providing food, clothing, shelter, or transportation for my family?

8. How many active representatives are there already in my area or online? How do you know this?

9. Are the products/services competitive both in quality and price with alternative products/services in your area or online? 

10. Are the products/services of value to the end user (the customer not me the sales representative)?

11. How often do the sales, commission structures, or promotions change?

12. How often is there inventory turnover? Can I get reimbursed for product that is no longer offered by the MLM company?

13. How easy is it for customers to cancel their subscription, get re-funded, or get a defective product replaced? 

14. Please give me 4-5 contacts that are currently involved in this company as references? Preferably people similar to my socio-economic status, who have been with the company for less than a year, have been successful with this MLM business model, and live in my city or state. 

15. What is the catch? 

I would also check with a local consumer protection agency, the Better Business Bureau, and read reviews online. 

The absence of complaints doesn’t necessary make a company legitimate. Companies change names and settle law-suits out of court. Do your research carefully. 

Typically, as was shown in the previous posts those at the top tiers are making “serious” money while those on the lower entry-level and "mid-managerial" level tiers are making at best only hundreds or a couple thousand dollars a year. I’ve seen a pattern emerge that 70-85% of average consultants, distributors, representatives, or “business owners” make nothing at all. The logical conclusion is that most people lose money with this MLM business model.

My advice? Be very careful. Learn from my mistakes see part 1. See the lessons I learned here in part 2. Again, do your research on the company. Sure, try a MLM at once if you’d like. Make sure you have the money to spend and in fact lose though. Maybe this MLM business model will work for you, you’ll be very successful making tens of thousands a month, and you'll be able to retire at 40 with “financial independence”. At best, keep in mind this opportunity could potentially mean a little extra cash each month. At worst you will have spent some money, some time, and some energy in an endeavor that didn’t pan out.  

Do these questions help? Would there be something you’d add to this list? Is the MLM business model for you? What has been your experience with MLMs?

See the data/links in Part 1 on my experience with MLMs and part 2 lessons learned from MLMs


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