Evaluating a Direct Sales/Network Marketing Opportunity

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As interest in network marketing opportunities grows, we encounter more and more misinformation on what to look for in a network marketing company. We wrote this guide to offer some simple suggestions on how to evaluate an opportunity. Evaluating potential opportunities is a great way to learn how to be successful in network marketing.

What is Network Marketing According to The Company

How long have they been in business?

Many people are under the impression that getting in at the very beginning is the only way to succeed. This couldn’t be further from the truth. The newer the company, the more likely they are to go out of business. Many people suggest that you look for companies that have been around for at least five years. We would recommend at least ten years. Even solid companies go through growing pains. It is not unusual for companies to go out of business because they are too successful. They grow too quickly and can’t finance that growth. In network marketing, this is even truer because the companies grow exponentially.

What are others saying about the company?

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Of course, the company will tell you good things, and so will the people trying to recruit you. What do people who have no financial interest in the company say? Who is endorsing the company, and are they paid to do so? Are you familiar with the publications that have published articles about them? Several magazines are nothing more than advertising pieces for MLM (Multi-Level Marketing) companies or magazines that sell advertisements that look like authentic articles. Stick to national publications that you are familiar with. If the company is publicly traded on one of the major stock exchanges, you can view their financial statements and annual reports to verify that what they are telling you is true. Be careful when visiting “scam” websites. You never know if the person posting is being genuine or if they are just a competitor. There are also a number of these websites that allow anyone to post anything about a company and won’t remove the post even if it is proven to be untrue. They charge businesses a membership fee to respond to the posts and offer real facts to prove the posts untrue. They are nothing more than a way to scam companies out of money. There are also official-sounding organizations who claim to protect consumers, but they really just take a short position in a company’s stock and bash that company hoping the stock price will go down so they will profit. Well-meaning friends or relatives may have strong opinions. If they are not living the lifestyle they dream of; then they are not the people you want to be taking advice from. Do your research, but be careful who you listen to.

Product, Need, and Marketplace

Demand-based pricing, unlike cost-based pricing, places firms in a better position to increase profits

Fads come and go, but if there is a need for what you are selling, you will always have a market. If you would not buy the product if you weren’t in the business, then most other people won’t either. You end up just selling a business opportunity. It’s a lot easier to market a product than an opportunity. If they need the product, they will still buy it even if they are not interested in the business.

Is there a market for the product? 

We constantly see and hear companies bragging about being part of a multi-billion dollar industry. That’s great for the industry, but if there are a hundred thousand companies in that industry, then you’ve got a lot of competition. Most of the products out there are “me too” products that people can get at the mall or at Walmart. Do you really want to compete with Walmart or lots of other people from lots of different companies? That leaves you having to convince people that your product is better or cheaper than what they are already using. If you are not a great salesperson, that can be difficult.

Is there value in the product? 

If the product doesn’t give people a greater benefit than what they pay for it, then you are once again in the convincing game. Suppose you come to us with a one hundred dollar product that gives us fifty dollars in value. We don’t even want to hear about it. If you come to us with a fifty-dollar product that gives us one hundred dollars in value, then we need to talk. There are a lot of products with an inflated price to cover the commissions paid.

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Compensation

How are commissions earned?

Commissions must be earned from the sale of a product or service. If you can simply recruit someone into the business and get paid a commission even if they don’t buy a product, then stay away. Also, be wary of companies who pay you a commission on marketing tools or websites purchased by your recruits.

How much will you get paid?

We all want to get paid and get paid well. Owning any type of business is full of headaches. If you are not getting paid well, those headaches aren’t worth it. We see a lot of companies out there that pay a two-dollar commission on a fifty-dollar product and require you to personally buy a lot of product to continue receiving commissions. Even if you only have to buy fifty dollars worth of product for a month, consider this. You will have to make twenty-five sales a month just to cover the cost of your product, which is typically more than you will use. Think of how many more sales do you need to recoup your initial investment to get started with the company and the marketing tools and training you will need to build your business.

You can be successful with these companies, but it will take a long time if you are not a super salesperson or super recruiter. Look for a company that allows you to earn a decent income upfront and on the backend without having to sell or personally buy tons of products. Cash flow is crucial for any business. Does the company pay daily, monthly, quarterly? Will they send you a check or direct deposit commissions into your checking account?

Timing

Timing is everything. A great idea at the wrong time won’t be successful. A bad idea at the right time won’t be successful (not very successful anyway). A great idea at a great time will be incredibly successful. If you get involved at the beginning of a trend, you make money even if you’re not very good. If you get involved at the end of a trend, you’ll spend money. Cell phones were a great business to get into in the eighties and early nineties, but everyone already has one now, and there is a lot of competition. The same is true with bottled water. Look for a company that has been around for a while but has a unique product.

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