Visit MLMLegal.com for more information on pyramid schemes and access to books, brochures and videos with all the information you need to know about the direct selling industry.
If you’ve decided that you’re right for network marketing, and that network marketing is right for you then it’s time to go out and find the best MLM company to join. Or, if you’ve already signed up with one, it’s time to make sure it’s worthy of your time and effort.
Choosing the right company is not a matter to take lightly. Due diligence will pay off. Being knowledgeable about the company you represent will help you to determine whether or not you want to join the company. Direct selling can bring you added financial security and many new friendships, but it’s important to be sure that you’re part of a legitimate opportunity.
If you are searching for a direct selling company to join, which you’ll be introducing to your friends and family, your credibility will be on the line. You want to make sure you are representing a company with credibility and with products that stand on their own in the marketplace.
Here are some questions you should be able to answer with a “yes” for any company you’re seriously considering. Think of these as nine preliminary steps in your selection process:
1. Check the Product and Price
• Does the company offer a high-quality product for which there is a strong demand in the real-world marketplace?
• Is the product fairly priced, and priced competitively with similar products?
• Can the product be demonstrated (such as at a home party), and does it stand out when you show it to your friends?
• Is the product proprietary to the company, and available only through its distributors? (Ever notice how you can’t buy Avon products in stores or Shaklee vitamins at pharmacies?)
• Are the products backed up with a customer satisfaction guarantee?
• Is post-sales service or customer assistance available?
• Do the people who participate in the program buy the product enthusiastically based on its own merits, even if they don’t participate in the compensation program?
2. Investment Requirement
• Can you participate in the company’s program without having to make any investment other than purchasing a reasonably-priced sales kit or demonstration materials sold at company cost?
3. Purchase and Inventory Requirements
• Can you become a distributor or consultant without having to fulfill a “minimum purchase requirement” or “inventory requirement?” (When you are pitched to purchase thousands of dollars of inventory at the very beginning run fast in the opposite direction.)
• Does the company’s compensation plan discourage “inventory loading” or “front loading?” (This is a dubious feature that should be avoided. However, there may be activity level requirements – rules requiring that you maintain a basic minimum level of personal purchase volume or sales in order to keep your distributor status.)
4. Sales Commissions
• Are sales commissions paid only on actual products or services sold through distributors in the network to the end user or ultimate consumer? (This means that products don’t end up in basements and closets – they are used, because they have genuine value.)
• Does the compensation plan avoid paying commissions or bonuses for the mere act of sponsoring or recruiting? (If the company pays “headhunting fees” then it is illegal.)
5. Buy-Back Policy
• Will the company buy back inventory and sales kit materials from distributors who cancel their participation in the program, as long as these items are in resalable condition? (This policy is required in states which have adopted multilevel distribution statutes.)
6. Retail Sales
• Is there an emphasis on actual retail sales to end consumers – that is, to people who are not participating in the distribution program, i.e. customers?
• Can the company demonstrate efforts to market products to the ultimate consumer/customer?
• Do the company’s distributors have ongoing retailing requirements to qualify for commissions?
7. Distributor Activity
• Are distributors in the company required to actively participate in the development and management of their networks? (Many of the MLM statutes require that distributors perform bona fide, supervisory, distributing, selling, or soliciting functions in moving product to the ultimate consumer.)
8. Earnings Representations
• Do the company’s literature and training materials scrupulously avoid claims of income potential that is, promises of specific income levels other than demonstrations of verifiable income levels for common achievement levels within its program? In other words, does the company offer hyped earnings claims? (The Federal Trade Commission, attorneys general, and postal inspectors all have their eyes on the matter of earnings representations. The acceptable approach emerging is that there should be no earnings representations unless they are based on a verifiable track record of the average earnings of distributors. For instance, a company should have statistics to show the percentage of active distributors and the average earnings of active distributors.)
9. Training Programs
• Does the company offer its consultants solid training opportunities in sales and recruitment?
• Are different levels of training offered to match the increasing levels of experience and responsibilities of distributors?
If you were able to answer “yes” to the foregoing questions, consider that company to be a prime candidate. But remember, these are just guidelines. Determining a company’s credibility isn’t black and white. There is still much more research you can do before you sign up with any direct selling company.
And don’t forget to visit the rest of mlmlegal.com and mlmattorney.com for limitless information about the direct selling, network marketing, MLM, and party plan industries.
Find us on our social networks:
Our next Starting and Running the Successful MLM Company Conference takes place October 24th & 25th, 2013 in Las Vegas. Call Charity before September 1st to receive a discount! 503-226-6600 or 800-231-2162.