The question; How to research Network Marketing companies, should be something that is taught in school, unfortunately, it's not. Choosing the right company to work with is, THE most important decision you will make when entering the Network Marketing Industry. What we have done, is put together a 29 point criteria on how to research Network Marketing companies which will help guide you in this very important business decision.
Our goal with these principles is to give you a powerful analysis tool, and to help you find companies where the part-time Network Marketer has a reasonable chance at making net profit quickly, without expending a lot of their own money in the process. So the principles below are focused on the part-time person who is getting involved with a limited budget of both cash and time.
Our studies have shown us that your distribution network will have a very consistent makeup: 60 – 80% of the commissionable volume will be produced by consumers who just use your product, and part-time distributors who introduce the opportunity to a few people and then basically become consumers in disguise. Here's the problem: typically less than 1% of the people in the average Network Marketing company earn over 80% of the available commissions! It looks like a 3rd world economy model, and most Network Marketing compensation plans are structured to produce this result. But it doesn’t have to be this way as we have designed this screening tool to help you research Network Marketing companies where you truly have a good chance of making good money!
So if you would like to avoid a Network Marketing fiasco, and dramatically increase your odds of succeeding, research our screening points and apply them ruthlessly to every opportunity you are considering. And do it before you join!
The best Network Marketing companies retain customers by giving them a totally unique, consumable product that works and at a price they will be willing to pay long term. That's the key… in order to keep customers, we need to give them quality with value. There should be a track record of customer-only retention! Without solid customer retention, residual income is impossible.
The best Network Marketing companies retain their part-time distributors through a compensation plan that rewards them for their efforts quickly, without these people having to put up a lot of money to get started.
The key to Network Marketer retention is simple…they need to make net profit in the first 3 months. That means a commission check to pay for all the related expenses. Expenses like; long distance phone bills, product usage, inventory, sales aids, marketing and advertising, meetings, etc. Most Network Marketing companies make it way too difficult for the average person to make net profit, and as a result, most people will quit within a few short months.
If you apply the research principles listed below, you will be able to quickly identify businesses that are geared to solve this problem. As a result, you will reduce attrition and dramatically improve your probability for success.
Use this research tool to evaluate any Network Marketing company and you will cut major time off your learning curve by studying and applying the 29 principles. Once you agree with the basic concepts, why stay in a company that violates the principles when there are those that qualify on all points? Our studies have found only 5% – 7% of Network Marketing companies can pass all the screens.
- Do your due diligence
- Don't be “faked out” by hype
- Do not skip any of these steps
- Include your team in the decision making
- Once you choose, don't look back
How to Research Network Marketing Companies:
Financial and Corporate
1) Company is at least 3 years old (five years old is even better). 90% of all Network Marketing companies do not survive their 5th birthday. Investing your time and money in a young company is an enormous gamble. Would you invest your after tax dollars in a stock that had a 90% chance of failing? Don’t commit financial suicide. Find a company that is solid, stable, five years old or better and still GROWING.
2) Company is debt-free, or is well capitalized with a low debt/asset ratio. Debt is as bad for companies as it is for individuals. The greater the debt, the greater the risk of failure. Find a company with a track record of low debt or no debt.
3) Company has a history of consistent expansion and sales volume growth. If the company is not growing…something is wrong. Network Marketing is designed to grow! If it’s not growing it’s because people are leaving the company faster than new ones are coming in. Maybe it’s temporary, but maybe not. Buying stocks at the bottom (bottom feeding) is not recommended. Companies are usually at a bottom for a reason. The same is true when researching Network Marketing companies. Find one that is growing consistently each month.
4) Company is well capitalized and has the funding to sustain exponential growth (under-capitalization is the NUMBER ONE reason for failure in new Network Marketing companies). When companies grow fast they are forced to expand fast. This requires deep pockets for new buildings, new computers and new machinery to make more products faster. Be sure to find out about how well capitalized the company is. For private firms, your only chance is to ask the owners how they plan to finance their growth (or do they expect to have fast growth—a more important research question).
5) The company has a high credit rating from Standard and Poors, or Dun and Bradstreet. Their financial dealings are regularly reported and their credit worthiness is a matter of public record. This report is $45 and can be ordered from D&B at http://www.dunandbradstreet.com.
6) Company management team has a proven, successful track record, which is verifiable. Managing a Network Marketing company is a highly specialized skill. Find a management team that can show you a resume of success IN NETWORK MARKETING. Other corporate successes don’t apply here.
7) Company’s marketing is honest, truthful, and within regulatory guidelines when marketing the products and opportunity. Watch for any signs of deceptive or misleading statements during the sales process. Implied income claims, outrageous health claims, or implied cures. Regulations in MLM are very strict. Any company that violates these rules is at risk of a shutdown. Remember the old adage: if it sounds too good to be true, it probably is…
8) Management team is accountable to outside sources. (DSA, Board of Directors, Advisory Boards, Stockholders, etc.). It is critical that the corporate management team listens and responds to field leaders or other industry experts. Dictatorships run by narcissistic personality types are to be avoided. Also watch out for upline trainers who are megalomaniacs and master manipulators. If you start feeling intimidated, pressured, shamed or manipulated during the research process, that’s a clear sign to avoid the program.
9) Company is a member in good standing with the BBB, and committed to following all local, state and federal guidelines for operating a Network Marketing company. If you aren’t familiar with the codes, contact your Attorney General’s office for your state and ask them for the guidelines. While you have them on the phone, ask them for a list of blacklisted companies, or companies with complaints on file. See if the one you’re investigating is listed. Also check with the Better Business Bureau for complaints. Blogs can also be a good resource, but they can also be a marketing trap by an “expert” who is really looking to cross-recruit you, so take them with a grain of salt.
10) Company does not have an exclusivity clause in their contract. They must NOT have a history of distributor harassment or check-pulling. Distributors should be treated as independent contractors. They should be free to pursue as many opportunities as they desire without the threat of termination, loss of commissions, ostracism, or reprisal of any kind. Non-compete clauses for top leaders are dangerous. Do not sign them. The most important and legitimate rules involve honoring the integrity of the genealogy. Cross-recruiting, which is recruiting sideline members into other deals, or sponsoring downline members below your 2nd level into other programs, is wrong and the companies need to stop it. Technically, anybody below your 2nd level is off-limits to you for any other purpose other than to help them in the primary program. This is a fair and just rule. All other restrictions with regard to limiting your ability to engage in other opportunities or businesses should be viewed with a great deal of suspicion.
11) Company has a written, clearly defined code of ethics that it will enforce, even if it means terminating successful distributors who violate it. Call customer service and ask them if anybody in the company has ever been terminated for violating the rules. If not, beware…it may mean the top leaders are actually running the company and impervious to punishment for violating ethical codes of conduct. Many companies are intimidated by their top leaders because of fear of loss, if you hear of this going on, avoid the company.
12) Distributors are given direct access to the company owners. Where possible, we also like to see rank and file members given the opportunity to be involved in the “inner circle” meetings, the marketing committee meetings, etc. and giving them a legitimate opportunity to have an impact on the future direction of the company.
Products and Services
13) Company products and/or services are consumable. In order for distributors to generate residual income, products need to be consumable.
14) Company products and/or services have a unique and compelling story line that sets them apart from all other products available in the retail world. Network Marketing is about telling a TRUE and POWERFUL story.
15) Retail products and services are priced by the company at fair market value. Where possible, brand comparisons are made with local retail stores. Pricing needs to be at or below the best market price currently available through conventional distribution channels. Commodity products with wide-spread availability, such as long distance phone service, need to be offered at substantial savings for the program to qualify. Nutritional products should be compared with the closest equal that can be found at Wal-Mart, or your local health food stores. Unique products can carry a premium, but not more than 20-40% higher than the market equivalent.
16) Products and services are safe and in compliance with appropriate regulatory agencies…the more compliance, the better. In some cases, 3rd party lab validation of quality, purity and potency is an important factor. The endorsement of the products or services by reputable 3rd party industry experts adds further credibility. GMP (Good Manufacturing Practices) certifications are important for manufacturers.
17) All products and services are protected by a minimum 30-day money-back guarantee. Mitigate the risk for your customers and distributors.
18) The company shows a financial commitment to research and development. Their products are maintained on the cutting edge of science and technology. Make sure the company has a track record of releasing new products and/or enhancements. Ask them what the budget is for research and development.
19) Products and services deliver the results for which they are intended. Customer satisfaction is high. Strong product or service testimonials are prevalent throughout the distributor and customer base. Return rates are low, and retention of long-term customers is above the industry standard of 15%. Company does not make exaggerated claims, or hype their products in a manner that cannot be substantiated.
20) Company offers a no-cost, or very-low cost ($50 or less) entry fee to become a distributor. High cost entry fees take players out of the game, that could be stars.
21) The marketing plan should accelerate earnings for new members. Front end money is critical for retention. We are looking for plans which reward the part-time distributor with profit in the first few months, without penalizing the career income earner who is looking for a large income through depth.
22) Marketing plan obligations are completely fulfilled based on the personal consumption of the products or services. Large initial inventory purchases over $1,000, known as “front-loading”, or any monthly sales quota (or “maintenance”) which goes beyond the amount required for reasonable monthly consumption, are grounds for disqualification of the program.
23) The compensation plan is just as strong for the last man in. It’s as good an opportunity for the new members as it was for the first members enrolled. The opportunity is not a “short window”, where only those in at the beginning can succeed and become the top earners in a program. Standard Binaries are notorious for this problem. Every new member should have the real possibility of being able to pass their upline in earnings.
24) The marketing plan has a Net Payout of at least 42%, but not more than 52%. The average cost of doing business for a wholesaler or manufacturer is 17%. In addition to that, they will need another 10% for R&D, marketing updates, new product additions, expansion, growth into foreign markets and net profits for stockholders/owners. Therefore, any company that pays out more than 52% is jeopardizing their financial future. On the other hand, payouts below 42% (net) are giving too much to the company and not enough to the members. When calculating the payout percentage, average monthly “breakage” must be considered. Oftentimes, the more complicated a plan is, the more hidden breakage there is, and the lower the net payout.
25) Company has professional and courteous customer service and/or distributor relations departments on site. Network Marketers are family and the company needs to treat them like that (except for that ugly one; Uncle George).
26) Company commits significant resources for support systems like high-quality, professional sales aids, sales funnels, phone apps, CRM, lead generation tools, internet funnel pages, 24 hour recorded “sizzle” messages, opportunity calls, training calls, conferences, Regional events, etc. It's all about reducing those “Cycle Times” (see video for explanation).
27) Sales aids and marketing materials are reasonably priced. They should NOT be a profit center for the company, but offered at cost to distributors. Companies providing free sales aids or mailings get high marks.
28) Company must demonstrate that their priority is to the customer first. Network Marketing only works with a happy, loyal customer base. Look for companies who ship products quickly, have very few backorders, have a high level of quality control, and a track record of customer retention. Without customers, there can be no residual income.
29) A simple business building system involving regular events, is offered to new members. In today’s world, companies need to have tools that are as efficient as possible in terms of closing down cycle times. By far, having tools that are internet based, is what can cut cycle times down and create momentum needed to build a business. In addition to a duplicable online system, company should have; trainings, local events, conference calls, replicating websites, etc. Often the system is provided by upline groups and the company is not involved. In other cases, the company manages the business building system. Ideally, a company will have a fully duplicable sales system in place in which highly effective tools for presentations and training have been created, making the sales effort simple for new members. Either way, a simple systematic process is key for duplication, success and rapid growth of a network.
After writing this blog, we used this exact format to determine which company was the best MLM company to be part of and we landed on a winner…FuXion!
We hope that this blog on how to research Network Marketing companies has been valuable to you. Remember, this is the most important business decision you will make in this Industry, so don't take it lightly!
If you have any questions regarding Network Marketing research or consulting, give Ben Mueller a call at 866-992-5551.