My goal is to breakdown how I evaluate network marketing companies to increase my odds of success in a business opportunity.
#1 I look at how many years they have been in business. I prefer long standing companies for me it provides a sense of security. So this is a pure opinion standpoint you do not have to follow it. I would say any company that has about 15 years or longer would qualify. Keep reading because there is more that goes into this other than time in business.
#2 I look at the opportunity and the timing based on the current environment I am in. Timing in business is critical. Think of supply and demand when investing in stocks or real estate. If you are a buyer it is nice to buy when there is low demand. If you are a seller it is nice to sell when there is high demand. In network marketing I look at the products and services that are over saturated vs products and services that are underrated in the marketplace.
#3 I look at the compensation plan and determine whether or not I can succeed in the business without recruiting people in the company. This is something nobody discusses on both ends. The anti MLM people and the pro MLM people. I have never met anyone that explains their compensation plan and say you can succeed in this business without recruiting. Most If not all network marketing companies push recruiting more than anything.
This is why in my opinion so many people fail in Network Marketing because most people are not skilled in sales yet along recruiting that is whole another level from pure sales. Sales Is a lot easier than recruiting in my opinion because you have to sell the product and the vision of the company when you are recruiting people.
So when you are looking at any compensation plan in a network marketing company or being presented with a compensation plan ask them very directly “Can I succeed financially in this business without recruiting?” You might stun most network marketers you encounter with that one question. You also want to ask yourself what does it mean to you to succeed financially. You need to determine what that number is. For me personally when I am looking at the compensation plan I want to see if I can create a 6 figure or multiple 6 figure income without recruiting over a period of about 3-5 years. For simple math if it takes 1,000 customers to make $100,000 then each customer commission is $100 per sale. From there I evaluate the time effort required to acquire one customer. I also look at the cost to obtain one customer. Customer Acquisition cost I believe is the proper term for this forgive if I am incorrect. If it costs $15 to acquire each customer then your cost per thousand people is $15,000 you net $85,000 after costs in your business. You then need to minus taxes and inflation to see what you net profit is going to be. Let’s say taxes and inflation combined is 40%. $100k-$40k-$15k- living costs say 33%(33k)=12k in profit. 12% profit per 100k in revenue. You can see how quickly the money dwindles when you start running numbers. As you know I love to run numbers because it removes the emotion and hype from the network marketers trying to sell me the product and vision of the company.
Let me give you another example. Let’s say it takes 350 customers to earn a $100k then the average commission payout per customer is roughly $285. Let’s also say that the cost to acquire each customer is $15 so the same as the first example. Let’s do the math $100k- Customer Acquisition costs $5,250 – Taxes + Inflation $40k – living costs $33k = $21,750 profit. That is roughly 21-22% profit per 100k earned.
#4 Quality of the Product
Once you evaluate the compensation plan and the previous steps, before joining the business I would use or test the product out to determine the quality of the product. When you decide to become a salesperson it would be very wise and in your best interest to use and fully understand the product you will be promoting. For me personally it makes the conversation that much easier. I am able to close the prospect that much faster. I am able to determine whether or not the product is a right fit for the prospect I am talking to. So test the quality of the product.
#5 Do Market Research and Find the Competitors
This helps you provide transparency and added authenticity when you understand the market in terms of pricing on your products compared to the competitors. Your clients will appreciate you when you do the work for them in terms of showing them the alternative options that compare to the product you are selling.
#6 Residual Income
This is one of the most attractive things about network marketing is being paid over and over again for the same customers you acquired one time. In addition to evaluating the compensation plan just like you asked can I succeed without recruiting you are also going to ask can I receive residual payouts without recruiting. If the answer is yes to both then you have found a rare network marketing company that compensates people that just sell product and not recruit. Most network marketing companies only support those who recruit so what ends up happening is the product becomes of less value. At that point all we are selling is the vision of the company not the actual product and changing peoples lives with the product. I believe in taking care of the client and then the people in the company will reap the benefits of having happy paying customers. If there are no customers then you just have a bunch of people in a business and the only customers are those in the business. That just doesn’t make sense to me. Coming back to residual payouts, this occurs after you have a customer for over a year typically. The better you are at retaining customers the higher your residual payouts will be year to year. Residual payouts is powerful overtime because to earn the same 100k per 350 people will require less customers. So let’s do some more math and say the in the first 3-5 years you acquire 350 customers and earn around or above $100k. Let’s say the residual payout for retaining those same 350 ppl for additional year pays $25k. That is roughly $71-$72 per customer. That removes the need to acquire more clients by 25% to earn the same $100k. What that means is instead of acquiring another 350 customers now I only need to acquire about 260-265 new clients and that number can reduce year to year. Now if you are a high performing person then none of what I am saying matters because you are going to dominate the market by acquiring new customers every year. For me personally I am very strategic with my customers because I focus on client retention not number of clients. Over a 10-15 year period being very conservative by the way acquiring a total of 1,000-1,500 customers which is roughly a 100 new customers every year. The residual payouts alone could reach over $100k. It is kind of like paying an index or stock and receiving dividends. That is what network marketing companies offer.
I know this was a lot of information I have an entire playlist on my channel that breaks down networking marketing in a very transparent way giving you a lot of information before you invest in a business opportunity. I am personally involved in two network marketing companies that meet my criteria. Those two companies are LegalShield and United Financial Freedom. You can gather a lot of information before joining a business so don’t let anyone hide information from you because it is available you just have to find people who are open, honest, and transparent.
God Bless, talk soon