Choosing Your Network Marketing Company

Network Marketing Business was one of the 6 types of part-time business that we have previously mentioned that could help you work your way towards your financial freedom. Some of the benefits of a network marketing business has already been covered in our previous posts, so today we examine the big question “Which is the right one for me?”

Risk more than others think is safe.


#1 Entry / Start-up Cost

Most network marketing companies would have a certain “start-up” cost to begin with, either requiring a person to purchase products or a license to sell the product. The model of this business is fine and fair, which is very much similar to how franchises work. Franchisees who like to purchase the brand, system and products of the business, can pay the price stated by the franchisor and thereafter the agreed terms will be delivered. Most of the times, franchisors will also require the franchisees to obey to certain rules as well as to submit a royalty fee or residual income back to the mother company on an annually basis.

With all that said, watch the amount ( which is the combined price products and ability to market the product) that you have to pay to begin with. One of the red flags that may indicate that a company might not be legitimate or might not be financially stable is super high start up costs. As a general rule of thumb start-up costs typically costs about USD $500.00 (or way lesser) and if it exceeds USD $1,000.00 – it’s about time to study further into details what business are you signing up for.

#2 Commission derivation

Find out if the commission is paid based on sales of products, or based on recruiting people. There is a stark difference between a legitimate network marketing company versus an illegal pyramid scheme. Most people think they know, but in truth, they can’t tell. Another red flag that might indicate this might not be the business that you should be looking into if you are paid based on recruiting people. Legitimate network marketing companies pays out commission based on the sales of the products or services. There are legitimate network marketing companies that outright declares that no commission will be paid out if you only recruit people.

#3 Pre-buys / Stock up inventory

Find out from the representatives and leaders if you are required to pre-purchase products or stock up on the inventory. Again, if required, dig further and ask the purpose of stocking up. Certain leaders or systems would mislead their teams and hence benefit from their purchase of products. Remember, if its a legitimate company led by unscrupulous leaders, they might imply the purchase of products in order to become a representative of the company.

Another disadvantage of stocking up inventory is that a certain amount of cash is locked up in them and that might affect your overall Cash Flow. While a brick and mortar business would operate very much in a similar manner, you, either as a budding entrepreneur or just someone who wants extra cash, might not have the capital to afford such cash flow. And that is the whole reason of getting involved with a low-cost network marketing company!

Steve Jobs on Entrepreneurship

#4 Industry, Products, Services

Find out the following:

  1. How big is the industry size?
  2. Who are the competitors?
  3. How long has the company been around globally and locally?
  4. Is the product / service lucrative?
  5. Is it a high demand product / service?
  6. Does the product / service offer real and tangible value to consumers?
  7. Are you personally passionate about the industry, product and service?

Let us elaborate and discuss further in depth for each question.

Any entrepreneur or business owner will always be interested in how large the industry size is. It gives a lot of insight about how lucrative the market might be. It also tells of the worst case scenario, and best case scenario. Assuming there is a certain percentage of success rate in anything that we do, the same statistics can be used and applied to outweigh which industry will be better for you as a person.

Next, as with any businesses, identify the competition. Study briefly at the very least and understand how they might affect your business. Likewise, if a network marketing company is in a huge market, highly competitive, yet extraordinary innovative and special, it might be a good opportunity to look further into. (Ask us which one we are very excited about.)

Knowing how long the company has been around globally and locally, and knowing which markets are opened can help you further determine your opportunity with that given platform. Most businesses fail in their first 5 years (Phase 1) and if it has passed the 10th year mark, it will generally be regarded as lower risk. Notice we mentioned “lower risk” not “no risk”. Also understand that any companies and businesses are vulnerable to closure without forewarning. Remember the global economic crisis a couple of years back that affected major financial companies in the world, and remember the news that stated big MNC having to lay-off thousands of workers overnight? These information and statistics are not exclusive to network marketing companies only, other businesses faces similar risks and statistics.

Question yourself and the people around you to find out if the product / service is lucrative and whether is there a high demand for it. Is it a “need to have” or “good to have”? What are the chances people will use it naturally? Humans are creatures of habits and emotions. If the product intends to alter a person’s habit, it might face certain challenges regarding the change of product usage. However, if the product or service offers real value to its consumers, and does not alter their habit, it might be one of the indicators that you are heading in the right direction.

Hint: Leverage on statistics report done by 3rd party research organization such as Euromonitor. Do your homework and understand the difference between facts and opinions.

Lastly, are you personally passionate about the product and service? Do you have that level of enthusiasm that you can’t wait to share with everyone and anyone about this amazing platform? Is it something that you can pull it off naturally without being fake? Network marketing business as it name suggests, leverage on your network. It is a relationship-based referral business. Be yourself, be genuine.

#5 Training, Support System, Culture

Now if you treat network marketing business similarly to a fast-food franchise chain, you will need to inspect the system that is backing up the business. More often than not, the training and support system plays a huge role in the running of your business. It helps make the business easily duplicable and simple to understand. Likewise, with a system in place, now 16 year old teens can cook in the kitchen and can manage the cash register in the fast food restaurant chain. Some fast food restaurant managers are as young as 18 years old! Find out how the training system differs from each company and that can skyrocket your business.

Remember – this is the gist and essence of network marketing business – it is a duplication business!

You don’t want to be the Superman on your team! You want to develop a team of empowered average Joes who can the same easy ABC steps, then duplicate it with their own teams. That way, you can truly achieve your dream lifestyle.

That makes the whole difference between a business owner and a self-employed.

Self employed loses money when they are not working on their business. Yet a business owner can take a 6 month vacation, twice a year, and his income will not dip but even possibly grow.

In Conclusion

Of course there are many more factors to help decide which company you should get involved with. These pointers will help develop a good start. See you at the top!

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