MLM Companies: Why Do Most MLM Companies Fail?

This is one of the questions I’ve often asked myself about the MLM industry. After all, MLMers always talk about how easy it is, and how “it’s a ground floor opportunity!”

So why is it that about 97% of MLM companies fail? There are tens of thousands of people that get involved in MLM/network marketing on a yearly basis. Some join because of the product, as they are told that it is going to be “the next breakthrough product”, one that has “never been seen in the industry”.

Some are taken in by the lure of “making big money with this revolutionary pay plan”. In most cases, these people have never been given a way of evaluating these companies to see if they are actually “worthy” of us to promote. The truth is that MOST MLM companies fail after 5 years for a reason!

There are 12 Success Factors that NEED to be in place for a home based business opportunity to be legitimate, lucrative, and secure. Here they are:

  1. COMPANY TRACK RECORD – Most companies fail within the first 5 years. Stay away from companies that profess “Ground Floor Opportunity” – Consistent Growth is more important than getting into a start-up if you want low risk and steady solid income
  2. FINANCIALLY SOUND – Look before you Leap. Check their financials. If they are a subset of another company find out the subsidiary’s financials or you could be spun off as unprofitable by the parent company
  3. STRONG MANAGEMENT – What is their background? Are they former MLMer’s? Many are. Many own downlines and know they have a short window to earn millions. They often make decisions to make themselves wealthy at the expense of the people.
  4. UNIQUE CONSUMABLE PRODUCTS – Do you have to establish need? Are they products or services everyone buys already? Are they a commodity that anyone can get anywhere with no differentiation? (such as gas and electric) Or are they unique to create a customer loyalty and yet necessities for residual income.
  5. COMPETITIVELY PRICED – Even if a product or products are fantastic, if they are overpriced and don’t offer value (quality + good pricing) no one will buy for long, thus little to no solid steady income.
  6. HIGH REORDER RATE – Only repeat purchases will create residual income, so you do not have to constantly go back to the same customer over and over; they will shop often themselves, thus more reliable, consistent income.
  7. LOW PERSONAL PRODUCTION REQUIREMENT – Many home businesses require some purchase of inventory or monthly auto ship of hundreds of dollars per month to receive a check. Some even have “volume checking phone lines” which hurt people. Ask about these practices. You should not have to buy more than you can easily consume yourself to familiarize you with the products or service. Otherwise, who will be your customer????
  8. LOW ENTRY FEE – $10 to $50 is reasonable for opening your on line store. Anything more than that is unnecessary. It should be fully refundable if you change your mind for 30 to 90 days.
  9. LOW ATTRITION – Will your business be based on only signing up business people? (Sounds like a pyramid!) Or can you make money if customers purchase without having to retail, deliver or collect money? What is the attrition rate? Most MLMs attrition rate is 90%!! What is the percentage of customers vs business people? What is driving the revenue? Is it product consumption? Or business people loading up with inventory?
  10. TIMING – Is the product or service something timely? Is the company growing? For example, healthy, green items, are in demand! Expensive juices are not…
  11. NO BREAKAWAYS – If you help to develop a new business person and they do better than you, what happens? Are they taken away? Many “binary” plans for example go against basic business principals forcing the rewarding of the non producer. Does the compensation plan strive to help others succeed? Is it a win win? Does it reward success, and productivity? Or does it penalize the person.
  12. NO RISK– Is this program something anyone can do? Can your Mom, your plumber and the busy professional get ahead on a part time effort? Are purchases fully refundable? For you and your customers?

Finally when looking with these criteria, think this very important question:

Which of these criteria would you be willing to do without and still throw your time, energy or even reputation into it?

The answer is of course, NONE!




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