Multi-Level Marketing

Do your homework before jumping into multi-level marketing

By Judy Artunian, Freelance Writer

Multi-level marketing (also called network marketing) is an industry—and a business model—with an image problem. And with good reason. The industry has been plagued by unscrupulous yet persuasive folks who talk the uninitiated into what amounts to a pyramid scheme. But there are honest, legitimate multi-level marketing companies. They recruit distributors who, after making a small investment, earn commissions from selling products or services to consumers. The distributors also get commissions from sales made by other distributors they have recruited. Illegal multi-level marketers pay distributors commissions just for recruiting other distributors. There is little emphasis on selling products or services to consumers because the owners make money by selling to the distributors. These disreputable companies often add to their coffers by charging new distributors for training programs, sales literature and other sales aids. Before investing in a multi-level marketing company:

Call the Better Business Bureau and other industry watchdogs to find out if complaints about the company have been filed.
Ask distributors who work with the company how much of their income derives from consumer sales vs. signing up new distributors. If the company seems to be focused more on recruiting distributors, look elsewhere.
Consider whether there is a strong demand for the product or service you’ll be selling.
Get a complete accounting of how much you’ll need to invest up-front.

Learn the business

Like any industry, multi-level marketing has its share of operational complexities that can trip up newcomers.
Try: Join the Multi-Level Marketing International Association (MLMIA) and get insights and tips from experienced multi-level marketers. You don’t have to be a member of MLMIA to post a resume and look for job opportunities in the organization’s job bank. Request attorney Jeff Babener’s free guide to starting a multi-level marketing business.

Is the company legal and legit?

Just because a multi-level marketing firm has been operating for years, that doesn’t mean it’s reputable. Do some investigating before you get involved.
Try: Find out if the Better Business Bureau and your state Attorney General’s office have received complaints about the company. It’s a sign of legitimacy if the company is a member of the Direct Marketing Association. The U.S. Federal Trade Commission provides more tips for evaluating a multi-level marketing company’s credibility.

Networking for customers and distributors

Look for prospective customers and distributors among your circle of friends, colleagues and others you know. But don’t stop there.
Try: Read the American Marketing Association’s tips on networking to create leads. Some multi-level marketers swear by attraction marketing, a strategy that encourages prospects to come to you rather than the other way around. Check out Magnetic Sponsoring. Keep track of your contacts with a contact management program such as ACT.

Streamline your operations

If you’re running a multi-level marketing business, let software help you get organized and reduce your paperwork.
Try: Your Solutions.net and Visual Flex give you tools to process transactions, create self-replicating Web sites and more. SkyMarx Solutions provides custom software for membership-based businesses.