Q: I'm thinking about joining an MLM opportunity. What should I look for in a legitimate company?

A: At the top of my list is a quality product or service. So here's what you should look for in a product or service:

Exciting. If you're personally excited by the products and use them yourself, your enthusiasm will be your best sales asset.

High quality. Your long-term residual income is based on the product's ability to deliver on its promise and maintain customer loyalty. You'll never have to make an apology for a high-quality product.

Fairly priced. MLM products don't usually win as the low-cost provider. However, high quality doesn't necessarily mean overpriced. Make sure you or your customers are comparing apples to apples when price-shopping the competition.

Lifecycle. Are you at the beginning phase of a new product with a viable and growing market demand?

Unique. If it's "another one just like the other one," you'd better look for a special marketing angle that separates this product from the pack.

Exclusivity. Be cautious if it's available through other channels of distribution such as retail stores, catalogs or other MLM companies.

Satisfaction guarantee. A company that doesn't stand behind its product will surely leave you embarrassed or potentially responsible to your customers.

Sales aids. Make sure the company has promotional literature that adequately supports product benefits and promotes retail sales.

Once you've found a product or service you can believe in, evaluate the company based on your personal needs and beliefs. Here's what to look for:

Support materials. Company literature should be easily understandable and provide a professional image to support your business activities.

Policies and procedures document. Read and understand what you can and can't do. These internal distributor regulations are designed to protect the integrity of the business and deal with the occasional renegade distributor who can ruin things for everyone. If the company offers no policies document, heed this as a red flag. This company either hasn't had good MLM legal advice or doesn't plan to stick around very long.

Corporate executives. They should be committed to quality and integrity, and have genuine concern for their distributors. If possible, interview them if possible, or at least talk to other successful distributors for their thoughts. Ask:

  • Does one or more have experience in MLM?
  • Are experts involved in areas of administration, financial management, distribution and commissioning software?
  • Has the company hired professional consultants to help in areas of weakness?

History. How long has the company been in business? How many countries does it operate in? How many distributors does it have? What are its gross yearly sales? Is it well-funded? If it's privately held, this information might not be readily available, but it's worth a try.

Compensation plan. Does it sound realistic in its promises? When something sounds too good to be true, it usually is. Was it designed by competent experienced MLM experts? Does it fit your needs for part-time income or a full-time career opportunity? Does the plan use time-tested and proven success concepts, or are you part of an experimental program? Look for proof of success of this concept as used by another MLM. Have your sponsor or a company official explain it to you in detail.

Philosophy. Does it fit your style and make you feel comfortable and proud to be part of the organization?

Sales and training meetings. Does the company or your upline offer regular support sessions or telephone training?

Commission software provider. Did a reputable company provide the software that will determine your bonuses? If new software has just been installed, it's not uncommon to see glitches for a period of time that can affect your anticipated income stream.

Communication. Look for good communication in the form of newsletters, voice-mail capabilities, national conference calls and a strong Web presence using all available communication technologies.

Protection. The only required investment should be a noncommissionable sales kit. All other investments should be optional. Beware of large inventory load enticements or offers to buy positions. In case things don't work out for you, make sure there's a buy-back policy on your unsold inventory.

Find out if the company belongs to its local Better Business Bureau. If you have access to a credit reporting service such as Dun & Bradstreet, check it out. Publicly traded companies can be investigated through online services.

You should also contact your industry associations for any input. While there are many fine companies that may not belong to industry associations, the associations are a good source of information. Call the Direct Selling Association at (202) 293-5760 or visit http://www.dsa.org. You can also contact the Multi-Level Marketing International Association at (949) 854-0484 or visit http://www.mlmia.com.

One important thing to keep in mind: If you're inexperienced, even selecting the right company won't assure your success. Choosing the right upline sponsor to support you can be equally important. Is there someone in your first three upline levels who has had substantial success and can show you the way? This can be your shortcut to accelerated growth and my strongest recommendation for gaining early momentum.

Michael L. Sheffield is the co-founder and chairman of the Multi-Level Marketing International Association (MLMIA). This organization represents network marketing companies, distributors and industry suppliers worldwide.


The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.