On the Level

Fiding a Valid MLM

Network marketing may be easier now that the Internet provides so many business-building tools, but is it right for you? That depends on your personality. MLM companies are different from each other in many ways, but they all involve either selling products or services to people you know or finding new prospects. If you find these concepts distasteful, don't bother investigating further. On the other hand, many distributors contend that the recruiting part is just like recommending a favorite movie or restaurant. Here are some questions to consider:

Is it a legitimate business or a pyramid scheme? Pyramids and ponzi schemes have each newcomer give a pile of money to someone higher up in the structure, then recruit others to do the same. Eventually, everyone involved is supposed to reach the payoff level and get rich-but there are only so many suckers in the world, and eventually the pyramid collapses. These schemes are illegal. Legitimate network marketing companies require a low initial investment and very little risk. Income is based on retail sales, not how many people you recruit.

Do you like the products? Would you buy them?

Does this company emphasize sales or recruiting? Some companies focus on presenting the products, letting interested customers ask about career opportunities. Others focus more on the money you can make by recruiting more distributors. Some companies ask you to buy a lot of products for your own use rather than sell them to others. Be sure you're comfortable with the expectations.

Party plan, person-to-person or opportunity meeting? Are you more comfortable demonstrating products to groups of people, doing in-home trials one on one, recommending products from a catalog or taking people to opportunity meetings?

What's the compensation plan? Do you have to recruit a certain number of people before you can start earning money? Does your unit "break away" at a certain level? Are people paid directly?

How good is the company itself? Make sure it's adequately capitalized, has a track record of at least two years, and has a computer system that can track sales and make sure everyone gets paid. Check out the Web site and which sales tools you'd have at your disposal. Make sure that there's a strong service department to deliver merchandise promptly and that you can get a refund on unsold merchandise.

New Attitude

Love the idea of network marketing but hate the idea of selling skin cream? Two old-time network marketing companies have launched Internet subsidiaries that are attracting a new demographic: young, tech-savvy entrepreneurs eager to make their fortunes from the Internet.

  • Last September, Amway Corp., the granddaddy of network marketing companies, launched a separate e-commerce site called Quixtar Inc. Both companies are based in Michigan, and both attract distributors through opportunity meetings that promise financial freedom to those willing to buy most of their household goods through the company and persuade others to do the same. But while Amway relies on catalogs, Quixtar provides an interactive Internet portal with a wide range of company products plus links to roughly 100 "partner" e-tailers.
  • Meanwhile, Nu Skin Enterprises Inc. of Provo, Utah, which has built a global MLM company with its personal care and nutritional products, has launched a network marketing company called Big Planet Inc. The primary product is an Internet access device called the iPhone, a telephone and Internet device in one that provides customers with Internet access at the touch of its screen-but always through Big Planet's portal, which sells a wide range of other technological equipment. "Of every 10 presentations, six adopt it," says Scott Schwerdt, COO of Big Planet. "Most people keep it in their kitchen."

Jane Easter Bahls writes freelance magazine articles from her home in Columbus, Ohio.

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This article was originally published in the July 2000 print edition of Entrepreneur with the headline: On the Level.

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