MLM Due Diligence

April 4th, 2009 | by Chris |

Doing you due diligence when you are planning to join an MLM opportunity is something that can save you from a lot of troubles and wasted time and money in the future and you shouldn’t take that subject lightly. Not few people joined the wrong multilevel marketing company only to see it down the road closing and losing their investment in time and money. Or sometimes they find themselves with a product that nobody wants and there is no market for it. Many times they may also end with an opportunity that don’t give them the potential to reach a higher level in their income or its pay plan severely limits their potential.

Of course there are also many scams out there that someone should also avoid. Many opportunities that are operating on the Internet are only a website and email account without any physical address and no information about the owners. You need to avoid such situations as obviously there is no future and potential if you join such a company.

MLM Due Diligence Tips by By Marc Menninger

You’ve decided that the time is right to invest some of your sweat and treasure into an MLM enterprise. You’re excited about the possibilities and you’re tempted to jump into any network marketing company that sounds half-way decent.

As with any business venture, though, a little due diligence and some pointed questions are in order before you charge forward. You need to ask some key questions such as: How established is the MLM company? Do they occupy an actual building or is the company being run out of someone’s garage? Do they have a real phone number with live operators at the end of it? Is their product or concept “bleeding edge” or a proven seller? You get the picture.

Let’s explore seven areas that you need to research before taking the plunge with a network marketing company.

Legitimacy

Many MLM’s are short-lived, either by design or mismanagement. Your first order of business is to weed out the “Ponzi” or pyramid schemes posing as MLM’s. Is the MLM company pushing you to sign people up for a fee more than encouraging you to sell product? If so, stay away. Are they asking you to buy more product than you can sell? This is known as “front-loading” and it’s a sign that the MLM company isn’t looking out for your best interests. The general rule here is, if an MLM company is making promises which sound too good, and if you’re being pressured to grow your downline very quickly, it’s probably a scam. Toss these “opportunities” into the round file where they belong.

Stability

Now separate the solid MLM opportunities from the riskier ones. As with any business enterprise, you want to deal with established companies selling proven product lines. First learn whether the company is “real”. These companies are housed in an actual building with an address and a telephone number. Believe it or not, tons of MLM’s operate with only a website and email address.

Management

It’s important also to find out who manages the company, and what the track record of these individuals are. A reputable MLM will be anxious to share this information with you; it reflects well on them if their management is honest and successful.

Mexico City street
Photo by jrsnchzhrs

References

Many people know what a “shill” is, but in case you don’t, it’s a person who sings the praises of a product or company to new prospects at the company’s direction. They’re planted to make the company sound good. Be cautious of testimonials that fall into this category. A wise and reasonable request to make of an MLM is that they provide you with contact information for successful distributors who are not in their line-up of testimonials. Not only does this increase your odds of hearing the unvarnished truth, it will give you a list of mentors–people who know the ropes when dealing with the company’s products and procedures.

Income Potential

What is the realistic upside of a network marketing company’s product line? You can partially determine this by evaluating a legitimate MLM’s business plan for their distributors. These companies will clearly outline the potential for your business and back the claims up. Use common sense when evaluating this. Ask yourself if it feels right.

It’s also handy to discuss this with the contacts discussed earlier. Ask them how close their real sales are to the potential claimed by the MLM company.

Entry Costs

No worthwhile opportunity is free. While some MLM companies require an initial investment, others do not. Still, you will likely incur costs to market and advertise. In addition, you may have to pay subscription fees or other extra costs. Be sure you have a clear picture of these costs ahead of time.

Control

Be sure you maintain control of your business. Many network marketing companies have very restrictive rules that distributors need to follow. Look out for MLM companies that won’t let you join other network marketing companies at the same time. If you plan on doing any marketing online you’ll be surprised at the rules most network marketing companies make you follow. Get your hands on the distributor’s policies and rules BEFORE you join and read it cover to cover. Then decide if their rules are acceptable to you.

These seven areas are by no means the only things you need to look into when researching your network marketing opportunity–but they’re a good start. Doing your research into the company you plan to align yourself with BEFORE you get involved will potentially save you a lot of time, money and heartache. Skip your due diligence and you’ll probably regret it!

Marc Menninger is a professional networker. He runs the website Nutrition MLM, http://www.NutritionMLM.com/

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