Understanding the Business Multi-Level Marketing, or MLM

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There are many companies in the global marketplace that sell their products through network marketing. Independent, non-salaried, distributors sell the products the company produces or the services it provides. These distributors are awarded commissions based on the volume of the product or services they themselves sell. In the terminology used by most, this is referred to as Direct Sales.

In some network marketing companies the distributors also receive commissions from the volume of products or services sold by those they have recruited into the business, or their ‘Downlines’. This is what is generally known as Multi-Level Marketing, or MLM.

MLM is a Legitimate Business Model

Some ill-informed people and government agencies confuse legitimate MLM companies with illegal ponzi schemes. In the latter, the entry fees of new members are used to pay the commissions of older members, with no real customers and often no real products. These ponzi schemes are sometimes inappropriately referred to as pyramid selling schemes, when in fact most legitimate corporations in the world are set up like pyramids, with the CEO at the top and ‘the masses’ at the bottom. Ponzi schemes all eventually fail when the input of new entrants dries up and there are no funds to pay the older members. Legitimate Network Marketing or Multi-Level Marketing companies are NOT ponzi schemes! They are companies that choose to spend their marketing budgets paying commissions to independent distributors instead of to advertising companies.

Why Choose MLM?

The MLM business model is very often chosen by those who want to start their own home-based business. There are several reasons for this:

. Start-up time is very fast. Usually one can make a decision and be in business in a matter of minutes.

. Start-up costs are very low compared to a conventional, or ‘bricks and mortar’, business.

. There is usually no need to carry inventory or ship products. The parent company looks after these details.

. The parent company usually provides a marketing strategy and marketing tools, as well as training and support.

. There are an almost endless variety of products being sold through MLM, so most people coming into the business can find something that suits their needs and personality.

Which MLM Company Should you Choose?

If you choose the MLM business model, and then choose the right company to deal with, there is almost unlimited potential for income. But the key to success is in choosing the right company. Here are some things to look for in your research:

. Financial Stability – how long have they been around, are they successful, etc

. Are they in a growth stage? (more potential for high income for you)

. Are their products in high demand?

. Are their products consumable? (one sale turns into many commission checks as customers re-order)

. Compensation Plan – Will you make both short-term and residual income?

. Can you market the business online?

A word of caution! Do not get caught up in the hype sometimes associated with the recruiting methods of independent MLM distributors. Many people have been burned when they succumb to exaggerated claims. Make sure you do your research and choose the right company.

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