As you are searching for a home based business, you will find multiple level marketing is a common platform for many of these business opportunities. This may cause you some concerns as this business model is often greatly misunderstood. It is my hope to show you some of the reasons you may want to consider MLM business model, so that you can make an informed decision.
The multi level marketing business model has been around for the past 60+ years. Many household names use this business structure for the retail distribution of their products. Some of these names include: Avon, Mary Kay, Tupperware, Fuller Brush and Watkins Products to name a few. At its core, MLM is a direct selling approach to retail sales. Direct selling simply means that sales are made outside of a traditional retail store setting. Sales are generally accomplished through independent business owners called distributors, representatives or consultants. This business structure provide an incredible opportunity for an individual looking to build a profitable home based business.
The first advantage of a multiple level marketing business is the low start up cost. When you join as an MLM distributor, you are essentially starting a “micro-franchise.” Most network marketing companies offer a start up cost of less than $200 and some are even free to join. When you consider that most traditional business franchises begin at $250,000 and go up from there, the low start up of a multi level marketing business becomes very attractive.
The next advantage of a multi level marketing business is the low cost of operation that is generally associated with this business model. In most network marketing businesses there are no inventory requirements. Product is shipped directly to the consumer from the manufacturer. Additionally, most companies are set up to take customer orders online, directly from the customer. These orders are placed through a coded website that allows the sale to be tracked to an individual distributor. This means that all billing and cash handling is performed by the company and the bookkeeping and accounting burden is removed from the small business owner. At the end of the sales cycle, which is typically on a monthly basis, a commission check is issued to the distributor for the previous month’s sales.
Another advantage of the the network marketing business model is the ability to build a sales team of your own. In a multiple level marketing company, you are encouraged to recruit and train other distributors, who then become a part of your sales force. You are compensated through overrides and bonuses on the sales production of your team members. A tiered compensation approach is common in most sales oriented businesses. The difference in MLM is the depth from which you are allowed to include sales production and draw overrides. Often times the depth of override compensation is allowed through 7 or 8 generational levels of distributors. The leverage on the production of others creates high earnings potential for the distributor who takes their business seriously.
These are just a few advantages found in an MLM business, but it is also necessary to address the primary drawback as well. A multi level marketing business is a business and it must be treated as such. When a home business owner doesn’t treat their business correctly, they will be very disappointed. Because of the low entry threshold, many people enter their MLM businesses with a hobbyist mentality. They lack the commitment that is necessary to make their business successful. If a home business owner is going to succeed they must make a commitment to invest time, energy and resources into their business, as would be the case with any other model of business. If you are unwilling to make a long term commitment to your network marketing business, you should not consider undertaking a home based business of this type.