Choosing the Best Network Marketing Company to Join

Network Marketing (aka; MLM, Direct Selling, or Home Business) is a great way to create an extra stream of income for the family or a primary stream of income that, over time, can turn into wealth for you and your family. Notice that I said “over time,” meaning that you keep your day job until your residual streams are 150% of your income from your job.

Network Marketing is a legitimate business that takes as much hard work as any business, but is different than a traditional business model because you usually have a low investment to start the MLM business and the main form of income is residual income, the Holy Grail of all income!

The most important part of starting a network marketing profession is choosing the best company to join. The following MLM due diligence steps will help you determine if the company you are looking at will provide an environment where MLM success will not elude you. Without the majority of these attributes in place, your chances of finding true financial freedom are slim.

Company traits

How old is the MLM company? You need to have a company that is stable in the industry. If you don’t, you increase the chances of joining a MLM company that will fail.

-The survival rate of a company that’s less than a year old is less than 10%.

-The survival rate of a company that’s one to two years old is 30%.

-The survival rate of a company that’s two to three years old is 50%.

-The survival rate of a company that’s older than three years is more than 70%.

Part of the MLM success equation is how fast the company is growing; is this a new company built on hype or an older one that is financially stable that has a new system putting the MLM into massive momentum?

Do the company owners/officers have experience in network marketing company management? The best combination for a successful MLM is a businessman and a good network marketer. As a word of caution, never go with a company with more than two partners because few survive. Do your MLM due diligence on top management including background and financial checks.

An old saying for the MLM Industry is; “you can change the products, you can change the pay plan – but you can’t change the owner!” It proves true over and over.

Does the company have adequate funding to survive? Lack of funding, even during explosive MLM growth, is the biggest killer of network marketing companies that are under three years old. The biggest fib that new companies tell is that they are well capitalized which leads people to a false sense of security when joining the MLM.

Does the company give you adequate support? Are checks paid promptly on time? Is there a good system for correcting errors? Does customer support provide timely support for questions or problems?

Are products shipped promptly without delays? Delays in shipping may indicate financial problems. Does customer support promptly assist with errors in fulfillment or shipping?

Can you order products quickly and easily by cost-free phone, fax, or Internet? Can your customers order directly using the same simple methods? Can you and your customers easily get products automatically each month by setting up an “autoship” program?

What are the products or services? Is the product or service competitively priced? Would you buy the product (or service) if there wasn’t an income opportunity attached to it? This is an indication of a pyramid scheme; money generated from the opportunity and not from the product (or service) is the focus of sales.

A simple question to ask is, “If all recruiting stopped tomorrow would I still be able to make money and would the company still be in business?”

Is the product (or service) consumable? The reason nutritionals and skin care are so popular is that they are consumed on a monthly basis. This monthly usage provides a solid basis for a stable monthly residual income. Is the product (or service) patented, or exclusive to your company? Do the products meet the needs of a major trend such as Baby Boomers wanting to stay young?

Do you like the products (or services)? Can you become excited or passionate about them? A belief system in your products (or service) helps you share them with enthusiasm. Could you truthfully give a testimonial about their effectiveness? These are major factors for long term success in network marketing.

Do the products have a money back guarantee of satisfaction? Do they contain high quality ingredients? Is the product (or service) easily demonstrated? Are there samples available? Is there a product video? Is the product’s packaging attractive?

Last, but probably first, the product also needs to be of high quality and is not something that is easily substituted. For example, if you are in an MLM that sells cell phones for example, there is a lot of pricing pressure on the cost of the phone because there are so many substitutes on the market. If there is a ton of pricing pressure, there is no way that a company can build in enough of a margin on the product to pay its business partners well enough. If the product is unique and very effective, the market will pay a premium therefore allowing for enough margin for the company to pay a person well enough to continue building their MLM business.

What industry is the company in? There are a lot of MLM companies that are in industries where there is a ton of pricing pressure as mentioned above. Some of these include; telecommunications, travel, legal, and others that provide a MLM structure around a product but have barely any margin to work with. You have almost no chance of becoming wealthy with products like this.

As a variable in the MLM success equation we need to consider those companies that have unique products. Not only do they need to be unique, but also VERY effective in what their intended use is. This way, because the products are doing something for someone that is not found anywhere else, the company can build a margin into the product in order to pay out well enough to distributors of those products.

Does the company claim a “get rich quick” type of atmosphere? RARELY does a person become wealthy in a short amount of time in network marketing. These types of claims are what drives people away from the network marketing industry. Therefore, you need to find a company that is realistic and supports people for long term growth.

Are the company’s policies and procedures available for all to see? This is one of those very important MLM due diligence steps when trying to find the best network marketing company to join. What is the overall theme of the P&P’s? Are they for or against the distributors? Make sure you read through them before joining any network marketing company.

Does the company support the “part time distributor”? 99% of all people that join the network marketing profession do it on a part time basis (5-10 hours per week). Therefore, finding a good network marketing company means that they do not enforce quotas (covered below) and treat all distributors equally.

What is the company’s relationship with the Better Business Bureau and the Direct Selling Association? Does the company have a good rating with the BBB? Are there any major complaints with the company?

The Direct Selling Association is a “3^rd party policing agent” of the Network Marketing Industry ensuring that MLM companies are; legitimate, ethical, pay fairly, and are not pyramid schemes. Accordingly, is the company that you are looking at a member of the D.S.A.?

How much is the investment to start with the company and what is the return policy? In our economic conditions today, we cannot expect people to have a huge layout of cash to get into a home business. Times are tight enough and to ask for a “membership” fee, along with product purchases being in the neighborhood of $1,000-$5,000 to start, is counterproductive. Even if a person is interested in the profession, they may not have the capital layout to be able to even afford the entry fee.

There are over 22 states that require registration if a network marketing opportunity requires you to spend over $500. Two states say it must be kept under $200. A good network marketing company will have a way to join for under $1,000.

Furthermore, MLM Companies in the “good” and “best” category will have a return policy good for 30 days to a year to get 100% of your money back on products.

There needs to be low investment options with your new company that brings the barrier to entry down to little risk. That range of investment should be $50-$500. With this range, almost anyone that has the entrepreneurial spirit can come in and build a business.

Is the company in a network marketing explosive growth phase? This is a very important aspect of success in the MLM Industry; Is the company you are looking at growing, stagnant, or declining? “MLM momentum” is something that can be infectious and can help to grow a person’s business big time simply from the energy a MLM company in momentum produces. Everyone in the company feels it which produces excitement and transcends through the ranks.

Compensation traits

How is the compensation (pay) plan set up? Just as with anything in life, there are poor, average, and great Network Marketing compensation plans, therefore, you need to be able to decipher which is which. In a good network marketing compensation plan, you get percentages on all the levels of activity (sales). You could have someone that is a customer or business partner that is 10 levels below you and you are getting a percentage of their purchase every month that they order. Therefore, the initial work that you did finding your first business partner is not only paying off every month from that partner’s order, but you are now exposed to everything your first business partner brings in every month, customers and business partners included.

Is it legal? It should be based on the sales of products (or services) and not solely based on bringing in new business partners. Generally a maximum of $500 in product purchases is legal to join a company. The cost to join the company should not exceed what you are comfortable with. Remember that there is no business in the world that can generate a significant residual stream of income with this type of low investment.

Beware of “Get Rich Quick schemes”, if the money sounds too good to be true, it is usually a pyramid or downline building scheme. A good Network Marketing pay plan will have an overall pay out between 38% and 55% based on the sale of products.

Does the compensation plan have a proven history? Can you understand the compensation plan and how to maximize your income as you grow your business? If not, ask your upline sponsors to help explain it to you better. Learn how to place new customers/business partners to maximize your income.

Are there high residual percentages close to your position in the company? The majority of MLM companies do not have high percentages in the first 3 levels of their pay plan. They tend to average 5%, 5%, 5%. Because of this, there becomes a “3rd World” make-up of the company’s distributors. There are those distributors that started with the company at the beginning and end up having a large percentage of the company’s distributors under them. They are the ones that generate the most income.

Because the pay plan does not pay people well enough initially, there becomes a “bath tub drain” existence with new people. Each month new people come in, may last a few months, and then quit, while new people come in to replace them. The initial business partners with the company always make a profit because the activity below them, but everyone else makes squat which is why they are considered “3rd World Pay Plans”.

This, of course, is why we hear, “Well isn’t that one of those things where the people at the top make all the money”. The true answer to this is “no”, but you can see how someone can get this impression.

What needs to happen is for there to be high percentages within the first 3 levels of a compensation plan so that new distributors get into profit immediately. Again, many MLM companies offer; 5% 1st level, 5% 2nd level, and 5% 3rd level. In order for a person to even break even in this matrix, they would need 15 people using the products.

Most people do not have enough confidence in what they are doing in the first three months to even acquire this many new customers or business partners and, again, leading to a person walking away because they are not successful quickly enough.

Is the MLM compensation plan a “Binary” plan? These plans are made up of two legs or sides. You basically are allowed only two people on your front line and do not start getting paid until both sides start getting filled up.

Let’s say you bring in a good business partner that takes off, but your “other side” is not moving, most companies won’t start to pay you until both sides are going. Once again, this plays into the whole phenomenon of people leaving the business if they do not make a profit in their first 90 days.

What is the “Net Payout” of the MLM company? The average network marketing company pays out 38% on every dollar that comes into the company. Meaning, all bonuses, residual, and the back end pay of a company does not exceed $.38 going out to distributors for every $1 that comes into the company.

When you are looking for a good network marketing company to join, a good question to ask is; “What is the net payout?” of that particular network marketing company.

Obviously, if all other factors are in line, you want to make sure that the payout is at least above 38% to be higher than the average.

Does the company implement quotas? Many MLM companies enforce a quota on a person’s pay check. This means that in order to get paid on a monthly basis, a person has to have a certain amount of activity in their organization and, if not, they either get a reduced check or none at all. This puts a lot of pressure on people specifically those doing this on a part time basis.

What if you were going along receiving $500 checks every month and you started to live within those means, then one month you have a down month and do not make the quota. All of a sudden, your budget is thrown into the wind.

In my opinion, this is another reason why network marketing can get a bad name as people do experience this type of set up in some companies.

Does the company practice “Front End Bonus Loading”? This is where a lot of MLM companies look good initially, but pay poorly over time because they give out ONE TIME bonuses on the first sale but then have low residual percentages over the course of the customer/business partner relationship.

Remember, the main reason to be in business, from an income standpoint, is to build a steady stream of residual income. If you notice that a company dwells on how high of a bonus you get for signing people up, that is a red flag. Big bonuses are great, but the name of the game is to “work ourselves out of a job”, and that does not happen if you have to continue to enroll people just for a bonus with low residuals on the back end.

A good compensation plan is going to have a moderate bonus but then good residual percentages on all levels.

How is the attrition rate of the company? This is the MAIN obstacle in building a successful network marketing business and usually is directly related to the compensation plan because the company does not pay enough for MLM momentum to start.

Momentum means that once you start your business and start enrolling customers and business partners, that these new people are not leaving as fast as you can bring them in. Momentum has new customers coming in that are satisfied with the product and continue to use them and business partners that are making a profit quickly and continue to build their and your organizations by bringing in other business partners. This Network Marketing momentum becomes an unstoppable force at a certain point.

I have been in the network marketing industry for 7 years and, per my calculations, you have 90 days to get new business partners into profit. If they are not in profit by then, 95% of them will leave the business. It can become an attrition rate nightmare!

Therefore you have to have a pay plan that does not base itself off of large bonuses up front, but a residual plan that pays high in the first three levels.

With this compensation structure, your business partners are able to develop a profit within those 90 days at which point only 10% leaving the business for other reasons (business not for them, no time, etc.). Otherwise, why would a person leave if they have their products paid for and have extra money coming in on top of their expense?

Training traits

Does the company have adequate training? Does the company have good systems for providing training on products, pay plan and building your group? Are they low cost and easily available? Will your upline help train you? Will they do three way phone calls with prospective clients?

What training methods does the company provide? The more the better such as video tapes, audio tapes, conference calls, manuals, newsletters, satellite shows, Internet, plus live local, regional and national training.

Basically, when a new person comes into the business, they are taken by the hand and lead through the training until they feel comfortable enough to walk. With other companies, the new business partner is given a website and few instructions and is then expected to go out and “make it”. This is not a recipe for MLM success.

Bottom line is that you will never be short on support!

What type of sales aides and marketing tools does the company have? Is there Internet support and training? Does the website help you sell products or services? Are there local meetings that you can take prospects too? Is there a good Internet web site with information available? Are there good brochures for mailing?

Is the company in other countries? In this day and age, building an international MLM business is not as hard as it used to be. Therefore, you want to find an MLM company that is well represented across the globe.

Is the company set up favorably for internet marketers? How many internet marketers are representing the company on the web? Are the network marketing training systems available conducive for MLM internet marketing success?

Because of all the tools mentioned in other areas of the article, including the funnel system that is available, people can turn this MLM opportunity into an internet Marketing Strategy that could propel your business into a very large financial asset.
Regardless of what company you choose; make sure you go through all of these MLM due diligence steps to determine if the company you want to join provides you with the best chance for Network Marketing success.

We sincerely hope that this opened a door for you into the world of owning your own business.