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Starting an MLM Company That Will Last, Part 1 4 Phases of a Company

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Article by: Mark Rawlins | Founder & CEO, InfoTrax
July 6, 2016

Multilevel Marketing is big business. There are dozens of companies (including Infotrax) that sell products and services to MLMs new and old. My company has been supporting companies in the industry for decades. I have seen a lot of companies start: some fail and some succeed beyond their wildest expectations, and many others fall somewhere in between.

Most of the advice you’ll come across for startup direct sales companies is about mistakes to avoid, problems to expect, and best practices for set up. One thing we don’t spend enough time talking about is what the roadmap looks like for a company going from startup to class enterprise. If you’re always focused on the problem of today, you aren’t thinking about where you’re going.

There are all sorts of strategies that create success, or bring on failure. We have identified several distinct phases companies go through. Each of these phases have their own challenges and opportunities. Obviously the number of orders per day and the monthly sales volume vary by company, but we’ll use both of those metrics to divide company growth into phases.

Phase one: 10 orders a day

($20,000 a month in sales)

Characteristics

A company in this phase is often run by the founder and much of the staffing is part-time or even volunteer. There is no actual formal organization: everyone pitches in to solve the problems at hand. The company has almost no internal process; problems are solved ad-hoc as they come up.

The computer system the company has is mainly used to track genealogy, take orders and pay commissions. No business intelligence or CRM features are needed or used even if the company bought them. You know every customer personally; in fact too much “computerization” can be a bad thing for startup companies, because it can limit your flexibility and cost money that can be used elsewhere.

Strengths

A startup company’s advantage is it can give the most personal of personal touches; you can truly try to be “all things for all people.” A customer has a question about the product? Put the inventor on the phone. Someone has an idea for a more effective sales piece? It can be done in hours. Also, this is the ground floor: leaders haven’t been identified. At this point anyone can become the “top” distributor.

Challenge

The challenge is surviving: every month the company is burning through its investment capital. It’s grow or die.

Phase two: 100 orders a day

($200,000 a month in sales)

Characteristics

Ah, we survived! And now if we played our cards right and spent our money wisely, we should be approaching breakeven operation.

At this point we have a few “professionals” on staff. Everyone still pitches in to solve problems, but someone is in charge of making sure orders are processed, and someone else is handling distributors’ questions and problems. You can start to see a hint of departments.

You are also starting to create internal company rules. How do you handle certain sorts of requests and problems? You still have a very close relationship with your active sales people and sales leaders. Maybe you don’t know every customer anymore, but you know anyone who is actively building. Also you have a handful of distributors who are making enough money that they can make this their full-time business.

You are starting to put together business processes and the team that will implement them. This is a very important stage for any company. You are still small enough that you don’t have to have solidly defined business processes to adhere to.  This won’t last long. If you don’t have the people and the processes in place soon to start to reign in the chaos, it could be fatal.

Strengths

You still have a personal relationship with business-builders, and you still have a lot of flexibility. In addition to that you can point to success! You are no longer in a “grow or die” mode. You can worry about other things that threaten survival.

Challenges

Leadership and thinking ahead: you need to put together the team that will help you implement the policies and procedures which you will need as you grow.

You need to start thinking about consistency. This is the moment when you have to ensure a strict adherence to policy. You need to restrict exceptions to only the most extreme of circumstances. If you make an exception to your policy every time someone calls you about it, you have no policy. It’s a tricky balance to find and maintain, not being so rigid that your people feel like they are dealing with a rigid bureaucracy, but not being so flexible that your distributors don’t have respect for the rules.

Phase three: 1,000 orders a day

($2,000,000 a month in sales)

Characteristics

The company is now managed and operated by professionals. You have various departments in order to ensure that important things don’t fall through the cracks.

The systems and software you have put in place protect you from chaos and ensure that you are meeting your distributors’ and customers’ expectations. You’ve spent countless hours creating policies and procedure and documentation in order to ensure that all of your customer service reps give the same answer to the same question.

You have started to build an internal knowledge base to have the right answers at your employees’ fingertips.

You are spending money automating functions like convention registration that in the past you would do by hand. You are incentivizing distributors to use the web instead of calling your customer service department.

Strengths

You have a good handle on processes. You have a good relationship with your top leaders.  You rely on your top leaders to provide support and training to their downline.

Challenges

Directing the creativity: the company is big enough that you can no longer turn on a dime.  It’s like the difference between driving a WaveRunner and an aircraft carrier—turning now requires planning ahead and coordinating.

Phase Four: 10,000 orders a day

($20,000,000 a month in sales)

Characteristics

Your company now needs additional “C” level executives (CEO, COO, CIO, CFO) who will help you define and execute the company’s strategy in order to continue to grow.

You rely on the systems you have put in place to give you the facts needed to make it in different markets. You have a formal review process for policies and procedure changes. Your business processes are automated. Rules are enforced, exceptions, strictly regulated. Relationships with distributors—even top sales leaders—are strictly professional.

Strengths

You have more predictability now.

Challenges

Keeping everyone on the same page, creativity in a bureaucracy, finding the next round of leaders, keeping your leaders engaged, and continuing to expand without losing control.  For more on starting a company see Starting an MLM Company Part 2.

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Mark Rawlins | Founder & CEO, InfoTrax

With a career managing MLM/network marketing companies that spans more than 30 years, Mark Rawlins is recognized as one of the pioneers and...

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