Just recently, I had gotten into a conversation with someone about network marketing or as some of you may know by the term Multi-Level Marketing or MLM for short.
That that might as will be a four letter word for some people. Now obviously there’s a lot of unscrupulous companies out there, but let’s put things into perspective.
I have been through enough for them to know what to do and not want to do. I think the biggest issue that I have personally learned is not to get caught up in all the hype. A lot of network marketing companies work off the emotion of you getting rich quick. I call this the lotto syndrome.
There’s a lot of people in this country who want to get rich quick without working at it. Which is why this a success with the lotteries. The real truth is, work and risk is necessary to attain wealth
So the conversation I had with this individual was the benefits of either purchasing a franchise or joining an mlm.
Before I start with the comparison, let’s deal with some of the perceived negatives of network marketing.
You have heard before in the past, only the people of the top make the most money.
So in order to put into perspective “that the people in the top make the most money”, let’s look at network marketing’s cousin franchising.
Do you believe the franchisor probably makes more money in the franchisee? I would say so.
OK let’s visualize this. Does McDonald’s Corporation make more money then let’s say, the person that may only own eight McDonald’s franchise restaurants? Of course McDonald’s Corporation make a lot more. So that perceived negative concerning MLM that the people at the top make more money than the people towards the bottom is pretty obviously true. That in itself should not be a reason for not getting involved in a network marketing opportunity.
Since we are not past that, let’s talk about some of the differences between network marketing and franchising.
- Upfront start up costs.
- Operational costs
Franchising Franchises usually require high start up costs, especially the good ones, usually require at least 250k if you are doing full time. Normally, there is little flexibility with your hours in operating a franchise so in most cases, you will need to run it full time, unless you have put aside additional money to pay for an operations manager.
So the initial seed money not only pays for the franchise fee, but pay for marketing. Some franchises do have active marketing campaigns, but you would like to have your own marketing budget for letting people in a 15 mile radius that you exist.
Also, unless you plan on eating P B & J’s until you business is profitable, you may want to all stash away living expenses.Obviously, how much you put away will depend on you personal circumstances. If you are single, it is obviously easier then if you have a family to support.
A huge advantage of a Franchise, assuming it is a well know when if they amount of advertising that is done. Plus the stigma that is associated with network marketing does not exist with Franchising.
Network Marketing usually requires less upfront costs and has the ability to “shoe-string” as far as what you need to put into day to day operations. Also, you get to make overrides on all of the distributors that are beneath you. So what this mean that the responsibility of creating sales volume is distributed in your organization.
To prevent “lotto syndrome” a person evaluating an mlm company needs to approach as a franchise business in their thinking. What I mean by that is you need to look at viability of the products. the product(s). Is something people will use, or want to use and does it have great value. Is it a consumable which would ensure reorders.
Also, another aspect you would really need to go over with a fine tooth comb is the compensation plan. Is it easy to understand? Believe it or not, this is critical in gaining new distributors. Just saying “You are gonna clock lots of dollas” is not good enough.
While you will make money in direct selling of an MLM’s product or service, the big money is in the different compensation strategies based on your downline. I won’t be even to remotely describe how they are because each network marketing companies plan is different.
Also, I downside for some people involved with network marketing is that you need to keep your team motivated. Normally this is done through weekly meetings and group events scheduled throughout the year.
Network Marketing is a viable alternative if you don’t have the cash to throw down in starting a franchise. In the end, you will need to decide what fits your budget and your personality.
Give me a shout out.