For most people, trying to determine the long term potential of an MLM opportunity is a matter of looking at the commission structure. They look at profit margins, percentages, bonuses, team overrides…
And they miss the point – completely.
The sad fact is that figures are easily thrown around at any network marketing presentation. It’s part of getting people excited, and lure them into signing up.
Most new network marketing recruits have no idea what they are getting into (before they sign up, anyway), and even less of an idea about the real potential of an MLM opportunity.
So – let’s talk about how it really works:
Things To Consider When Looking For an MLM Opportunity
Firstly, profitability is determined by much more than the commission percentages you are offered. In fact, any business is about much more than how much profit you can make per customer.
Your first concern has to be “will people want to buy this (and how many will want it)?”
If they don’t, then your recruits who don’t make money within the first two months are likely to start dropping off. In addition to that, when tough times hit, people cut back on their luxury items first – so if they aren’t making money yet, and the products aren’t useful to them, they’re gone.
In addition to that, if the product(s) will sell by themselves, it allows for another stream of income, even if the rep isn’t able to recruit people yet.
It also goes without saying that people who use your products first often become your best reps – simply because they believe in the products. This spells great potential for an MLM opportunity.
Secondly, you need to consider the pricing. In many cases, the products on offer are premium products, and carry a higher price tag, but it’s worth it. It makes your target market smaller, but it won’t put you out of business.
However, if the products are simply over-priced, nobody would want to buy them unless they have to – which means your reps won’t be able to do any direct retail sales while they learn to recruit.
To make it worse, some opportunities expect you to place monthly orders for more product(s) than you can actually consume. It’s a recipe for disaster.
If (a) it’s not really a product which people will buy without worrying about the potential of the MLM opportunity, or (b) the product isn’t worth the selling price, your biz opp is recruitment driven, and not product driven.
This means that people will only be buying the products because they have to – and you will probably not be able to sell anything besides the compulsory personal volumes ordered by your recruits.
This, in turn, means that people will be much more likely to drop off when they don’t make money soon – which will be for most of your recruits (since nobody really wants to buy the products, and people will be wary of the biz opp as such).
An MLM Opportunity – Costumers are Important Than Distributors
Now – if most of your recruits don’t stay around for long, it doesn’t matter how great the commission structure or the compensation plan is – the long term potential of the MLM opportunity is limited, and chances are that very few people are actually making real money from it.
On the other hand, if you can offer useful products, at a sensible price (even if they are premium products in a higher price range), you will not only keep your recruits for longer (and make much more money from them), but you will also be doing more retail sales, some of which will allow you to sponsor additional reps that will make you good money for a long time – because they believe in the products.
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