Network marketing or social marketing is a good career for a select few. It will be a waste for most others. As with any business, a successful multi-level marketing (MLM) venture will require a significant investment of time and effort. Done correctly, it’s a great way to build wealth. But there’s no room for people who think they can make a quick buck with it.
What is network marketing?
Network marketing is a referral-based sales business. A company will offer a product or a service and recruit others to sell it for them. Sales reps, who are independent contractors and not employees, are paid commissions for what they sell. If they recruit other reps, then they’ll also earn a portion of their sales, too.
As a basic example, let’s imagine that a company uses an MLM model to sell laptops. You might join because for each one you sell, you’ll earn a 10% commission. If you recruit me into the business, you’d also earn a 2% commission on each laptop I sell. And if I recruit someone else, you’d earn 0.5% on each one they sell, and so on.
What are the advantages of network marketing?
Yes there are some and you should be aware of them before proceeding.
Ready Made Product
The greatest advantage of social marketing is that you can build a thriving business without having to develop a product or a brand. The company provides it for you; all you need to do is sell. A well-managed firm will have systems and marketing material available to bolster your chances of success.
You can develop your business into a vast enterprise with numerous layers of recruits. If you’re willing to invest the time, eventually you can have enough sales reps on your team to walk away from it altogether. A network marketing venture can thus be an effective income producing asset. There are plenty of MLM entrepreneurs who earn six and seven-figure incomes passively.
Network marketing is a great way to develop sales, public speaking, leadership and management skills. I often suggest it to aspiring entrepreneurs who haven’t yet decided what they want to pursue. Network marketing may not make you rich overnight, but it can teach much of what you need to know to have a successful business. You can use it as a training ground.
Be Part of a Community
A lot of people find value from the mentorship and personal develop components involved in network marketing. If you participate in MLM, you’ll join a community of like-minded others. Your peers will want to reach financial freedom, they’ll stand by their product, they’ll believe in their mission and they want to expand their skill set. That’s valuable in and of itself.
What are the disadvantages of network marketing?
Yes there are some and you should be aware of them before proceeding.
The MLM world is a hotbed for scams and shady characters. Companies like Business in Motion were found to be Ponzi schemes. Karatbars international, OneCoin, MMM and several others have all had run-ins with the authorities. In December 2016, Vemma paid a $238 million settlement to the US Federal Trade Commission (FTC) for non-compliance issues. I’d suggest reading sites like BehindMLM.com and ThompsonBurton.com to keep abreast of current events.
Changing regulatory framework
Trade and securities regulators have pushed network marketing companies to base their compensation models on sales commissions, rather than on recruitment. They take issue with firms who pay people to simply find others to join instead of actually selling the product (Vemma, for instance). It’s likely that regulators will continue to scrutinize the MLM industry.
Your asset can disappear
If the company folds or terminates its relationship with you, that will destroy the asset you spent years building. MLM participants are reliant on the good standing of the company. One way to hedge against that risk to is to maintain close relationships with those in your downline. They would then be more likely to come with you if you choose to switch businesses.
Most network marketing businesses come with some sort of fee to join. It will usually be in the form of a minimum monthly product purchase, a start-up fee or an annual membership expense. Moreover, there are often incentives to pay more in order to upgrade or qualify for higher bonuses.
You could also look at it from a different perspective, though. Most small businesses come with start-up costs. Paying a few hundred or a few thousand dollars to participate is cheaper than a lot of other ventures.
Is Network Marketing a good career?
Network marketing can be a great career, contingent on a few factors. They include:
The effort you make
Most people become disillusioned with network marketing because they expect to make money quickly. After a few months of dismal results, they either quit or become inactive. Even worse, they often write off the experience as a scam. To be clear: MLM is a small business. Just like any other entrepreneur, you’ve got to work hard for years before you’ll see results. If that’s not an option, then network marketing (and business in general) is not right for you.
Your tolerance for volatility
Income in any business is never stable, nor is it guaranteed. As an early MLM entrepreneur, you may experience months of decent earnings followed by droughts. The business won’t produce reliable passive income for at least a few years. Such volatility can be stressful and emotionally draining, especially for those with high expenses. You should be prepared for earnings swings and manage the money you do make carefully.
How you spend your earnings
It’s common to spend your network marketing earnings on upgrades and training packages. The company will often encourage you to do so, justifying it as an “investment in yourself.” While there’s truth to that, people often go overboard. They’ll dump most of what they make right back into the firm, leaving little for themselves. Doing that too often can dry you out.
As a rule of thumb, you should try to invest in activities that will directly produce revenue. For example, if you spend £200 at a hotel to host a recruitment seminar, you might make £1,000 from it. That’s opposed to spending £200 on sales training and justifying it by saying, “Well, the skills I develop will be worth it.” Continually purchasing programs and activities that have indirect potential can be a dangerous trap.
Finding the right company
There are a lot of MLM junkies; people who hop from one network marketing firm to the next. They abandon the former each time a shiny new business opportunity arises. Frequently jumping ship will preclude you from spending enough time on your venture. You’ve got to find the right firm and stick with it. As part of your due diligence, you should consider:
Whether the company’s product/service is good
What systems the company has in place to promote your success
The quality of the firm’s marketing
Any hidden costs
The compensation plan (is it lucrative? Is it sales-based or recruitment-based?)
Legal or compliance issues
While researching prospective companies, you’ll probably find websites that call them scams. I’ve never seen an MLM business without bad press online. There will always be someone who says they were ripped off. In my opinion, you should base your conclusions on evidence. Sometimes, where there’s smoke there’s fire. Other times, however, people are either disgruntled or they’re trying to drive traffic to their own network marketing venture. Don’t ignore what you read online, but strive to understand the context in which it was written.
Is Network Marketing Better Than A Job?
What’s my experience been like Network Marketing with Arbonne?
I registered as an Independent Arbonne Consultant in January 2014. At the time I was disillusioned and I thought I could promote to the top of the company in 3 months and be making some ‘Gangsta Money’. Luckily my sponsor sat me down and explained the compensation plan to me and told be about the average time it takes people to promote.
With arbonne the there have been people that got to the top of the company in 6 months, and others that took 13 years! I am have been with this company for 5 years now and I’m not were I thought I would be by this time but I am making steady progress each day. Having been a traditional business owner, having worked in the corporate world for years, and now being a part time network marketer, I agree 100% with the video above!!
A Final Thought
Network marketing can be a good career to pursue. You can do quite well if you build a team of hard-working individuals. The passive income that can be produced is vast. It is certainly a vehicle to reach financial independence.
But MLM has pitfalls. Perhaps the main one is people being convinced that it will lead to easy money and then discovering the truth afterwards. If you make an informed decision and work hard towards success, then I’d encourage it. If you can’t commit to that, though, look elsewhere for opportunities.