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Is Network Marketing A Legitimate Opportunity?

One of the most frequent questions I have received over the years is about the legitimacy of network marketing.  Many are surprised to learn that I have no problem at all with the concept.  I would point out, however, that the vast majority of the network marketing companies out there do not represent reasonable business opportunities. It should also be noted that legitimate network marketing companies are not 'pyramid schemes.'  

Network Marketing, What Is It?

Companies such as Avon, Tupperware, Amway, and Mary Kay, are all part of the booming industry of network marketing.  Network marketing is the concept of selling a product within one's network. The term 'multi level' is usually used to describe the commission structure, which denotes the various 'levels' of payments that can be earned by recruiting a sales 'downline.'

Popularity Percentages

Avon 9.57%
Mary Kay Cosmetics 4.92%
Herbalife International 4.20%
Pampered Chef 4.11%
Scentsy 4.06%
Thirty-One 3.70%
Amway 3.41%
Melaleuca 3.22%
Tupperware 2.75%
Advocare International 2.58%

Source: MLM

The Appeal Of Network Marketing

The appeal of network marketing is based on the ability of an individual to acquire a turn key business with an unlimited upside potential for a nominal cost (Usually under $300).  This makes the opportunity ideal for those that want to start a part-time, home based, business. Some statistics suggest that more than 60 million people are involved in the industry worldwide.

The Criticism of Network Marketing

There are a lot of critics of the concept. Take for example, Herbalife.  Herbalife is a publicly traded company (HLF) and has seen rapid growth in recent years.  Founded in 1980, the company now has annual revenues in excess of $3 billion dollars. You may hear their ads on talk shows such as Sean Hannity, Michael Savage, Neil Boortz and others.  They typically don't mention their name in the ads but go by "Income At" The ads suggest that working from home you can make substantial income. Various testimonials are offered of people making thousands per month. If you listen very closely, however, there is a disclaimer at the end of the commercial.  It points out that the earnings mentioned in the ad are not 'average' and that their website has the more complete statistics. Income At earnings figures are far less exciting when you read the real numbers from their own website (required FTC disclosure).


My Own Experience With Network Marketing 

I started my own network marketing company in the 1990's and after two years I was out of business. To make a long story short, I hired a very expensive consultant to guide me through the process. I followed his advice and ended up having more money going out than coming in. He convinced me to offer very high commission rates to attract distributors. We did have quite a lot of distributors, but we were never profitable. I decided that owning a network marketing company was not for me.

Later, my wife and I became representatives for Pre Paid Legal in 2000. We were active for about four years and did very well.  In fact, even though we have not been active at all in this business for more than six years, we still have several hundred dollars per month in residual income.  I am no longer active in Pre Paid Legal. I simply don't have time to work with any network marketing opportunites at this point.


My Recommendations On How To Pick A Network Marketing Company

1.  Stay away from companies that have been in business for less than two years.  

2.  Select a company that has a good product in an industry that you have some personal interest in.

3.  Be sure that the product is competitively priced.  If people can buy a similar item at Wal-Mart for less money, they will.  In my own case, I first became a member of the Pre Paid Legal service plan and used it several times before I was convinced that I could market the service to other people.  No matter how good the compensation plan is, there must be an excellent product or service at the center of any potentially successful network marketing company.

4.  Check with state regulators in your own state and the state where the company is based to find out if there are any pending legal issues.

5.  Use Google to find out what former distributors may have to say about the company.

6.  Make sure you understand the compensation plan and what it will really take for you to earn a decent income. 

7.  Realize that it will take very hard work to see results.  There is no overnight bag of money,  and those expecting that are usually gone within a month or two.

How Will You Build Your Network Marketing Business?

Oh no, don't tell me to make a list of my friends and relatives!  This is what most people's reaction is, but they reluctantly do it since they have no real alternatives. Many of you know that I teach Internet marketing and on occasion build and sell turn key websites.  I have just created a very unique online marketing system (available on December 4) for those that want to use the Internet to recruit for their network marekting business (no calling on friends and family).  Online Network Marketing System 

This is one article that I especially want your input on.  If you have had a good or bad experience with network marketing, please use the comments section below and let's start a conversation.

Helping you make the most of God’s money!

James L. Paris
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