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Friday, January 13, 2012
MLM Business Foundations - Essential Action Steps for Launcing your MLM company
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| Todd Tolman | Prodigix Software |
Starting
an MLM enterprise is difficult and leaves no room for mistakes. You
need to learn from those who have gone before you, veterans who have mud
on their shoes. You don't need to repeat the mistakes of other start-up
companies if you are ready to learn.
As an MLM Software
provider, we are pleased to have aligned ourselves with several
industry experts with decades of experience helping new MLM enterprises
to launch successfully. Professionals that have been there before, many
times as an independent distributor and also running successful MLM
companies. They will help you put all the steps in order, putting you in
a position to succeed.
This year topics for our newsletter will be progressive, each step preparing the next one, so you will understand the direction to go with your new company. A road map.
This month we start with MLM Business Foundations.
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Foundations for a Successful MLM
By Terrel F Transtrum
Essential Action Steps for
Launching
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MLM and Network Marketing and Home Party Plan
Over the
years, direct selling has primarily consisted of two distinct models: “home
party plan” and “network marketing” models.
Each has a sales force comprised of independent representatives that earn
commissions and bonuses from sales of products.
However, the key differences in the two models can be found in product
margins, sales methodologies, consumer and seller characteristics, compensation
models, and terminology.
Both types
of companies feature “multi-level compensation” (MLM) of one type or another, paying
sales representatives for sales produced as a result of managing and leading
sales representatives in various levels of the sales organization. Much like local, regional, national, and
global commissions that flow through the traditional sales organizations, these
multiple levels also exist as incentives for the small percentage of skilled,
driven, visionary leaders who get out of bed each day and get the job done.
The
differences in the two models begin to appear in differences that appear in a
spectrum of product selling methodology, ranging from a retail foundation
(where products are discounted to the seller who makes a markup plus smaller
percentages on overrides) to the other end of the spectrum which is considered
to be a “consumption” model. The
consumption model typically features an MLM compensation plan and product that is consumed on
an ongoing basis (for example, nutritional supplements) and the selling often
occurs as a one-to-one presentation.
Home party
companies are characteristically designed to support highly social gatherings,
usually of women, who share much in common as they come together to support a
friend who may be “hosting” the gathering (or “home party”) in exchange for
free products and discounts. The Direct
Selling Association (DSA) reported that in 2008, the
average home party consisted of 8 orders at an average of $54 per order, or
$432 in sales per home party. Of course,
these are averages, and some companies report home parties generating as much
as $800 to $1000 or more per party.
MLM companies
are characteristically designed to support one-to-one selling, have a higher
percentage of male representatives, and can sometimes be identified by more
complex compensation plans that sometimes appeal to
analysts and engineers. Companies
typically consider each active account worth $100 per month in sales on
average, though they often incorrectly classify all accounts as “independent
representatives,” where in fact the largest majority are customer accounts
(using the definition of customer as someone who merely purchases and consumes
products but who does not recruit other customers or builders).
Both types
of companies find themselves in safe waters when they focus their efforts on
finding and developing customers. At
first blush, this may seem obvious to the seasoned business person, but in a
business-driven direct selling model, some view the prize as being “builders”
and those who pursue their careers as recruiters who love the hunt and thrill
of finding people to “sign up.” In
reality, the prize goes to the company that focuses on delivering genuine value
to customers who value the products and services whether or not there is an
income aspect to the package.
Multilevel Marketing (Network Marketing) or Multilevel Compensation?
Multilevel
Marketing (Network Marketing or MLM) is the common name for network
marketing. We teach that multilevel
compensation is paid in network marketing and home party plan companies. Multilevel compensation is a compensation
framework through which flows percentages of sales based on pre-determined
qualifications, paid in multiple levels in the sales organization. Its appeal is found in the opportunity that
representatives have to receive compensation not only on their personal sales,
but also on the sales volumes of others in various levels of their sales
organization.
The building
block of multilevel compensation is the leverage gained by reaching wider and
deeper through the application of the management principles of selling
(prospecting, presenting, handling objections, inviting the sale, supporting
after the sale) and training (teaching others to duplicate the proven
customer-prospecting and business-building techniques).
Web Marketing and Affiliate Programs
As direct
selling companies learn more about harnessing the power of the Internet to
reach the world with their messages (product, vision, earnings, culture, etc.),
web marketing has become an integral part of direct selling. The greatest caution we extend to any who
will listen is to never forget that direct selling is person-to-person,
relationship selling, and that there simply are certain tasks that cannot be
done through electronic medium. No
electronic tool can compensate for the power of eyeball-to-eyeball expression,
personal motivation that flows from deep within when in the company of like-minded
people, and the personal, physical interaction that forges bonds of trust and
loyalty. Many accept with light hearts
that direct selling has a substantial number of “huggers,” people who hug when
they meet and greet each other at live events and meetings. And, can this be bad for business? Of course not!
The most
powerful use of the Internet we have experienced is in the ServiceQuest®
Recruit Builder System™ (RBS). This
system combines cutting-edge web marketing that funnels searches into recruits,
at the most basic level of human behavior.
Whether your company uses the Internet to advertise and build brand
awareness, to support reps with web offices, or leverages its reach to connect
with those who are looking for what you have, the Internet is the most powerful
direct selling tool second only to the live human being.
At the
fringes of direct selling can be found affiliate programs that compensate
others for referring business to an e-commerce website. Time will tell whether companies effectively
use affiliate marketing, although the evidence isn’t compelling.
180 Days or Less to MLM Startup
180 days or
less to startup? Can you really start
and run a successful direct selling company in 180 days or less? What about all those people saying you need
to build an MLM business plan and secure funding first? What about all those obstacles—the right
Network Marketing / Home Party Software, the right name, the right compensation
plan, the right legal entity and registrations, and so forth?
Yes, you
can. You can do this. And you can do it in 180 days or less. Here are the two most important reasons why
that’s so:
1.
The world
has changed dramatically in recent years and we all know it. Today, we can use online tools, information,
contacts, and services to do things much faster than was possible just a few
years ago.
2.
When you
look at the core elements of a new direct selling business, the actual tasks
involved—just the real tasks, not the thinking, training, researching, and
long-time deciding—don’t take that much time.
Technically, it takes about an hour to register a name for your business
and to become a legal entity. Setting up
a location can take a couple of hours if it’s in your home, and as little as a
few days if it’s in an office somewhere near where you live. Delaying decisions doesn’t make them any
better.
It’s true
that not all businesses can go straight from the first spark of an idea to the
full and complete execution in just 26 weeks.
But many can. On one hand, you
may not get product molds created, initial orders placed, and finished goods
delivered from an overseas vendor in this relatively small window, but on the
other hand, you just might depending on your experience and shortened learning
curves. Many cannot raise millions of
investment dollars in a few months, but then you may not need that much or you
might already have the necessary capital.
It’s also
true that the essence of a direct selling company is not only its ability to
scale and grow, but because it’s typically a cash-up-front business, much of
the growth is self-funding. We put those
two facts here because they show that the majority of new direct selling
businesses are like the one you want to start, meaning they are manageable,
focused, and ready for you to get going.
So, with
that in mind, here’s how it works! The
timetables show how you go from where you are now to operational in just 180
days. And, our hats are off to our
clients who have done it in less time while not cutting corners.
Ongoing Learning and Development
The power,
simplicity, and effectiveness of applying key business fundamentals to
successfully launching and running your direct selling company are best
experienced as experiences, in real
time, with real situations in your real world.
Necessarily, the guide must put the essence of this dynamic art of
workflow management and personal productivity into a linear format. We’ve tried organizing it in such a way as to
give you both the inspiring big picture view and a taste of immediate results
as you step along the path.
The
knowledge and learning that you gain along the way will take you to new
plateaus of confidence and accomplishment.
Each will open the door to the next level of growth, and this pattern
will continue far beyond the first recruit, the first convention, and the
exhilarating first million dollars in revenues.
We encourage (and expect) ongoing learning and development, and our
approach assumes that you have (or will make) the commitment.
In return,
our commitment back to you will be to stay in the trenches to contribute and
learn and share all that we can to help you to succeed. We find our success, our fulfillment,
and—yes, our fortunes, when you succeed.
Your Network of Trusted Advisors
As you seek
out MLM consultingresources to provide you with
advice on your business, you will likely talk with trusted advisors and friends
in your circles as well as with others who are referred to you by your friends
or whom you discover through your research and networking efforts.
You may have
an attorney, MLM consultant, or a general business
consultant that you’ve relied on for other projects and with whom you have
created a relationship of trust. We have
found that the issues in starting and running a direct selling business are
similar in many of the traditional business sense, but are unique and even
peculiar in some ways.
Pay close
attention to identifying those issues that experienced direct selling
professionals can assist with, particularly those who are dedicated to teaching
you the principles and best practices so that you can make sense of the
exciting (but sometimes unconventional) aspects of network marketing and home
party marketing.
Networking
is a powerful way to discover the sources of support that have experience
working with many direct selling companies like yours.
Terrel Transtrum is the co-founder of LaunchSmart, a company
that supports clients in starting and running successful network marketing and
home party companies. Accepting new
clients and offering free no-obligation MLM consulting. terrel@launchsmart.com
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