Friday, January 13, 2012

MLM Business Foundations - Essential Action Steps for Launcing your MLM company

Todd Tolman - Editor
Todd Tolman | Prodigix Software
Getting started...first steps

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.


Foundations for a Successful MLM  

By Terrel F Transtrum

Essential Action Steps for Launching
  • Learn the foundations of successfully launching and running a direct selling business
  • Commit to ongoing learning and development
  • Establish your network of trusted advisors
  • Clarify your vision, write your story, and express your values

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.

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