With tons of MLM companies proclaiming the success of this business model and pushing to sell everything from cosmetics to home utilities, using this business model, MLM businesses need some serious attention. What’s the real picture of MLM business? Is it a scam? Or has some truth. Jon M. Taylor conducted research into a few MLM businesses and published his findings in an e-book “The Case (For and) Against Multi-Level Marketing.” Let’s take a quick look at some of the figures he has shown in this book:
MLM Dropout Rates v/s the Failure Rate of Small Businesses
One of the primary features of a networking business, Taylor shows is that it does not qualify for any small business loan or assistance program. This is because of networking businesses’ dismal failure rates.
Taylor showed, a networking business loses about 50% of its representatives in the first year of its operations, 90% of its representatives within five years of its operations and by 10 years at least 95% of its representatives have dropped out.
Taylor showed one can easily compare this with the traditional small business failure rates in the US. According to The Small Business Administration, in 2008 44% of US small businesses survived at least four years and 31% of US small businesses survived at least 7 years. Only 64% of small business failed in a decade.
MLM success correlated with mentorship
But despite all these facts and statistics there are MLM companies that are hugely successful. What’s the secret of their success? According to Jody Greene, the CMO and co-owner of Chic CEO - a free, online resource for female entrepreneurs, the success of a networking business is correlated with mentorship.
A multi-level marketing business model starts with a product/service that one person is selling and a team of people earning commission from that sale. A MLM marketer also needs to concentrate on building a team under him. The cycle continues until there are multiple levels of people benefitting from a single sale.
Mentoring or coaching plays an important role not only for the top-tier sales people but at every level of MLM. A network marketer needs to be mentored on using MLM marketing tools like lead capture forms, replicating websites and auto responders, and the products/services he is selling and also on the networking business structure in general. Moreover, a marketer also needs to know a little about the company that he is joining.
It is also important for a network marketer to develop his own team. Often people join MLM business as a part time opportunity and most of the MLM networkers work from home but a network marketer must make efforts in developing his team. Like any other business, team work is important for the success of
MLM businesses as well.
Though MLM businesses are often confused with get-rich-quick schemes, it’s far from that. It’s a proper business that has its own needs and demands. Though some of these are similar to traditional small businesses, there are a few that are quite different and unique.
