Tweamster's Blog

What To Look For – Part 2 | April 26, 2010

Okay, so we’ve all agreed that we want to develop a reliable, long-term, residual income, right? If you don’t think that’s what you’re after, then perhaps you’re looking at the wrong blog…  But please, come back for the humor, I promise I’ll amuse you and your hits on my blog will make me happy.

Okay in the last blog we looked at the company track record, this next point is related to that and that is financial strength. There have been many companies that have outgrown their ability to finance themselves and so had to close their doors. Maybe their investors pulled out or the institution providing their financing turned off the money spigot, or they put too much of their cash flow into commissions or into product research for new products; the reasons for running out of money can be as many as the number of companies failing.

Lest you think that your company is too good, or has too amazing of a product to possibly fail; it still takes money to make that product and pay those commissions and pay the home office staff and keep the computers running that figure it all out. The company track record and asking some hard questions will tell the tale, you have to use your judgment as to whether you’re comfortable with the answer.

Here’s a quote from John Milton Fogg, “There is no such thing as a great MLM company. Distributors are responsible for their own success… The best the company can do is stay in business.”  Sure, they provide great products and pay commissions and have great conventions, but at the end of the year, are they still going to be there? If things work out, they will do research and development, bring out new products, streamline the commission structure, and generally do everything they can to provide an environment where their distributors can flourish and bring other distributors and consumers to the company.

They can’t do this if they go out of business because they ran out of money.  MLM Insider Founder and Editor-in-Chief, Corey Augenstein was once quoted as saying that 85% of MLM companies go belly-up in the first five years, most of them in the first 18 months. Does your company have the financial backing and money smarts to make it past those first few years? Or has it already made it past the magic number and is financially sound and prepared to grow into the next few decades. That’s what you want, you have to decide what your magic number is, I recommend at least the 5 years quoted above, one of my mentors recommends 7 years.

Here’s one example of how not choosing your company carefully can backfire: Jerry Rubin, former 1960s radical jumped into network marketing in the 1980s when he realized that the skills required for success in network marketing were the same as the skills that had made him so good as an activist. He took the plunge, sinking thousands of dollars and week’s worth of time into the new venture. As he expected, he proved good at it. His network marketing business took off, thousands joined his downline. He had 200 people per night waiting in line to go to opportunity meetings in his office.

Then one day the phone rang and the son of the owner was on the phone and said that the company had filed Chapter 11 bankruptcy that day. Jerry looked around and saw his office, the thousands of people he had brought into the business, and two closets full of powder and food and got angry. He lost $30,000 of his own money (1980s dollars), plus his existing business.

Years later Jerry went on to become a very successful network marketer and became a spokesman and an advocate for the network marketing industry. There was nothing wrong with network marketing, nothing wrong with his skills, he simply chose the wrong company, the company didn’t have the capital to survive the growth. (This story is quoted from Richard Poe’s “Wave 3 – The New Era in Network Marketing.” © 1995)

While it may not be easy to check the financials, it is easier than it was back in the old days when pretty much your only option was to go visit the company and interview the principals. With the internet, you can check for scams and fraud, and you can find distributors for the company and interview them. You can check out mlm watchdog sites, here’s a very good place to start: http://www.mlminsider.com/MLMResources.aspx?RC=Watchdog. However, visiting the company and meeting the principals is still a good way to go if you have the wherewithal to do so.

Funny mlm adlines:

“24/7 phone hotline reveals secret to insane profits”  Can I stick with the sane profits, please?

“Can you use $10,000 -$20,000 now?”  Umm, no,  but check  back with me in a few weeks.

“Looking for 24 highly motivated professional networkers edging to make a fortune with the next MLM giant”   And what exactly does edging to make a fortune entail?

For more of what to look for, sign up for the free newsletter at http://www.AlansMLMTips.com.

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3 Comments »

  1. Nicely written, Alan!

    I did not know the Jerry Rubin story. Can you tell me what company he joined that failed on him?

    Comment by Lou Abbott — April 26, 2010 @ 5:11 pm

    • Hi Lou,
      I can’t, I have seen this story in a couple different places, but neither one gave the name of the company.
      Alan

      Comment by tweamster — April 26, 2010 @ 10:24 pm

  2. You are an absolute hoot! Love this blog. I know where to come to get my advice on mlm.

    Carrie

    Comment by Carrie — May 29, 2010 @ 4:10 pm


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