Home Based Businesses

Should you Choose a MLM program for Your Business Startup?

Is your inbox overrun with emails claiming that you can make k or more each month working from home? The majority of these emails are multi-level marketing business advertisements. Ranging in price from a few hundred to several thousand dollars to buy in, these businesses provide you a product that you then sell to others. A portion of your sales go to the guy above you on the food chain, and if you manage to sell to others, you generally get a piece of their sales. With the growth of the internet has come an explosion of MLM opportunities, and these offers usually come with a “free” website for you to launch your business and include a monthly fee (usually around ) to host the website.

MLM programs offer just about every type of product you can imagine, from the popular Pampered Chef and Avon programs to the “information services” programs that sell virtual libraries or other how-to instructions of questionable value. The purpose behind many of the latter types of businesses is solely to build an MLM program and quickly cash out. Some entrepreneurs find great success in all different types of these programs, at all different levels, but most who invest do not.

The majority of people who buy into these multi-level marketing programs never earn back their investment. Why? Well, there are several reasons. First, the buyer is often under the impression that merely signing up or hosting a website will draw customers. In fact, posting a website without marketing it is like filming a commercial in your living room and leaving the DVD on your shelf — if no one sees it, it might as well not exist.

Second, buyers are usually under the impression that the person above them on the chain is actually motivated to see them succeed. In reality, if the guy above you can sell another “business” on his own, he keeps a much larger share of the profit than if he helps you sell one. Generally, the monthly hosting fee goes to the guy who started the whole program, so the mid-level seller has almost no motivation to help you succeed, and is not likely to provide much help once you have bought in.

Third, very few MLM programs, even the legitimate ones, provide assistance to entrepreneurs in the areas most critical to business success — business planning, marketing, and financial management. It is nearly impossible to build a successful business without these tools, and most MLM programs, like franchise programs, ignore these key skills and leave the business owner to figure it out for himself (or not).

Another difficulty in reselling these programs, especially if you are low on the totem, is the oversaturation of these “businesses” in the marketplace. There are thousands of them available at any given time, with many joining and exiting the marketplace daily. Many of these programs are essentially scams, though not all. The problem with even the legitimate programs is that, unless you are at the top of the food chain, your chances of overwhelming success are not great.

Many potential entrepreneurs are drawn to MLM programs because they want to run their own business but don’t have a business idea to pursue. Keep in mind that the best place to be in an MLM is at the top. Otherwise, you are better off developing your own business idea and building your own startup, guided by the three keys to business success — planning, marketing, and financial management.