In the network marketing industry, the dropout rate can exceed 90%. This means that the majority of people who try an MLM company do not survive the first few months!
On the other hand, the advantage of network marketing is that out of 10 people who survive the period of five years of continuous work, 9 people become super-wealthy.
The MLM industry has produced more millionaires than any other industry in the world. A good reason to persist in continuing to network marketing!
If direct sales and network marketing are a great way to earn money, why do many of the MLM companies involved fail?
There are many reasons, but these are the ones that are probably more common. If this industry has produced so many millionaires, how is it that so many people give up? Here we explain the reason why MLM Companies Fail! You can realize the main reasons behind it.
Reason Why MLM Companies Fail
Reason 1. Without Distributors you are nothing!
Creating a successful sales organization within a direct sales company is a great achievement, but it is not the same as starting and managing a complete business. However, many successful distributors, with six figures per month, look over the shoulder at the owner of the company that is making even more money and decide to take the next step.
However, they discover that choosing and creating the products that the market wants, manufacturing, storing and shipping requires a great deal of experience that goes beyond just selling and recruiting others. Starting a company like this also requires that employees, financial experts, and accountants with that experience be learned or hired.
Reason 2. Did you start with Enough Capital?
This is one of the main reasons why all new businesses fail. The founders begin with a dream and a bond, and that is not enough to pay the bills. According to experts, a new company needs to have enough capital to be able to stay afloat for at least the first two years.
This has to do directly with the first point. The 6-figure distributor per month is rich thanks to his personal income, but he generally does not realize how much additional capital he needs to create a new company.
Reason 3. Control your Speed.
Recruiting quickly enough brings new distributors who buy and sell the products while recruiting more distributors. That is what makes the cash flow through the door. Cash is the life of all businesses. And direct sales companies require distributors to make direct sales.
This also overlaps with the first reason. Successful distributors assume that they can build an entire company as they did with their own organizations.
Reason 4. Do your business with Legality.
There are many ways in which direct sales and MLM companies face state and federal regulatory agencies. With the latest actions of the Federal Trade Commission against Herbalife and Vemma, it is possible that the gap that separates legal direct sales companies and so-called pyramid schemes is larger than ever in the near future.
Companies in the health, beauty, cryptocurrency and nutrition segment must be very careful with the product declarations they make, as they risk receiving adverse actions from the Food and Drug Administration.
It is more important than ever that direct sales companies have attorneys with industry experience to review their claims for marketing products and materials, their compensation plans and their recruitment marketing materials. They must also adopt policies on what they allow distributors to say and do.
Reason 5. Apply proper Technology
A new company needs to install a website and host network hardware and software to track inventory, distributors, genealogies, and sales. The representatives expect a precise and timely payment for every penny they and their organizations have earned. Although such software exists, it must be customized for a single payment plan and specific products. If someone is unable to update himself through this advanced software and technology they will fail to manage and fill the business target. This is one of the main reasons for MLM companies’ failure during this technological era.
Reason 6. How is the health of your Products?
One of the strengths of the direct sales industry is that it pioneered some innovations in personal health. However, new nutritional and beauty products from the largest health food and supplement industry are often copied. Products must have an edge, or a “pit” in the language of Warren Buffett, which makes them superior and invulnerable to imitation. If consumers can find the same product for half the retail price at Amazon, why should they buy it elsewhere? So be sure about the product price and availability. If you want to start your MLM business with food or health items you have to check and confirm the pricing of your products. Product pricing is an important valiant of MLM business.
Reason 7. Run with the proper Compensation plan
Basically, each compensation plan is just one way to divide the money from the net sales that flow in the company, although the industry has presented innumerable variations. The most important thing is to make sure everyone sees the plan as fair to them. The company must receive enough money to continue operating with profits. You should pay the upline members enough to motivate them to stay with the company and recruit many distributors, or they will look for other options. The individual distributor must be provided with enough money, fast enough and help them see how they can make a profit in the business. Your MLM system should have a proper gateways plan to run it smoothly.
Reason 8: Do not take the activity seriously
Many people think it is a short-term mission. That’s the main reason, that’s what really makes a lot of people fail. Because it does not require enough investment to start in network marketing and for the same reason, people do not take it seriously.
Even if you only invested $100, take the activity seriously as if you had invested $1,000,000 in it. This is how you will succeed.
Reason 9: The Doubt
Doubt is a big dream killer. If you doubt network marketing, then you will never succeed. Unless you change your mindset.
So we are not saying to doubt your success (it happens to everyone) but never doubt the industry.
Keep in mind that even if you don’t succeed …
“Network marketing is one of the most reliable industries for developing financially and mentally”.
Doubt usually begins to settle at the beginning of people who start in network marketing when they are rejected, it is the thing that scares them most in all areas of life.
Remember that rejection is just the fact that the person is not open for what you presented to him, this is not the right time for him, he has worries, he has a very important project that he does not want to interrupt …
There you have it, there are several causes of rejection and it should not cause doubt in your brain.
Do not focus on “Oh my God! He just rejected me, I can’t bear the next rejection ”. You just have to focus on why the person rejected you.
Is this one of the reasons we mentioned above? So go to the Next.
Reason 10: Do not focus
Do you remember this famous quote?
“You can’t catch two hares at the same time!”
It’s the same thing if you want to be successful in network marketing and we think that’s what you’re looking for by finding out why 95% of MLM Companies fail!
So forget about other sources of revenue of the same type as network marketing and focus on your MLM for at least 3 years. We are not saying to give up your job, no!
Work part-time until you find at least the equivalent of your salary for 5 consecutive months and you can think about quitting your job and focusing 100% on MLM.
Reason 11: You have no vision
You have surely heard of this famous quote:
A man without a vision is a man with no future.
It is absolutely pure truth, having a vision allows you to have goals and take action.
Determine you are why to start network marketing and project yourself in 3 years, 5 years and more…
What you see yourself doing should be your main motivation!
These are the 11 reasons for failure that we learned in network marketing. Network marketing remains a simple and professional job, you must learn the mandatory activities to do to succeed and do not wait for the chance!
For many, it is an extremely attractive idea: the possibility of being their own boss, generating a good income, working a flexible schedule, leading a team and even possibly having their own online sales site. If you have an enterprising soul it would seem ideal, right?
In fact, many try using multilevel marketing companies ( multi-level marketing or MLM), a business model in which companies use independent distributors to make direct sales to the public of their products or services. Some of the most famous companies operating under this model are Herbalife, Mary Kay, Avon, Amway, and Pampered Chef. But there are many more that together represent a $ 35.4 billion annual industry in the United States. In 2018, more than six million people in the United States – 22% of them Hispanic – participated in one of these businesses, encouraged by the possibility of achieving financial independence or supplementing their income.
But the reality is that most fail and do not generate profits. They even lose money. After the discussion of why MLM companies fail, now we present 9 important things that you should know about multilevel marketing companies. This will help you to start a successful MLM business.
Key to success
“The secret formula is that you have to look for something not only to make money … it has to be something that pleases you, you are passionate because that will connect you with the product and people will feel it,” says Geraldine Otero, a Peruvian-Argentine 37, who lives in San Antonio, and turned his passion for health and nutrition into a very profitable business.
A single mother began selling Herbalife products part-time. He left his job to devote himself to a dance studio and sales of nutritional products in 2015. Currently, he has approximately 80 vendors in his team. But Otero points out that you have to be creative to stand out from others.
MLMs are a legitimate form of economic development, but you should familiarize yourself with them before getting involved. If you are interested in breaking through this business model, consider the following points:
1. Investigate and advise yourself
Before investing your money, research the company, its officials and products. Have you had problems with the law? Are there complaints from consumers or sellers in forums or websites?
Find out what are the initial costs to be an independent representative, the compensation plan and what is the company’s product repurchase policy, if you cannot sell them. According to the DSA code of ethics, to which its members are subject, companies must offer a 90% refund on products purchased within the year.
Consult with other people who have experience with the company and its products to determine if it is worthwhile to get involved.
2. How does the process work?
To begin, companies require you to purchase a kit of initial products with a cost that ranges from $ 30 to more than $ 1,000. When you buy more products, the company offers you bigger discounts.
Companies encourage distributors to sell products to their family and friends to start a network of customers. Generally, activities are carried out in friendships to demonstrate products and sell them. But that traditional model has evolved with current technology. Some distributors now have “digital stores” on the internet and use social networks to promote the products they sell.
3. Legitimate business or scam?
Not all MLM businesses are legitimate. Some are pyramid schemes where they do not offer products or services, but try to recruit people, usually offering quick enrichment to give money and in turn recruit others to contribute more money to the “pyramid.” That is a scam and it is illegal.
The law requires MLM businesses to compensate their distributors based on real sales to real customers. If they encourage their distributors to sell more to other distributors than to the public or to earn more money by recruiting than by selling, it can be considered a pyramid scheme. Some companies have been penalized by the Federal Trade Commission (FTC, or Federal Trade Commission) for resorting to this type of deceptive practice.
4. Understand the market
Beyond your network of family and friends, under what conditions will you act? For example, the product you plan to sell, is it from a recognized brand that advertises its products in social and traditional media? Who are your competitors? That is, other companies with similar products, or other distributors of the same company. Where and to whom are they sold? Is it a market that prefers direct communication, in more intimate meetings?
5. Ask for information in writing
Do not sign any contract or deliver a deposit of money without understanding the risk and your responsibilities. Take time to think and investigate. It is your money, your investment and your future, do not be pressured. Seek legal advice and from someone you trust who is not affiliated with the plan or the company.
6. Ask direct questions
Accurate details with company leaders and other distributors. Remember, it is your money, your investment, and your future. Depending on how they respond, you can assess whether it really suits you to participate. The FTC recommends asking: How long have you been with the company? How many people have you recruited? How much did you earn, net, last year? How much did you spend on training, product inventory, and expenses associated with its sale and marketing?
7. Warning signs
Avoid working with any company that:
- Exaggerate the potential of your earnings
- Press to sign a contract quickly
- Requires purchases or training with high upfront costs
- Does not allow the return of unused inventory
- Suggest that you borrow to buy inventory
- It has a bad rating with the Better Business Bureau
8. Advantages and disadvantages
Among the advantages is the flexibility of your schedule, the fact that you can work from anywhere, and the potential earnings, depending on the effort you put into it.
But there are also disadvantages. The initial investment can be large. To achieve substantial income, you have to work many hours, recruit other people and sell products to family and friends, something that can generate conflicts. In addition, since your participation is considered your own business, you are responsible for all expenses related to sales (for example, auto and insurance expenses), which decreases the profit margin.
9. Consider your interests, goals, and personality
After all, do you like to sell? If you think you will not enjoy selling products to strangers, or keeping accounts; If you do not have space to store an inventory or lack a reliable means of transportation, there are factors against you. It doesn’t matter if the product is good or you have a solid business plan, if you don’t like to sell or make new contacts, your way will be difficult.
Those who have tried their luck as consultants, such as Otero and Cruz, recognize that success requires a lot of time, dedication, discipline and the ability to interact with other people. Your recommendation to determine if making direct sales is something for you: start small to see if it is something you have the energy and desire to do.
The DSA has a self-regulatory process and a mechanism that allows consumers to file complaints and obtain help to solve problems associated with violations of the code of ethics of the organization, such as not delivering purchased products or not accepting the return of merchandise. It has a budget to reimburse money to the consumer while negotiating with the company. They only offer a financial resolution to people who file complaints from companies that are members of the DSA.
Conclusion and summary
There are many MLM companies who do not know how to set their goals to lead the business. Health products, nutrition even cryptocurrency are now the availble business products in this MLM business. For example, CryptoDevelopers helps the Cryptocurrency or Bitcoin base MLM business company to run it smoothly. They are the leading Cryptocurrency wallet development service provider. Also, they are professional consultants in the Bitcoin MLM software industry. Like this, you have to take services, solutions, and consults from a professional MLM business service provider. So that you can run your MLM business with the proper guidelines. And thus you won’t fail as MLM company ever. You should bear in mind that:
- Work hard at first, you will reap the fruits of your labor later and it will be easier (the reverse does not exist)
- Never give up after a refusal. It is bypassing the failures 1 by 1 that you will succeed
- Only count on yourself
- Be determined to succeed with unwavering conviction
To your success and development in MLM business…