Editor’s note: This article was first published in May 2010, against the background of job losses during Spain’s economic crisis; the entry costs it quotes (from €300 to €10,000, usually around €500) are 2010 figures.
Everyone has heard of multi-level marketing businesses, which, with new technologies and the internet era, have given rise to online marketing networks: network marketing.
Because of job losses, many people are trying to find out whether multi-level businesses really work or not. Today we will try to clear up many of the doubts an entrepreneur has when thinking about starting out in this kind of business.
When should you consider a multi-level or network marketing business?
You may know people for whom this kind of business has brought a better quality of life, and others who feel cheated by it. It all comes down to the entrepreneur’s mindset. Not everyone is cut out for the same thing. You could say this idea is worth considering:
- If you want residual income for a long time, or for life.
- If you want to be independent in your work.
- If you want your own business with minimal investment.
- If you are willing to put in time until it becomes your main income.
- If you don’t need the money right now.
Advantages of multi-level or network marketing businesses
- Independence: Even if you join at a small level of the pyramid, you will build your own network of sellers, your own team, so it will be your own business within a network.
- You can start part-time until you go full-time: This can also be a disadvantage, as we will see shortly. But it is a way to get started with the idea while you keep your current job, so you would not be under financial pressure at the beginning.
- You don’t start from scratch: This is very important. You join a business that already exists and whose products are already on the market, so others have done the work of introducing them and have found the best ways to sell them, ideas they will share with you.
- Multiplied earnings for the same effort: Once you have built a distribution network, you will earn income from your affiliates, and when they bring in new affiliates you will get paid on each of their sales. Some multi-level businesses pay commissions down to the eighth level of affiliates.
Drawbacks of multi-level businesses
- It is your business only up to a point: Let me explain. Earlier we said it is your business within a network, but it is not really your business. You may do well, but if tomorrow the company decides to invest in some venture and goes broke, or simply decides to shut that system down, it would affect you and you would have to change business. Not everything is in your hands.
- Not everything is as it is sold to you: Some multi-level companies look for professionals and are professional when it comes to advising you. Others promise you will earn large sums of money in very little time, and as a rule that will never be the case. It is not easy money at first, nor is it fast money.
- It requires an investment: Be clear that any kind of multi-level business requires a minimum investment. It ranges from €300 to €10,000, although as a rule you can start with €500. That is why you need to be very sure.
- With no fixed hours, you can slip into neglect: Not having a start and finish time is a big advantage, since it is your business, but you can also fall into the irresponsibility of not working, because nobody is pushing you for results. Keep that very clear in your mind.
Now it is up to you to weigh the advantages and disadvantages of multi-level businesses. Before you start, you should be clear about how involved you are going to be and what mindset you will bring to this business.
Why do some people succeed in this kind of business while others fail?
I am sure it is a matter of mindset, just as some people open a restaurant and fail while others succeed. You also need to know how to choose which network you want to belong to.
- Look for one that sells basic necessities or, failing that, products that encourage saving rather than spending.
- An established network has its advantages, but also more competition. A younger network has more room to grow and less competition.
To find out what mindset you should have before starting any activity, I recommend reading our article on the mindset of an entrepreneur carefully.
Further reading
- The aptitudes you need before going into multi-level marketing
- How to start a business with no money
- Start a business or buy one?
- 10 ways to carry out your business idea
- 5 ways to grow your business
Featured image: State Library and Archives of Florida, Public domain, via Wikimedia Commons.
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