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Why MLM is a Better Business Model
Why MLM is a Better Business Model:
You might be surprised to learn that MLM (multi-level marketing) is being taught in many MBA programs (although they often give it another name- relationship marketing, stakeholder marketing or social network marketing).
MLM has gone legitimate. From it’s unfortunate beginnings, when it was associated with pyramid schemes and get-rich-quick scams, distributed marketing (nothing like a new name!) has emerged as a tried and true method for low capitalization entrepreneurs to build their own thriving businesses.
Some of the successful long-term MLM companies are familiar names- Avon, Amway, Neways and others. Critics are left without a good answer when presented with these examples of the MLM business model working day-in and day-out, as steady as any blue-chip company on the NYSE.
What are they teaching MBAs about distributed marketing? Here are some of the advantages over traditional business models:
Low startup costs.
Financing a new business is a task no one enjoys. The hunt for a lender, initial loans and debt financing make most startups a partnership. The unwanted partner is the bank or venture capitalist who’s holding your paper. And this marriage isn’t going to end with a quickie divorce- either you pay the loan off or go bankrupt. When two out of three new ventures fail, you have to wonder at the courage it takes to put your house and future on the line for an idea.
None of this comes into play with MLM. The initial outlay is extremely low. The anxiety of working for your lender is eliminated. The usual setup is low to no inventory, no physical location (rental of commercial property is avoided) and no liability insurance. You get the tax advantages of any business without the overhead. Which brings up employees…
Low labor costs.
Traditional businesses hire, train, and eventually fire employees. The relationship is similar to the one we have with machines. You buy/rent a lawnmower, set it at it’s task and throw it away when it breaks. Is it any wonder most employees don’t like their jobs? They understand the fundamental flaw in the game; they sense it is rigged against them.
With MLM, the closest thing to employees is the down-line. But these people aren’t working for you so much as they are working for themselves. There is a future for them in creating and sustaining their own down-lines. And it’s commission sales. Income isn’t predicated on hours worked, but rather, on sales. There is an old saying that is still true, “You can’t overpay a guy working on commission.” The more your ’employees’ produce, the more they make and the more you make. All without paying withholding taxes, liability insurance or medical benefits.
This joint success has been artificially mirrored by corporations who talk about ‘associates’. But that’s a fiction; none of those associates are ever going to own more than a tiny slice of the real profit pie. Not so in MLM. The only real way for an up-line to succeed is if their down-line succeeds. Shared profits are built into the system and provide the incentive that is missing from a 9-to-5 job.
The pacing advantage.
When you work a normal job or own a regular business time is a commodity in short supply. There is always pressure to meet some deadline and beat the clock. Without the time to move thoughtfully, we are put under a great deal of stress and we make mistakes. Business doesn’t have to be this way. By easing into an MLM gradually, new members set their own pace. Sure, it can be hustle and bustle if that suits your personality- but it doesn’t have to be. You can’t overstate the benefits of working because you want to, instead of because you have to.
“But,” critics argue, “You don’t know how much your paycheck will be every week.”
My favorite answer to this is: “Yes, but I can’t imagine how you live knowing what your paycheck will be every week.”
It’s simple. A wage slave makes the same amount every week. Stability is the reward. But stability is also a prison. They are never going to have a series of good weeks while their business grows into a series of good years. Since most MLMers transition from a weekly paycheck job by developing their own down-line, the pressure is minimal. It is possible to have your cake and eat it too.
Without the need to make loan payments or meet a sales quota, MLMers can focus on quality instead of quantity. Sure, sales matter, but attitude and motivation matter more. You have the luxury of time. Time to try out new ideas and methods, time to learn and grow, and time to network with peers.
Another advantage of MLM is the support structure. Small businesses are usually started on a sink or swim basis. There’s a spirit of competition and survival of the fittest right away. The best you can do with a brick and mortar operation is buy a franchise- but even then you are trading your freedom for any tips and tricks they pass along. With MLM the paradigm is different. Since your up-line depends on your sales and growth, they are more than willing to mentor new members.
By getting real-time advise and direction, new marketers can stay on-trend, taking advantage of other members’ adroit moves and avoiding their mistakes. This is especially valuable when marketing on the Internet, where fast adaptation is quickly rewarded. You can’t wait for some technique to make its way into a book or a lecture; you need the info now, while it can still do you the most good.
Beyond this, mentoring helps you establish the essentials. There’s a huge amount of business knowledge available to tap into. Affiliate marketing, ezine and forum marketing, network marketing and a host of other techniques for growing a solid and productive down-line are there for the taking.
Instead of the trade secrets model found in the rest of the business world, you find helpful teachers who’s profits are tied directly to yours. Compare this with bosses and managers whose sole function is to keep your wage as low as possible. The contrast is apparent and makes you wonder why anyone would take a salaried job.
In truth, this is the reason most people get into MLM. They recognize how limiting their current employment situation really is. MLM is full of examples of people who have made outrageous sums and live exotic lifestyles.
What isn’t as well reported are the folks that make it less than super-rich. That’s enough for most of us- a steady source of income to augment and eventually free us from the daily working grind. What MLM offers us is a future worth having. We don’t have to be ultra-rich (although that would be nice) we just want a chance to grow out of the current rut we are stuck in.
We see that the time we have to sell an employer is limited. It is limited in amount and it is limited in how much we can get per hour. The beauty of MLM is that my efforts today do not die away as tomorrow dawns. A down-line is like a garden, you plant seeds, you water and weed a bit, but mostly you sit back and let nature take its course. And then you reap the benefits of a harvest that grew up while you were doing other things.
By leveraging my time- in essence multiplying it- I am freed from the inherent limits. Something I do today will be paying me for years to come. If I repeat the same process tomorrow, I can add more and more to my storehouse. This is the real reason MLM works, this ability to keep yesterday’s efforts alive and well. And it’s something you won’t find in a traditional job.
About the Author
Rebecca Commerford of www.MLMStop.com
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