"...it's a question of expectations. And, sometimes those expectations can get in the way of a successful career in the MLM business."

Ten Common Distributor Mistakes -
And How To Overcome Them

By Jeffrey A. Babener

  1998

  1. Inflated Earnings Expectations
  2. Go For The Product, Not The Plan
  3. Don't Think Short Term
  4. Easy Money - It's Not
  5. "Gimmicky" Product - Forget About It
  6. Don't Ignore The Company Track Record
  7. Run Away From "Front-End Load"
  8. Look For Products With Profit Margins
  9. Don't Be an MLM Junkie
  10. Don't Sit Around

Great Expectations

It was Yogi Berra who said, "If you don't know where you're going, it's going to take you a lot longer to get there." And, sometimes networkers, with the best of intentions, turn down the wrong path. It's not a physical turn, it's a mental turn, it's a question of expectations. And, sometimes those expectations can get in the way of a successful career in the MLM business.

Here are ten common mistakes that networkers make. These mistakes are often ones of attitude, missed judgment calls, or misinformation. Addressing those mistakes, however, will get you "there," as Yogi said, a lot faster.

1. Inflated Earnings Expectations.

Yes, it's true, there are many millionaires in the MLM business. Well, there are many millionaires in the NBA. But, how many schoolyard ballplayers make it to the NBA. Precious few.

This is the case for earnings opportunities for networkers as well. In fact, the earning opportunities are unlimited. It is also a fact that relatively few, probably less than one percent, will ever make the "big money."

Statistics indicate that less than ten percent of the distributors in the business are full time. By and large, network marketing offers a great part-time activity for folks who keep their day job. Realistic expectations and goals for the average distributor should be an extra $400 or $500 per month as auxiliary income to their permanent job. A distributor who is locked into expectations of the "big money" will soon be disappointed and drop out. In addition, a sponsor who recruits other distributors with expectations of the "big money" will soon find that he or she has lost credibility with those that he or she has sponsored. In other words, be hopeful, be realistic, and your distributors will likely be around for a longer time.

2. Go For the Product, Not the Plan.

Too often, recruits are seduced into a program by a "sexy" plan. Promises of instant riches are held out as the result of compensation plans that are "break-through," "revolutionary" or whose payout guarantees instant riches.

In fact, history has demonstrated that no company has been successful on the basis of its compensation plan alone. It may get a jump-start and zoom like a rocket, but it will fall like a rock in short order. Of course, a fair compensation plan that provides good incentives is important. But, the "sizzle" plan is often an excuse for poor product and poor management. A "sizzle plan" will not carry the company or its distributors long term. In the long term, it is the company's quality products to which distributors are bonded, and its management and its vision that will carry the day. Networkers should turn their attention to these attributes instead of the "magic pill" plan.

3. Don't Think Short Term.

The MLM business is like any other worthwhile endeavor. Distributors who look for success in the short term are preparing themselves for failure. Realistically, a distributor should not be expecting to see the true fruits of his or her labor until at least six months into the business. Those who have been truly successful have been at it long term. Give yourself some time. Remember what the famous economist Milton Friedman said, "The future is longer than the present."

4. Easy Money, It is Not.

Often times, the MLM recruitment pitch is one of "easy money." Prospective recruits are told that they don't have to work, they don't have to sell, they just make lists and $20 bills will sprout wings and fly into their mailbox.

Those experienced in business will tell you that this is not an easy money "game." It is not merely a recruiting game. It is not a game. Distributors who are successful know their product, know their customers, know the company's vision, and are prepared to do that which is necessary "hard work." A distributor whose mind-set is on laying a "foundation" rather than looking for easy money will be around a lot longer.

5. "Gimmicky" Product - Forget About It.

If you're looking for an amusement park ride, go to the amusement park. Getting on to the roller coaster of a company with gimmicky "fad products" will yield a lot of ups and downs, but the ride will be over quickly. Sometimes, companies can follow through on the momentum of a fad product with a fuller product line. More often than not this does not happen. MLM history is littered with skeletons of diet cookies, 3-D cameras, 5-year light bulbs and thigh creams. From the onset, distributors would be better served to look for a company with a solid product that makes sense and one for which there is a true "real world" marketplace among consumers.

6. Don't Ignore the Company Track Record.

It is true that the "big money" is often made by those who get in on the "ground floor." And yet, for the average individual, the ground floor opportunity may be of little value if the ground falls out from under them in a short period of time. The success ratio of MLM companies is probably no different than that of other small businesses. For better or worse, there is a significant failure rate.

Therefore, a distributor who is looking to increase his or her odds should pick a company with a track record, preferably a company that has been in business at least for a year and has demonstrated quality management. For those, however, who are not faint of heart, and wish to take the plunge at the very beginning, they should do some significant due diligence as to the principles of the company, their prior success in business, their infrastructure and talk to other distributors that are coming in on the ground floor.

7. Run Away From the "Front-load."

The company that needs to "front-load" distributors with unnecessary inventory will require substantial "cash investment" and is unconsciously sending a signal of failure to the prospective recruit. In a day of UPS and Federal Express Next Day Delivery, no distributor should be asked to carry large investments of inventory. The only true rationale for such a practice is to generate large sums of money for the payment of large commissions to "heavy hitters" who develop "recruiting machines." These programs are disguised pyramids and, when the recruitment slows down, the opportunity will also disappear. In addition, the company will not be around to take back the huge inventories foisted on unsuspecting recruits. Give them a call and you will find that the phone is disconnected. Instead, look for a company that demands modest investment from its distributors and ask its distributors to purchase product in an orderly fashion for intended expectation of personal use or sale. Autoship programs for both customers and distributors represent a far more sober and long-term approach than large front-loads.

8. Look for Products with Profit Margins.

Too often distributors are distracted by the compensation plan or the earnings hype to spend time looking at the profitability of the products and services sold by a company. A company with a proprietary product can justify a higher profit, which means the ability to pay commissions in the long term from the sale of products or services. Historically, this is why the largest and most successful MLM companies have had, as their mainstay, consumable products that are proprietary such as nutrition, personal care or household products. These products are unique to the company, allowing for sufficient profit to pay commissions.

The closer the company's product is to a commodity or something available generically in stores, the less likely the company can mark it up and achieve true profit margins for paying commissions. There can be no profit margins in selling a commodity such as an American gold eagle coin for instance, and thus companies must look for other inappropriate sources of revenue to pay commissions. Services represent a significant future in the MLM industry, but such services as telecom or internet access carry a much smaller margin of profit. These are fine products, but a distributor who embarks on a career selling low profit, low margin services should be prepared for the fact that it will take a much larger volume of customers to achieve the same residual income as selling products with high margins. In addition, distributors should be careful to study the program and determine that the long-term future of the company is not built around the redistribution of high-priced training fees for distributors as opposed to the residual income from service sales.

9. Don't be an MLM Junkie.

There are a few distributors in the industry who have developed the ability to "work" multiple programs. Those professional distributors are few and far between. Since the average distributor is part-time to begin with, he or she should carefully pick a company and stick with it. History favors the long-term committed distributor rather than the MLM junkie who hops from company to company to company. It is difficult enough to focus energy on one company and its products, let alone several. Splitting your time and energy among several companies will probably yield thin results compared to focusing "like a laser" on one company.

10. Don't Sit Around.

Activity is the name of the game in MLM. It may sound odd, but the expression "you snooze, you lose" is very applicable to this business. It is not enough to join the company, call all your friends at once, and expect the money to come rolling in. One of the worst mistakes a distributor can make is to sit around rather than getting "proactive." The most successful distributors are ones that are constantly recruiting, constantly selling, calling upon the same prospective customers and recruits multiple times, and reinvesting a substantial chunk of their commission check back into the business of recruiting and selling. Those that merely "sit around" will have unfulfilled expectations and be "lonely."

And, so ...

And so, remember that much of the success or failure in network marketing is determined by the attitude and vision of the traveler. If you will recognize some of the common mistakes by distributors, and instead, head off in a more productive direction, you will get to where you want to go - much faster.


Jeffrey A. Babener
Babener & Associates
121 SW Morrison, Suite 1020
Portland, OR 97204
Jeffrey A. Babener, the principal attorney in the Portland, Oregon law firm of Babener & Associates, represents many of the leading direct selling companies in the United States and abroad.

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