Choosing An MLM Software Provider

Eight Killer Questions You Must Ask Before Taking Your First Step

By Michael L. Sheffield

If one of the popular "reality" shows promised to make you rich if you walked through a live minefield, but couldn't tell you where they were buried, would you do it? Unless you like the nickname "Peg", probably not. Because chances are it would blow up in your face.

When entrepreneurs use our free initial phone consultation to ask if they should develop their own MLM software in-house or hire some unproven software provider to set up their business, our advice is about the same. We explain that while it might sound tempting, don't do it. Because chances are it will blow up in your face. How can we be so sure? Well, the experts all agree.

As notes Jeffrey Babener, leading MLM attorney to a who's who of the direct selling world (

"A Multi Level Marketing Company startup is like a chain at the mercy of its weakest link. To be strong, it must have adequately addressed the issues of proper product, support tools, legal issues, marketing plan, compensation plan and commissioning software integrated with information and communication technologies. Wise entrepreneurs seek advice in each of these areas from experts with a proven track record. There is no substitute for experience."

Eight Killer Questions You Must Ask:

  • Does Your Size Really Matter?
  • What's Your Channel?
  • How Tangled Is Your 'Net'?
  • What Kind of Bait Are You Offering?
  • What Is Your Real Cost?
  • What Does Your Future Hold?
  • Should You Consider Outsourcing?
  • Who Ya Gonna Call?

Sheffield Resource Network agrees. How can we be so sure? When you have been helping Direct Sales, Party Plan and Multi Level Marketing companies grow from concept to success as long as we have, there are some things that are no-brainers. And deciding whether you should hire your "computer expert" or some geek-of-the-week company versus partnering with a proven network MLM-savvy software technology provider for us is a no-brainer. Unless you want your dreams to go up in a blaze of glory, you go with the pros.

Exploding the Software Myths

The battlefield of MLM start-ups is littered with failed entrepreneurs who have attempted to write their own software programs or chosen the wrong providers. What's really sad is that some of them had everything else going for them. Extraordinary products and concepts. Field leadership and distributor loyalty. Marketing sizzle and skills galore. A great story and personal integrity. And even the most precious commodity of all - momentum. But early on these entrepreneurs allowed some "computer wizard" or 20-something programmers working out of their college dorm get into their heads - and more importantly, into their wallets - and sell them on the idea that they could write the program that would set the industry on fire.

Unfortunately, the entrepreneurs are the ones who went up in flames.

Seems like their hotshot programmers had no clue about what today's hyper-competitive multi-level market and discerning prospective distributors expect. And by the time they finally understood, what they had developed was obsolete, incompatible with other critical programs or simply incapable of handling exponential growth. So, checks didn't go out on time or weren't correct. Leaders couldn't access their genealogy or determine their sales. Products sat in warehouses too long or simply were never delivered. The average prospect couldn't figure out how to enroll online and, when they did, neither they nor their sponsor knew what to do next. Customer Service Departments quickly became customer-complaint dumping grounds. The Compliance and Legal Departments grew more staff than Order Fulfillment.

Ultimately, the business imploded. With it went the time, money and livelihood of everyone who bought into the entrepreneur's dream. All because the visionaries didn't fully understand that the Multi Level Marketing industry is moving at the speed of light - and, all things being equal, those who stay current with the technological trends tend to thrive.

Eight Killer Questions You Must Ask

So, how do you avoid a potential business-killing situation? Ask yourself these killer questions before you take a single step.

1. Does Your Size Really Matter?

If your goal is to start a little company to give your kid a job and secure a tax deduction, you can probably find existing off-the-shelf MLM software to manage it. But if your dream is to build a company that will provide income, products, services, opportunity, and perhaps even financial independence for thousands - or hundreds of thousands of distributors - you need scalable software that will allow you to grow to that level without committing virtual business suicide.

Before settling on a vendor, confirm that the MLM software has proven installations that are supporting hundreds of thousands of distributors. You must prove this capability now, because once your business is in operation and has momentum you cannot put it at risk by having to convert to a proven software solution.

That doesn't mean you have to start out with the most expensive software package with every bell and whistle. It just means you need software that can keep stride with your growth.

2. What's on Your Channel?

On the grand scale, MLM is viewed as simply just another channel of marketing and distribution. But in reality, it is a combination of product offerings; business-building methods, distributor support systems and compensation plan options presenting a complex range of alternatives. The software company you choose must be amazingly proficient in managing your marketing method choice, be it pure Multi Level Marketing, Direct Sales, Party Plan, or the growing hybrid concepts that seem to dominate today's start-up ventures.

For instance, if your product requires demonstration or is sales-friendly in group presentation environments, a party plan may be your best choice. Your software provider must offer not only solid commissioning software, but the breadth of experience it takes to design software that will track hostess rewards points and ultimate compensation, handle retail commission rebates, and support preferred customer direct marketing campaigns. All this while continuing to compensate the original sales person, manage inventory and perhaps even fit your multi-language, cultural-sensitive international division by handling currency conversions, tax calculations, and any number of international issues that only an experienced provider is prepared to handle. So, it is easy to see that if your software provider or inside guru doesn't understand the present and future needs of your business, things will get harrier than Sasquatch on Rogaine.

Translation? Your wisest choice is an experienced software provider that not only specializes in the business channel you adopt, but has proven success with all of the distribution models (MLM, Party Plan, Direct Sales) and with international markets. When you expand, versatile software will give you the flexibility to move into new markets - without a new software system to boot.

3. How Tangled Is Your 'Net?

If you plan to do the bulk of your business with your distributors via the internet, you need net-enabling software technology that will allow your distributors to manage their entire business - online ordering, downline organization tracking, management and communication, prospecting tools, financial analysis and more. Self-replicating websites that integrate with your software are no longer a luxury but an expected tool.

New Web technologies are emerging every day from numerous vendors, and you must implement those that integrate and communicate with your existing software. You need proven tools for integrating and implementing third-party web solutions, so don't fail to ask potential software providers how many third-party web solutions have been integrated into their product.

Even if your product or service offering will be more "high touch" than "high tech," your distributors will rely more and more on you and their computer to manage their home-based business.

4. What Kind of Bait Are You Offering?

If you are fishing for minnows ( Multi Level Marketing novices), questions about your back-office support will never arise simply because they don't know the issues or even what to ask. But if you want to catch the whales of the industry - the seasoned MLM professionals who can catapult your business into the stratosphere - you must offer the right bait.

And one thing veterans - the kind with scars left from MLM companies gone bust - will ask upfront is, "Who is your technology provider?" They will grill you on the particular functionality that is meaningful to them. They'll inquire about the sophistication and applicability of your replicating websites. They'll ask if they can get their genealogy in real time and will expect scores of other tools that will allow them to leverage their time.

Understand that your MLM software selection is a major business decision, not just a technological one. Because, in the end, the software is running your business. Don't let your IT department or software consultant make this critical decision for you until you have had a needs based business evaluation. Make sure that your MLM software vendor can provide proven solutions and support for the type of business you are now as well as the type of business you want to become. Beware of software vendors that support only small MLM businesses.

5. What Is Your Real Cost?

If you think your in-house programmers can design, program, test, revise and deploy a reliable and stable MLM software application within your timeframe and budget, you more lost than Ozzie Ozbourne at a Toastmasters' convention. Even great programmers may lack in-depth MLM software experience, and therefore be clueless about how extensive and complex MLM software truly is. They see the tip of the land mine, but because they lack experience, they don't realize the hazard that is buried beneath.

Going with their own computer wizard is a common mistake for start-ups - and unfortunately almost always a fatal one. The history of Multi Level Marketing is strewn with failed businesses that went with a vendor who they thought could build MLM software from scratch.

6. What Does Your Future Hold?

Distributors will quickly become a very strong influence in any business decisions you make, and they will expect you to move at warp speed on their requests. Nearly all of these changes will require software modifications, and you will need to make them quickly, seamlessly and accurately. Experienced MLM software vendors are accustomed to these changes and have designed their software to accommodate them rapidly. And they can usually predict where most of your changes will be made, while inexperienced in-house or novice MLM outside programmers probably couldn't even guess where future changes are likely to occur.

Remember: An MLM company usually has one chance to succeed. If you can't be responsive to your distributors because you're waiting on your programmers, you're likely to lose your opportunity for success.

7. Should You Consider Outsourcing?

The life of your business depends largely on your ability to manage your most critical asset your sales organization. And the ability to do so successfully rests on your access and ownership of the data that tracks their sales and produces their commissions. Although the vast majority of all major MLM companies host their own data on their own servers at their home office, there are a growing number of new start-up software providers selling a service bureau approach. However, take caution here! This is an awesome responsibility to put in the hands of an outsourced provider without understanding how to manage your own expectations.

You had best do your research and select a stable and proven partner. They will want you to give them your data and let them manage it with the promise of saving you the expense of an in-house IT manager. But consider this. What would happen if that new "access everything over the internet" provider lost power the day you were running commissions? What if their server crashed? What if they went out of business? What if they wanted to hold your data hostage because of some disagreement between you and them? If you are just starting your company and have limited people and financial resources, the service bureau concept could be a practical and cost effective solution for you. Just make sure that your provider has a good reputation, a satisfied client base and is financially solid. Also, make sure your agreements allow you to transfer the hosting of your data to your own server at your home office when the time comes, and that this transition will be smooth and reasonably painless. .

8. Who Ya Gonna Call?

Okay, so the image of looking like Wile E. Coyote after the TNT goes off has finally convinced you to go with the pros. Now, where do you find them and how do you determine which one is best for you? You start by asking even more questions from people who can provide the right answers. Questions like: Who is regarded as the best software provider in the industry right now? Who are the most promising newcomers? Who has the best track record? The most experience? The latest cutting-edge technology? The best IT support in their maintenance package? Who can I afford?

If you ask enough of the right questions of the right people, a few names rise to the top over and over again. Once you narrow the search to the top three or four, you then simply interview each of them and determine which is the best fit for your company.

There's a timeless adage that says an ounce of prevention is worth a pound of cure. Never has that advice been more applicable than to the entrepreneur taking the walk of faith into MLM. If you are to remain unscathed, we highly recommend you choose a software provider that has thousands of hours of MLM experience. Select a respected vendor that is competitively priced and stable enough to provide service, training and support from the moment you launch until the day you are managing your entire company from your laptop on the beach. Most of all, choose a software partner that will have the foresight to make your business smarter, safer and stronger every perilous step of the way.

Michael L. Sheffield is the CEO of Sheffield Resource Network, a full-service direct sales and multi level marketing (MLM) consulting firm. He is also cofounder and chairman of the Multi Level Marketing International Association (MLMIA). He and the Sheffield team have assisted in hundreds of national and international MLM corporate start-ups as well as offered a full line of services for established direct sales companies. As the most noted expert on compensation plans, he has been a guest lecturer for the DSA, University of Illinois, University of Texas, Berkeley and Harvard Alumni Association. He has helped launch over 200 new products marketed by direct selling companies around the globe. He can be contacted at 480-968-6199 - 1805 N. Scottsdale Road, Suite 7, Tempe, AZ. 85281 website address:

(Reprinted by permission)

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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