The most misunderstood business model

It is a $40B industry in the USA. About 20M people are involved. It permeates many sectors. Its leverage effect makes it a very powerful business model, yet it is widely misunderstood and often carries a negative connotation.

I 'grew up' in the traditional retail sector. I worked for a fast moving consumer goods multinational. I consulted for a distributor. My most successful venture was a purchasing platform linking manufacturers, wholesalers and retailers. I thought I knew a lot about retail, yet I only discovered the network marketing business model about eight years ago.

Before that, I had a vague, negative feeling towards this alternative retail model. Like for many people, this feeling was groundless. It was just an instinctive reaction based on what appeared to be a general consensus, a complex of superiority over the ¨Tupperware ladies¨. I had in fact never taken the time to understand fully its mechanics and missed a powerful business opportunity all these years.

Network marketing, also called MLM (multi-level marketing), and pyramid scheme by the people who least understand it is a retail strategy for the sale of products or services where the MLM company incentivizes a non-salaried workforce to sell its products/services through a variable commission-based plan. I won´t go here into more details of the model as each MLM company can set its own commission plan. I would suggest you to read The Business of the 21st Century by Robert Kiyosaki if you want to learn more.

A powerful model

I will focus instead on the key factors that make this business model so powerful to me as an entrepreneur.

1. You can start a global business instantly.

No need to register a company, to buy stock, to organize logistics, etc. Now that most of the sales go through internet (it was not the case at the time of the Tupperware ladies), you can start selling the goods/services on a global basis as soon as you decide to get involved.

2. No capital is needed.

I do not know any other business requiring time and efforts (i.e. not the lottery) that you can start with so little money and potentially reach so much. I have challenged many business friends to show me one as I would surely want to engage in it. Unfortunately, no proposal has ever come forward.

3.There is essentially no limit to your income.

Some MLM companies have more potential than others. So it is important to choose well the company your are working with. For the biggest companies, your potential will only be limited by your time, efforts, ambition and grit.

4. Income is recurrent

Once a critical mass has been built, the recurrent income generated by the business ensures a lifestyle with much free time.

5. Anybody can do it.

You do not need a PhD to be a great distributor. All the skills required for this business can be learned. In fact, a good sponsor would teach them to you.

I could mention other factors like the fact that you can easily change your business' jurisdiction as it grows, or that it provides a stable income in retirement, or that it can easily be transferred to your children.

Choose well

As I mentioned earlier, all MLM companies are not equal, so aligning yourself with the proper company requires some careful thinking. Here are the 5 criteria that I used in choosing the company I am associated with:

1. A listed company

Choosing a company listed in the stock market ensures transparency of information, continuity in professional management and better access to capital to manage growth.

2. Quality products

These products should be based on strong R&D, with a strict manufacturing process and a reliable quality insurance.

3. High growth potential

Growth makes selling easier so I am looking for two things: an extensive new product funnel, and a strong ability to manage growth.

4. The best commission plan

All companies have different rules to the game. Compare the commission plans and choose the best. A good company with a poor commission plan will make it harder for you to earn a good income.

5. People

People are a big part of this business. Make sure you choose a company with a culture you relate to and people you would enjoy spending time with.

Once you get into it, network marketing is quite simple to understand, however it is not easy! It requires hard work, perseverance and grit, but it is the only business that allows any motivated person to reach financial freedom. If you are still skeptical about it, do not take my word for it. Just dig into it with an open mind and reach your own conclusions just as this Forbes' writer did. And please share with us your findings so that we can all progress.

Thank you!