Having recently injured my hand I have been looking at alternate methods of earning an income, rather than working with power tools. One of the things I am looking at again is MLM or network marketing. Being a fella that likes checking the math I have found that MLM could be amazing, especially if you own the business.
Multi level marketing or network marketing as is the new way of referring to the system could be a great way to make money but for a few pitfalls This article will show you why Network marketing can be great or can be a total waste of time and effort.
Did you know that 95% of recruits to MLM systems fail. Why do you think this is? Many would blame MLM for the failure and they would be totally correct. Greed makes the owners of MLM systems change the way it works to benefit themselves, rather than their "franchises"
I will be writing a series of articles to show why MLM as a system fails. The fact that some do make good disproves most of these theories, but I blame human nature.
The networking system in it's purest form will have you developing a matrix. Most network marketing companies will suggest a matrix with specific numbers. The easy way to describe the matrix is a s a pyramid. a 5 x 5 x 5 matrix would require recruiting 5 people who in turn would recruit five people to a depth of 5 levels. Your earnings will grow exponentially as your matrix grows.
In principal this is a great way to get a business up and working and develop an income for life. The truth of the matter is that a 5x5 matrix will develop along these lines if every level works as it should.
Level 1 5 recruits
Level 2 25 recruits
Level 3 125 recruits
Level 4 625 recruits
Level 5 3 125 recruits
Level 6 15 625 recruits
Level 7 78 125 recruits
Level 8 390 625 recruits
Level 9 1 953 125 recruits
Level 10 9 765 625 recruits
Level 11 48 828 125 recruits
We can see that by level 11 you need the entire population of South Africa signed up, On level 12 you run out of recruits. This is one of the reasons that MLM systems fail, because a point is reached when there is no one left that wants to be recruited.
Remember this is based on every single person that joins recruits just 5 people. Fortunately or unfortunately for network marketers 95% of people will drop out of the system and try another one. I read somewhere that 70% of people join and will never recruit anyone else.
These failure figures are good news for the ownership of the system, because they get the money and they don't have to pay huge commissions to the network.
They are also good news for the succesful MLM'rs because that means they can leverage their matrices, unless they have the 70% in their downlines.
Does this mean MLM or networking is bound to fail you. The succesful people prove the exception. The lesson you should be getting here is that if you get in early you are more likely to be successful than if you join later.
Because of the large churn, the results we see above will never be reached, but as with all things it becomes harder and harder to recruit people as the system ages.
Having said this, this focuses on one aspect of MLM only and that is selling the opportunity. Any network marketing system that is more interested in selling the opportunity than the product will create a negative system. If the focus is on a good product and you are selling product and building a real business, the power of the network can build your profits.
There are many networking businesses that want you to move product. If you have a ratio of 20 customers to one recruit, you are doing it right because you would be moving product rather than just selling the opportunity. 95% of people should be customers not distributors, sales people, or marketers.
Any networking opportunity that has you sitting with unsalable stock in your garage is also not a business. Any business buying more than it sells will end up broke, and that doesn't matter whether you sell tyres, trucks or teaspoons.
Any networking opportunity that claims, you don't need to sell is promoting an untruth. Every business will need you to do selling in one form or another. How else are you going to get customers or recruits?
Follow me on Twitter @guymclaren
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