Multi-level Marketing... Evaluating an Opportunity

Services for Real Estate Pros with RealSell Companies

Here is some information I provided in a proposal to some investors about five years ago:

The Industry (Cooperative/Multi-level Marketing)

After extensive research into the cooperative marketing industry, experts have developed three criteria that a cooperative marketing company must have in order to make it a most desirable opportunity.  They are:

A.)       The company must be 18 months oldThe reason for this is that 90% of all cooperative marketing companies that fail do so within the first 18 months.

B.)       The company must have a product that is both unique and highly consumableBeing unique in this case means that you have an exclusive product that can only be purchased from your company's members.  Having a product that is highly consumable means repeated sales, thereby guaranteeing customer loyalty, verses a one-time sale and having to locate new customers.

C.)       It needs to be a 'Ground Floor' opportunityExperts suggests that in order for the Opportunity to qualify as 'Ground Floor" there needs to be less than half of 1% of the population involved in the country or area where this network marketing company exists.  This figure is equal to 1.5 million people.  Experts also state that if there were less than 0.5 million people involved you would be on the cutting edge of a great opportunity.  Additionally, if the company has less than 100,000 members, it is considered to be a once in a lifetime opportunity.

There are (4) stages of growth in a cooperative marketing company.  They are:

•§         FOUNDATION - Usually lasts for a period of 6 to 12 months.  This is when the company develops its product and marketing plan.

•§         CONCENTRATION - Lasts from 2 to 4 years.  This is when the member network is started.

•§         MOMENTUM - This period usually lasts from 2 to 4 years also, this is when the company experiences phenomenal growth.  Both retail sales and membership growth explode.  It is during this period of time that the company visually sweeps across the nation.

When a company's sales reach $5.0 million they attain what is called "critical mass" (sales go vertical right off the chart), approximately two-thirds of the company's growth of new members occurs during this period.

For example, when Herbal Life reached $5.0 million in retain sales, they jumped to $151.0 million in retail sales in the following twelve-month period.  They also added over 80,000 members to their organization.

Let us assume we have an organization that is producing an override bonus check to us of $1,000 per month.  When the company reaches "critical mass", members automatically experience a ten-fold increase in their earnings during this period of time.  In other words, $1,000 becomes $10,000, with very little effort on our part.  This is the reason for getting involved on the "GROUND FLOOR', so that we will receive the benefits of explosive growth.

•§         STABILITY - This period lasts for the life of the company.  A network marketing company that is dedicated to the success of its members will experience longevity; thereby ensuring that an active distributor will realize continued earnings and growth.

Comments (3)

Joeann Fossland
Advantage Solutions Group - Tucson, AZ
Master Certified Coach to Motivated Agents

I've never seen it laid out like this. Thanks for the clear explanation!

Jul 12, 2008 03:16 PM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

I think it does not matter how you lay it out. The principal idea is that this is a pyramid, and the closer you are to the top, the more chances you have to make money. No MLM can be what the promoters claim it to be - a paradise and decent income opportunity for everyone. It is a golden opportunity for less then 10 on top. The rest are just feeding them.

Another thing is by the mere business model, MLMs charge you more for the product that you can find on the market yourself. Just Google the ingredients in Mona Vie and you will find a similar or better product for less price.

In my mind this is a legalized scam. All you need is a calculator and a 5th grader to show that ... well, arithmetically


Jul 12, 2008 03:25 PM
Walt LaDale
RealSell Companies - Rancho Dominguez, CA

I love the fifth grader thing!  :-)  Everyone dreams of paradise.  Some seek it and some work for it.  Many millionaires capitalize on an opportunity when it is ripe.  If we all took advantage of ripe opportunities, if we all were in position to purchase real estate or stocks when they are at all time lows, we would all be millionaires.  Not everyone can sell real estate and make a good living, right? 

Close to the top, if 1 million members out of 5 million members is considered close to the top, I for darn sure would be a part of the top million to be able to get a residual $2,000 per month in the mail (forget the $30k per month numbers).  There are a lot of folks who don't even make $2,000 per month.  You think they would not mind having an opportunity to build a business and make a few dollars. 

Everything is not for everybody.  The folks that speak against MLM saying that only a few make the money, its all relative.  There could be several hundred thousand people making good money on a monthly basis.  Good money is relative too.  Right?  $500 per month for many years to come for work you did years ago is good money to me.  How about you? 

This blog is definitely about MLMs and secondarily it covers MLMs that provide support services to Real Estate Transactions.  I do not get involved with the lotions and potions so I can not speak to the cost of Mona-Vie or other retail products.  It is not real estate serving so I don't work with it.  I really have only gotten involved with 2 MLMs.  One in 2000 and just here recently.  I'm no authority but I do the homework on the company or surround myself with buddies from other ventures that do the research.

I promote due-diligence, hence the info provided in this and my other blogs. I'm sure one would not buy any franchise or business without doing some level of research or asking questions about the product an the parent company.  With MLM most often times people do not have the right questions to asks.  Should not just ask how much money someone is making.

Once critical mass is reached the products become retail opportunities and then you have to compete for sales.  Guess what?  Move on to the next good opportunity if you need to or don't miss out on the next ground floor opportunity because the millionaires won't.

Great feedback folks... I enjoy it.

Jul 12, 2008 04:22 PM