Network Marketing--The New School, Part 2

Network marketing opportunity "buy-in" prices range from less than $30 to about $500 throughout this dynamic segment of the direct selling industry. For that "buy-in" price, you receive a "business kit" that usually includes excellent product knowledge information, a few marketing tools and other knowledge--such as tips on developing a contact list--sincerely designed to help you succeed as a home business owner in the network marketing distribution and compensation system.

Okay, so you buy in. You get your kit. You go to work. Immediately previously unrevealed business expenses explode around you like skillfully disguised time bombs. Check the numbers.

On your full-time job, your take home pay totals $2, 264.35 per month, and after bills, including daily transporation, as well as savings, you have $75 unclaimed money each month. Now that you're "in business," you discover, much to your dismay, that your sponsor and others "in the business" expect you to attend weekly "business" meetings, usually in a local hotel, that costs you about $250 annually. That's $5 per week times 50 weeks. Your sponsor also urges you to attend the manufacturing corporation's annual convention that will run at least $975, including transportation costs, if several of you ride together. Marketing materials, such as brochures, business cards, CDs and DVDs will cost about $240 annually or more. Other marketing expenses could run as much as $1,200 or more your first year "in the business." Setting up your business properly which means, among other things, registering it locally, federally and within you domicile state, along with choosing a business entity that protects personal assets, could cost almost $1,000 or more, depending upon several variables.

Let me explain,

According to a spokesperson with the Direct Selling Association that I interviewed recently at least 95 percent of network marketers operate as sole proprietors. That business entity exposes both your business and personal assets to litigation. Consider this possibility. I contract to distribute products for a new wellness company. Despite their best efforts at quality control, a bad batch of suppements slips through the process and winds up in the hands of one or more of my customers. Since the company drop ships orders, I will not know about the problem until my customer(s) tell me. Next, I could be receiving legal papers from those customer(s) who believe they were harmed by this bad batch of products that I recommended that they buy.

These customer sue the manufacturing corporation and my company, the sole proprietor and wins. The leaders of the manufacturing company face no personal asset exposure, but I do. The litigant could take my home, car, etc. because there's no legal distrinction between me and my company. Therefore, an estimated 14, 250,000 professional network marketers risk losing everything they worked so hard to achieve. To avoid this possibility, every home business owner should organize each network marketing contract inside a legally structured business entity. The best examples include a corporation, a Limited Liability Company or a Limited Partnership. In the Private Discussion Group we operate, we have an article entitled: "Do you know how to protect your assets?" that answers the pertinent questions surrounding this issue.

Now, back to the numbers.

Your first year business expenses, using the numbers I mentioned previously, as examples, total $3,415. That averages to about $284 monthly. Most new network marketing professionals try to fund their Business Operating Budget (BOB) from revenues--selling products and services to their so-called warm market. Just to break even, you will need almost $290 in commissions each month during your initial year in business. Using just one contract among the several contracts our LLCs have with various manufacturers, we would have to have at least 20 customers spending at least $50 each month. This produces $1,000 in retail sales, and since this company pays us 30 percent commission, our company generates $300 in monthly business revenue. Since each month, I need a different 20 customers buying about $50 in products, I need 240 buying customers throughout the year. With a five percent closing rate, I need a list of 4,800 prospects to contact each month with marketing presentations. Since almost no one's "warm market" numbers nearly 5,000 individuals, where do we get the names of that many prospects, and how do we reach them? It requires astronomical numbers to calculate the chances of an one-on-face, face-to-face marketing strategy working with those numbers.

Okay, what if you use your personal money--the $75 left after paying bills each month? Using this money produces a business operating budget deficity of $209 each month or about $2,600 annually. That's one of the major reasons that about half of the new home business ventures fail within five years--inadequate start up and operating capital to fund the company's budget. In other words, you cannot pay all the "bills" in your life and fund your company's BOB on your paycheck-to-paycheck lifestyle.

You need an Action-Based Capital Development System (ABCDS). That system already exists. You do not have to invent it. You need it revealed to you. You need to learn how to work it.

In one aspect of the ABCDS project we use, we show clients how to access governmental assistance that will finance about one third of your annual home business operating budget. In another project, we introduce clients to one of our new business partners where, with just a little successful effort, a new home business owner can generate almost $100,000 in business capital annually. In the third project of this system, we show clients how to tap into a network of individuals seeking quality, usable and workable home business information. Provide that information to a targeted market for an affordable price, such as $1 and through the initial three stages of this strategy, you will receive from this network more than enough capital to finance your Business Operations Budget.

Your attitude provides the key to the success of the ABCDS project. First, you must think, believe and behave as a business owner, not as an individual who suddenly receives a windfall of money. Second, you must maintain your vision of developing a business system that empowers you to achieve time, financial and debt freedoms. Greed, ignorance and impatience kills this venture as surely as hitting the neck of a goose that lays golden eggs robs you of lifelong wealth.

Next: The seven performance laws of success in action