Similarities and Differences Between Small Business and MLM

A multi-level marketing distributorship typically is a small business run by a person, a couple, or a family. It can also be a larger distributorship run by a company with several employees. I have known distributorships to have revenues of several million dollars per year.

In a typical small business, a product is invented, manufactured, and or purchased, and can be sold to a customer or to another business. Similarly, a multi-level marketing distributorship purchases product or the product is purchased on behalf of a distributor from the company, then is sold to a customer. A distributor will recruit other distributors to sell the product, which is similar to finding other businesses to sell the product.

In a small business, you could have the product drop-shipped to your customer (which could be another business). Similarly, the typical multi-level marketing company allows the product to be sold from the MLM company directly to the consumer with the distributor getting the credit. Drop shipping typically allows a company of whichever kind to keep their inventories low or non-existent.

So we see that the typical small business and the typical MLM distributorship function in exactly the same way. They buy and sell products for a profit. They can sell to customers or other businesses. They can both keep their inventories low or they can stock to meet customer demand.

The main way MLM is different is that it earns commission on several levels of business to business sales, i.e. your downline or network. This gives you a great incentive to help out those you sponsor, those they sponsor, and sometimes those 10 levels below you. MLM is a helping business. Multi-level marketing is also the kind of business where you can build up income over time for a less than superhuman effort today. You leverage your efforts with independent business people rather than employees. The income you generate can take you through retirement and you can potentially leave it to your heirs.

Now a multi-level marketing distributorship is a business and it can get busy. Busyness is a good problem to have though.

What’s Wrong With This Picture?

You are excited. You sign up and buy the kit. You are going to make big money. All you have to do is sponsor three and teach them to sponsor three. Sounds soooo easy. You call all of your friends and none – zero want to be your distributor. But but all you have to do is… Then you try and try and try, you get more and more frustrated. Then discouragement sets in. People are telling you that you seem like you are part of some cult, and that this will never amount to anything. You know what else your sponsor told you? That you never have to sell… Hey, you’ve been selling your opportunity to your friends and family right?

These are the two lies that sponsors tell: You only have to sponsor 3 – and you don’t have to sell. “Everybody” uses these lies, because they are true in theory. I mean, you don’t have to sell if you are buying for yourself and sponsoring others, or do you? Sponsoring is recruiting and is very similar to selling; so technically – it is selling. And you do sell to yourself. If you advertise, your marketing message is a sales pitch and usually requires a sales presentation as a follow up. Even if you are recruiting this is true.

As far as needing to sponsor just 3 people and teach them to sponsor 3, in my experience your attempt to sponsor from your warm market is nearly impossible and where else would you get just 3 from? Let’s say that you beat your head against a brick wall long enough and it crumbled… in other words you sponsored 3. The likelihood that all 3 will want to do anything is slim and none. Especially if you use the same “sales” pitch: sponsor just three, no selling involved. Some people will just sign up to get you off their back. Others will sign up and get busy. Others must watch Monday night football and have a case of beer nightly. Some just have the misfortune of getting sick, injured, fired, divorced… you just never know what you’re going to get.

Ok, so what do you really have to do? First, realize that you are in business. You started a small business and you will need to know how to sell your product. No way around it. You must sell to yourself, your warm market, people you know, and people you don’t know. You do this to learn their objections. Hey if you sell something, that is great, but your greatest learning experience is when people don’t buy. Why did they choose not to buy? Very important stuff because we need to learn how to overcome the objections to your product… mainly because the product is also the opportunity.

When you sell an opportunity, you are selling yourself as sponsor and your lifestyle, but you are also selling your product. Because… who is going to buy the product? We know from earlier posts that legal MLM companies must have product sales in order to pay commissions to distributors. If everyone is recruiting and nobody is buying or selling the product, how much money do you make? That’s right, zero. “Gasp,” you say, “I don’t want to work my butt off and earn nothing!” Well then, you must sell the product to yourself, to customers, and to your downline distributors.

Second, you must realize that even though theoretically it’s possible to only need to sponsor three (or four or five), the reality is that 95% or more of distributors will drop out. No matter how they are recruited, no matter how much support, no matter if you build their business for them, no matter if you have the greatest product ever… they will drop out. So you will constantly need to replace your drop out distributors in order to keep your business growing.

Another sad reality is that good distributors (i.e. big fish) work not with all of their distributors constantly, but mainly with their best producers. Do I agree with doing this? Absolutely. You should be there for all your distributors but usually it’s the best ones who want and deserve help. The others are bothered when you call them.

One thing you can do to keep drop out distributors happy: Don’t oversell your opportunity. If you tell your distributors they can make money while playing on the computer, they’ll be playing solitaire wondering why the checks are not flowing in. Tell them that hard work pays, they will either work hard or not, but they won’t be unhappy either way.

What Do You Do with Distributors?

On my blog, I have discussed the methods used to attain distributors which I will quickly review here: People will become your distributor in their time not yours. You need to have the patience of a fisherman, otherwise you will scare the fish away! Your job is to support them during the process of consideration, give them what they need to make a good decision then stand back. Any pressure or hype will probably get you distributors that will do nothing.

Once you begin signing up distributors, your focus really switches to supporting them. You should give them encouragement, train them, and help them as much as they will allow you to. You should give the most help to your best and most trustworthy distributors, and you could go as far as building for them with them by your side if this is agreeable to them.

You do also want to train them on the product.  The product’s uses, features and benefits, and why a customer would want to buy it.  Make sure that the distributor buys for himself so that he or she can experience the benefits personally.  Ultimately you want customer sales but customer sales follow personal use.

That is mainly it. Of course you continue to gather leads and work with prospects all along for yourself but now you have the added work of supporting distributors. The added burden is not huge and is usually enjoyable. However, don’t frustrate yourself because somebody is not doing their part, just work with the ones who are.

The Use of Loss Leaders, Discounts, and Promotionals

I don’t believe in giving away the store but there are times when loss leaders and discounts are in order. Loss leaders is product, samples, information, booklets, catalogs, etc. giving away at a loss in order to secure future business. A discount is a reduction in price but not so much that it creates a loss. A promotional item is something useful to someone else that promotes your business.

Many people expect samples, catalogs, and promotional material to be given away for free but they do cost you money. One thing I will say about giving away these kinds of items is that you only want to give them to people who want them. For instance, if you are doing door hangers, use cheaper materials and give catalogs to people who respond. People who receive catalogs otherwise will just throw them out and they are very expensive to you.

Giving away product is similar. It is very expensive to you so I would try to avoid this practice. Samples cost less. However, if you have a very warm sales prospect or very warm distributor lead, giving away an item might be in order. Use this practice sparingly or it may get very expensive very fast.

Sharp discounts should definitely be given to your warm market, i.e. family and friends. In fact, I would sell at cost to your warm market because they will be your best source of word-of-mouth advertising. Smaller discounts can be given to your best customers or those who buy a lot of product.

Promotional items are useful in some cases. For instance, I like to use inexpensive key chains or pens with my company name and web site address. I usually give them to people who ask for information. More expensive promotional items can be given to your best customers or prospects who may mean a lot of money to you. The more useful an item is, the more they are likely to use it and look at it. Still, I would not use it as a substitute for networking or advertising.

One thing you should never, ever do: You should never pay for a distributor to sign up. However, offering freebees to your best prospects is useful, especially to promote good will and to get them to open up to you. I like mailing postcards offering to send them free items to help them with their decision. Now they may call you because they have something to talk about, and that can lead to questions and answers about the business.

Even using freebees to people requesting them, i.e. free information and samples, can get expensive. We used to spend our entire profit from selling products on freebees, and we sold a lot of product. Especially when first starting out it is important to give yourself a business budget and stay within that budget, because you don’t want to find yourself out of business before you even get started.

Sales Presentations and Web Sites

We have learned a lot of things thus far so I just wanted to review at a high level. In MLM, you can sell or you can sponsor. You can do either or both by networking or advertising with the objective to get warm leads and give them a sales presentation. You can advertise for free or for cost, off line or on line. We learned that a sales presentation could be a one step or a two step process, with the final step using mostly company or company approved materials. We also learned that in sponsoring or recruiting, you mostly sell yourself and your ability to help your prospect become successful, avoiding references to your upline or company until necessary. We also learned that image is important and we build image by being professional and not by spending lavishly. Your advertising can be used for image building by telling the viewer what they should think of your company, but mainly advertising is used to gather leads.

Your sales presentation can be given in person, by video, or with printed materials but at the point you mention the MLM company or it’s products, you need to use company approved materials. I wouldn’t be too worried about writing a cover letter with key points for joining but the company usually has very good materials and you won’t get in trouble with them for using their materials. If you build your own presentation, you must work with your upline or company to make sure your materials are not going to cause you a problem.

A website can be your sales presentation to your prospect but again you must check with your upline or company about the requirements for selling or sponsoring online. Your website can do everything from beginning to end without your presence, which is great if you have prospects who want to do everything themselves. I would also allow some offline options, i.e. sending your prospect printed materials.

A website can also do so much more than deliver a sales presentation. You can use it in many ways to relieve you of telephone duties. Mainly you learn why a customer or prospect calls, then try to provide the information they need on your website. It doesn’t prevent all telephone calls but prevents some.

When you are starting out, it is important not to spend tons of money on things, but you can develop your own website with free tools that are available. It is definitely not so important to develop a site that you must spend hundreds of dollars. In fact, your upline may actually have a prospecting web site that you can use to provide information to your prospects.

Demographics, Metrics, and Advertising on the Internet

We are going to do a little review today since we have talked about so much so far. We have talked about selling products and recruiting, and I often mix the two because doing both is similar in a lot of ways. For this article, we are going to talk about the effort to recruit or sponsor a new distributor for your company. If we choose a random person out of the population, we learned that perhaps 1 in 100 will eventually join. And of those that you sponsor, only 1 in 100 will sell and or recruit. In other words, to get three producing distributors, you must contact about 30,000 people.

We learned that we can improve the odds of sponsoring, or reduce the number of people we contact, by contacting the right people. We do this by devising a demographic profile for a person who would sign up as a distributor. For instance, the person might be interested in business. They might be your best customers who want to buy at a discount. They might be top sales people. There are many answers to who might be someone who wants to be your distributor and you may start with one picture and change it later. But the more specific and accurate your picture is, and the more you can find people who match it, the fewer people you will have to contact before somebody signs up.

A metric is simply a measurement and we can use it in the following way: you must contact 100 people per distributor signed; that is a ratio of 100:1. As we improve our method of finding and qualifying people, hopefully our ratio falls to 10:1. Note that these are sample figures and only to be used for illustration. It might be that it takes 1000 random people to find 1 distributor, it really depends on many factors. But the point is that it takes much more random people contacted to find a distributor then if we only contact people that fit our demographic profile. And by continuing to improve our profile, we can improve our ratio.

Advertising on the internet can be great because you can be really, really specific about your demographic profile and actually find people that match it. In addition, you can do all kinds of metrics through tools provided to you or tools that you create yourself. For instance, if you do search advertising with Google Adwords, you can have Google display an advertisement when a particular search is done. For instance, when somebody searches “home business ideas”, it will pop up your ad. If the searcher likes your ad, they will click on the link and go to your site. A Google Adwords ad is sort of like a classified advertisement so you can also filter your prospects by wording your ad just right.

Google Adwords provides business people with all kinds of tools to measure the effectiveness of their advertisement. It shows how many times your advertisment was shown, for which search terms, and how many times searchers went to your site. The click-through ratio is a measurement of displays to clicks. You can also measure warm leads to clicks pretty easy by seeing how many visitors request information. Web space providers often provide data on unique visitors and much much more.

Google Adwords is just one example within a virtual universe of endless possibilities. Please feel free to do research on internet advertising by doing a search and see what you can come up with.

Advertising on the Internet

When you think of advertising on the internet, you may think of a web site. In my opinion a web site is not advertising but is your full sales presentation. You can build a website but that does not get you prospects. You must advertise your web site in order to get visitors, which could be prospects if they came to the website via a marketing message. Visitors may also be many other things such as spies or accidental tourists.

So you have built your web site but have no visitors, hence no prospects. What can you do to get prospects? Yet again you must advertise, somehow, to get prospects. Advertising for a web site can be done offline but this article is about advertising on the internet. Online advertising can be done in a variety of ways, some free and some for cost. Free advertising might be done by submitting your website to a search engine, posting a link to a free-for-all links site, or posting a classified advertisement. It can also be done via a social networking site like Twitter, Myspace, or Facebook.

Pay advertising can be done through various website. When you pay for advertising you should be guaranteed to get visitors to your site. Google has adwords which will post your advertisement in various places and charge you only when somebody clicks on your link.

One thing I had mentioned before is that you can advertise on the internet without having a web site. For instance, you can place a classified advertisement that has a prospect call you on the telephone for further information.

There is advertising galore available on the internet and you can do a google search to find more information or examples. If you want free advertising, search for free advertising. Regardless of how you advertise, your objective is to get prospects so you can give your presentation to them, whether on your web site, over the phone, in the mail, or in person. Not everyone will become a customer or distributor so we are seeking a constant inflow of prospects.

Advertising is a way that we can clone ourselves and not personally give a marketing message to each potential prospect. In other words, our objective with advertising, free or otherwise, is to save ourselves time. If it costs us more time to advertise than if we contacted people personally, we are doing the wrong thing.

I will post information soon about building a web site.

Motivation and Metrics

I have much more to talk about with regard to advertising, but I thought we would take a break today. And that is what you need to do sometimes because you have to enjoy your life. We get so busy beating our head against a brick wall in business that we do not realize we still need to be social, we need other activities, and generally we need to do things we enjoy. If you cannot both live your life and run your business, you will not be someone that people want to be around. It might also be a good idea to avoid business talk in social situations, where we are getting away. Note that we sometimes use social situations strategically for business, but there is a time and place for this.

It can be hard to stay motivated and getting away is one thing we can do to remain motivated to keep pressing on with our business. It is tough going day after day networking to build your business and have nothing happen. I am sure you ask yourself whether this is worth it or not. To determine whether it is worth it, perhaps you measure by looking at sales per contact or new distributors per contact. Personally, I would set the bar a little lower. How many contacts are you making? Of these contacts, how many act interested? You can use this to gauge warm leads per contact. If you are getting any warm leads at all, you are doing pretty well and you should pat yourself on the back.

If you are getting no warm leads at all, perhaps your demographic profile is a bit off. It might be a good idea to look at this and make adjustments. Are you contacting enough people? If your demographic is good and you are contacting these kinds of people, at least one in ten should show some interest. If you are contacting random people, your ratio may be as low as 1 in 100, which can be very discouraging, so make sure to contact the right people.

Metrics is about measuring, as we were measuring warm leads to contacts. We can also measure many other things and try to improve these measurements. However, remember that we want to sponsor the right distributors not just anybody, so we need to do things properly to make sure the right people join. This may mean that only 1 in 100 contacts join but that is ok. Better one hard working distributor than a bunch of drop outs or MLM junkies.

One thing about selling product that you probably need to know. Once you have a lead that wants or needs your product, you need to ask for the sale. I like something like this: If you buy today I can offer you a 10% discount. This creates a little urgency and offers a bargain to the customer. Closing a sale is important in selling but the opposite is true in sponsoring. People will sign up in their own time and you should be there when they have questions. They need to want to do the business, so let them sign up when they are ready.

Advertising in the MLM World

There are legal issues involved with advertising opportunities that you need to be aware of. There are often issues involved with using a company’s name, product name, and product likeness that you also need to be aware of. At this point, I am not going to go into detail about what you can and cannot do or can and cannot say, but I will say that your company probably has published rules or approved advertising. Bigger upline organizations will also be well aware of company rules and can help you out when and if you want to advertise.

You can choose to promote your product or opportunity in advertising by avoiding the company name (i.e. Amway) and such, but you do have to be aware of the laws involved with advertising. I personally feel comfortable with an advertisement if I am telling the truth and am giving the reader realistic expectations. I have seen bigger business people fail the second test and get in trouble. I mean, sure you can make $1 million a month, but nearly all distributors will fall short of this amount. Even using possible, i.e. $1 million a month possible, does not let you off the hook for setting high expectations. Even if you quote your own commissions, you may still be setting unreasonable expectations so be careful.

For an advertisement to be successful, there has to be something delivered or desired in return for the effort to respond to the advertisement. Free information is ok to use, but free information about what? Free information containing secrets about multi-level marketing. That is more substantial. But do you actually have secrets about MLM that others do not know? Again, we do not want to create unfulfilled expectations.

An important part of advertising is filtering. We not only want to attract people interested in the opportunity, we also want to filter out people who will waste our time, sign up and do nothing, or generally be a problem for us. Setting reasonable expectations helps, but we need to craft our advertisement to attract good people while avoiding others. For instance: Easy money in MLM. Make money while watching TV. This would not be good. Try this instead: Hard work in MLM is rewarded. Free report.

Your follow up information must fulfill your advertisement and generally should be a presentation for your product or opportunity. You could use a two step approach, giving a bigger advertisement on the first mailing, then delivering the presentation on the second. You could also do a one step or two step with a personal presentation at the end. Because the presentation is going to be specific to the company or the company’s product, you should use the company’s materials or have your materials approved by the company. A cover letter on letterhead is generally ok, but anything that goes into detail should be company approved.

I am going a little long with this blog and there is so much more I want to say about advertising. I guess we will have to continue tomorrow.

Free Advertising

A cynic would say that there is nothing free in life, that everything has a cost. Free advertising does have a cost and that cost is your time. Sure there is no monetary cost, but advertising for free will eat up a lot of time for the result you get. Still, when you are starting out, you have more time than money so spending time to advertise is a better choice than spending money.

Before I get too deep into where you can get free advertising, we need to define what advertising is. Advertising is a way to sell your product or opportunity without you personally making a sales call or presentation. It is your marketing message given out in your absence.

Advertising is meant to do one of two things or both: Gather leads for your product or opportunity and or create an image for your company. Good display advertising should do both. In classified advertising we are probably just asking for leads. These are two ends of the spectrum and there are many possibilities in between.

Print advertising is not the only game in town either. You can advertise on television or on youtube. You can also advertise virtually on line, which can be similar to display advertising or can do much much more. Media advertising is not the end of the road either, because you can deliver your advertisement directly to your prospect. For instance, putting a business card on the bulletin board in the grocery store or hanging flyers on the front door of homes.

So you can start to see how advertising can be either truly free or kinda free. You will have to spend money to print flyers or business cards but there is no cost beyond that. There are also many free classified sites online that you can make use of. You probably will get very few leads this way but the leads will be free.

Let’s talk for a bit about what makes a successful advertising. I had talked about demographics and asking for what you want in another blog. You can apply these to advertising also. To get the best response to an advertisement, you need to advertise where the viewers are interested in what you are advertising. For instance, if you sell children’s books, you may look into advertising in Parents magazine. This is an example and advertising in Parents would have a cost, but you can see what I mean.

Your advertisement must also be carefully crafted so that you are asking for what you truly want. For instance: Sell household products for profit. Free information: SM, Box 5432, Chicago, Illinois 60652. The responses to this advertisement will be people who consider themselves sales people, and who are not put off by the idea of selling household products.

These days, you can also create a web space for free or very little money and direct people to visit. Many people use twitter or facebook to get out a marketing message, which are both free. Do a google search on free website for more possibilities. I will write more about advertising in future blog entries.

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