Yoli Founder Daren Falter warns “What to Watch For, and What Out For, In MLM.”
Company Leadership-Who is your Business Partner
Part IV: 23 Things to Watch For and
Watch Out For When Scrutinizing An MLM
By Daren C. Falter
Things to Watch Out For
As we evaluate network marketing companies, it’s critical that we check and cross check our work to avoid mistakes. Here’s a fantastic list of things to avoid in a company. Be sure the double check this list with every company you scrutinize.
1. Avoid companies that do not appear to have a bona fide product or service. Never join a program where the product is simply thrown in the mix as an attempt to legalize the process of mass sponsoring. For every top distributor earning $50,000 per month or more in commissions, there are literally thousands of customers purchasing product month after month. If the product cannot stand on its own, these checks will not last long.
2. Avoid companies that focus on rewarding you for the mere act of recruiting. Commissions are earned through the sales of product, not distributor sign-ups.
3. Avoid companies where the product price is inflated beyond what is reasonable in the marketplace. Compare the price of the product to other top networking products that have been in business for ten to twenty years or more.
4. Avoid companies that don’t control all revenues. All revenues associated with product sales and commissions paid to distributors should be collected and dispersed by the company, not the distributors.
5. Avoid companies that make, or allow their distributors to make, unrealistic earnings claims. Any earnings statements of any significance must be substantiated through strict guidelines set forth by the FTC. It’s better to just avoid income claims.
6. Avoid companies that allow inaccurate or misleading advertising. Aggressive promotion is fine. Deception or exaggeration on any level is intolerable.
7. Avoid companies that make illegal medical claims. FDA and FTC attacks against careless network marketing companies are becoming more and more frequent. Companies and distributors must be increasingly cautious about the statements they make about health products. All companies planning on sticking around must be proactive in self-regulation and should have an aggressive program in place to stop any improper product claims. Good management teams will not hesitate to reprimand distributors for making improper medical claims and will even cancel distributorships for repeat offenses. After all, the company can be held liable for claims made by independent distributors.
8. Avoid companies that do not keep distributor testimonials in check. Testimonials of health benefits, lifestyle benefits, or other product benefits can easily be counted as product and income claims. Make sure the company you’re investigating has guidelines for testimonials, which they are proactively teaching to distributors.
9. Avoid companies that send commission checks late or not at all. Avoid companies that send product shipments late, have frequent back orders, or fail to send product or perform services in a timely manner.
10. Avoid companies that make the distributorship seem like a job offer. Independent distributors are just that, independent contractors. They own their own business and do not draw a salary or benefits from the company like an employee.
11. Avoid companies that have an unfair or non-existent refund policy. Most companies offer the standard 90 percent unconditional buy-back policy on unopened product which means they’ll unconditionally refund 90 percent of your purchases, holding 10% with the company for a restocking fee. Some exceptions exist in the various states. Make sure your company is confident enough in their product to offer a full refund without question.
12. Avoid companies that pay commissions on sales aids, distributor kits, distributor training, or anything other than the company’s legitimate product or service.
13. Avoid companies that encourage distributors to make a large purchase of inventory when joining the company. Generally anything over $500 is questionable. Pyramid laws state that you must sell 70 percent of your product inventory before making another purchase.
14. Avoid programs that require substantial investments in tools like brochures and sales aids. Most companies can be started for $20–200 in tools and a $50 distributor kit. Why would you need thousands in tool inventory when shipping only takes three days? Distributor kits should be sold at or near cost.
15. Watch out for companies that require the purchase of peripheral items, accessories, or other services.
16. Avoid companies with no requirement of purchasing products to maintain active as a distributor. These opportunities are usually short-lived.
17. Avoid companies that do not encourage retail selling of your product or service. You should be able to document retails sales to at least five to ten customers per month who are not a part of the commission plan.
18. Avoid companies that claim you can succeed without recruiting distributors or selling product. These programs are scams preying on the ignorant.
19. Avoid programs with too many complaints filed against the company. Most regulatory agencies keep track of complaints. Looking into these complaints can be helpful. By the way, even the legitimate companies are going to have some complaints from a few disgruntled distributors. There are countless ways to offend people in modern society. What you don’t want to find is frequent litigation, many unresolved complaints, or criminal activity.
20. Avoid companies that allow spouses or even dependent children still living at home to sponsor under each other. This type of sponsoring is illegal in many states and is a great way to attract the attention of enthusiastic regulators. At the very least, it’s a manipulation of the compensation plan and can disrupt the natural flow of earned commissions.
21. Avoid companies that offer to sign you up in multiple MLM programs. These companies are called portfolio programs and they usually don’t even have permission from the companies they are promoting to do what they are doing, even though they swear they have written contracts. No portfolio program has ever survived.
22. Avoid companies that have not raised sufficient start-up capital. You’ll generally be able to find out about financing when you interview the company CFO, top distributors, and company vendors. Avoid companies that are a prelaunch to raise money for the start-up of the company. Lack of start-up money is one of the top reasons that companies go out of business. Start-up companies often use profits from today’s sales to operate the business, hoping that they can pay distributor commissions out of next month’s profits. Soon, products start to back order and commission checks arrive late, or not at all. Most undercapitalized companies can’t maintain this juggling act for long and end up filing bankruptcy.
23. Avoid companies that agree to build your downline for you in exchange for you investing in the company. Don’t believe them for a second. These programs usually take your money and build their own downlines, leaving you high and dry months later. Report any of these programs to your local state attorney general’s office.
About the Author
Daren C. Falter is the author of the network marketing industry-wide best seller How to Select a Network Marketing Company. Daren has been a consultant to the network marketing industry for over 12 years and a student and participant for over 20 years. Daren has built downline organizations into the tens of thousands of distributors with several different companies. Daren is a popular convention speaker and trainer. You can visit Daren online at his blog at www.networkmarketingreview.com. You can also order Daren’s best-selling MLM book at www.networkmarketingbook.com.
Daren recently launched a new network marketing company, Yoli, Inc., near Salt Lake City, Utah. Daren and his four partners are excited to introduced the worlds most nutritious beverage using patented BlastCap™ Technology. For more information about Blast Cap Technology, Blast Caps, or Yoli, visit Yoli at www.prelaunchinsider.com.
Copyright ©2009 DC Falter Marketing, Inc. ALL RIGHTS RESERVED
ATTENTION: Breaking News!
Daren Falter will be launching a new company called Yoli. We will be introducing an incredible new nutritional formula in the form of a delicious functional beverage using Mikel Anderson’s patented Blast Cap Technology. The founders of Yoli are Robby Fender, Daren Falter, Rick Eisele, Corey Citron, and Michael Prichard. To find out more about Yoli Blast Cap Technology, visit www.prelaunchinsider.com
Kingsley Ennis is one of the few “hand selected” FOUNDING DISTRIBUTORS that are helping to launch this new company … and you can join him and one of the fastest growing teams in all of Yoli at the very beginning of this great network marketing adventure!
With a background in the Seminar Industry and 12 years of Noteworthy Success in Network Marketing Kingsley is the Author of “Split Second Marketing” & “Your Extreme Advantage”. You can listen to them FREE at www.usahomebusinessexperts.com
QUESTIONS ABOUT YOLI? Email kingsley@goyoli.com or call 717-303-5710.
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