This MLM blog entry is for the MLM business owner who wonders how long it takes to make money in an MLM.

Most have heard of the plan for sponsoring two people who sponsor two, each of whom sponsor two until the genealogy is as numerous as the sands in the sea.  On the one hand, this kind of MLM forecasting is just fine, as long as it’s only about numbers.  But when the human factor is introduced to the equation, hosts of variables make for an entirely different exercise.

While MLM forecasting is not an exact science, any hope of a reasonable estimate turns on the informed use of human behavior in the key aspects of selling, recruiting, and managing.

Over the years, we have studied the trends and forces that drive MLM distributor retention—why people join, why they stay, and why they leave.  How long it takes for them to make money becomes a significant metric in determining how long it will take your MLM company to also make money, especially the much-needed profits that fuel growth and expansion.

Of the top reasons people do not make money in MLM, or at least do not make what they consider to be “meaningful money,” is that they have expectations that are not met, and often will never be met.  Beneath this is the realization that they simply do not understand how successful MLM really works.  For the owner of a startup company, whether working with an MLM consultant or not, the key is to define the game plan with a well-conceived MLM business plan.

Making money in MLM, as in any business, depends on how well a distributor applies foundational prospecting and selling skills, the consistency of effort applied, planting in fertile fields, and knowing how (and when) to harvest.

On occasion, a distributor will enter the game with such experience, such vision, and such consistent commitment of resources that they will shoot to the top and stay there.  A closer look at these “overnight success” stories will reveal that the success is a culmination of years, even decades, of learning now to make money in MLM—along with the failures, discoveries, and refinements along the way.

As a rule of thumb, we’ve never missed the mark by our educated estimate that a business will take (on average) from 500 to 1,000 active MLM distributors or home party plan consultants, to set a foundation of break-even revenues.  Carefully managed, this base can—and often does—sustain the next round of growth, where the growing margins provide much of the necessary capital for funding inventories and overhead.

Factors that contribute to making money in MLM include these MLM growth principles:

• Exceptional training for MLM distributors
• MLM startup training
• MLM fast-start programs and incentives
• MLM compensation plan elements that reward early, key behaviors
• MLM products that are valuable, exciting, and enduring
• MLM company leaders with vision, stamina, and tenacity

Whether your goal is to get to breakeven in MLM as early as possible or to create forecasts that look far into the future, the key to projecting MLM sales and growth is to understand the human factor and apply the known MLM best practices to help you determine how long it may take to make money in MLM.

Congratulations to ServiceQuest, recipient of the 2009 DSA Partnership Award (Direct Selling Association).  The award, presented at the DSA Annual Meeting, goes to only one company each year, out of hundreds of highly regarded providers of services and goods for MLM and Home Party Plan member companies.  ServiceQuest founder and president, Terrel Transtrum, received the award on behalf of ServiceQuest.

ServiceQuest was selected for the 2009 Partnership Award because of its decades of work in MLM distributor service, MLM best practices, and MLM consulting.  Serving direct selling companies from around the world, Terrel Transtrum has earned his place as a Top MLM Consultant.

Question: Will you explain the difference between MLM and Party Plan?  I think that MLM is the same as Network Marketing, but are these different from direct selling?  And how do I know which is best for our startup?

Answer: “Direct selling” is the generally accepted term the selling system that moves products and services directly from a company to its users and consumers.  The selling is performed by the independent representatives of the company.  Worldwide, companies sell an estimated $118 billion in goods and services through this massive distribution system of person-to-person marketing and sales, with as much as $28 billion of that in the United States.  (Sources: Direct Selling Association, www.dsa.org, and the World Federation of Direct Selling Associations, www.wfdsa.org)

Some MLM Consultants teach that there are three methods of person-to-person selling:

1. Direct Selling
2. Party-Plan Selling
3. MLM or Multi-level Marketing

The LaunchSmart MLM consulting team suggests a subtle distinction, which is that direct selling is the umbrella under which two methods of selling reside: MLM and Party Plan.  Direct selling is a generic reference to the movement of goods and services directly from company to consumer, where sales commissions are associated with the sales efforts of the company’s independent sales force.  Party-plan sales commissions are generated through group selling, often with retail commissions plus incentives for gathering a group together.  Party-plan compensation leverages a one-to-many sales presentation.

MLM compensation plans pay commissions for personal sales, accumulating commissions and bonuses on sales that are related through sponsoring lines.  Both MLM and Party Plan methods link individual sponsors and business builders, often paying compensation through, and/or as a result of, these connected lines.  These methods are sound and very legal since compensation is tied only to the sale of products and services, and not to the act of sponsoring someone.

Advantages that are common to MLM compensation plans and Home Party Plan compensation include the following:

• Sales representatives need not stock products other than those used for demonstration or samples
• The company ships directly to the distributor or customer who makes the purchase
• MLM presentations and Home Party Plan demonstrations are ideal for presenting products that require explanation
• MLM compensation plans, like Party Plan compensation plans, pay for sales personally produced, with commissions and overrides paid to those who train and manage individuals and groups in their sales organizations
• Distribution channels, once established, are the marketing channels through which information, goods, and services are moved
• Part-time to full-time selling, with incentives for immediate action, are characteristic of successful MLM compensation plans and Home Party Plan compensation systems

Through MLM (multi-level marketing, network marketing, viral marketing, referral marketing, etc.) the direct-selling process is duplicated by independent sales reps who sponsor and train others.  Through this basic system of selling, on which virtually all sales systems are based (from insurance to real estate, and from automobiles to men’s clothing) multiple levels of commissions are earned, paid directly from the company to the sellers, managers, and leaders.  This basic concept applies in both the MLM and Home Party Plan selling models.

For a Free MLM Consultation or Free Party Plan Consultation, contact the MLM Consultants at LaunchSmart.  We want you to succeed, since your success is our success.