How To Evaluate A Home-Business Opportunity (Part 2 of 3)

How To Evaluate A Home-Business Opportunity
Part 2 of 3
By Gary L. Vincent

Hello, my name is Gary L. Vincent. I own and operate several businesses. I am a Real Estate investor, network marketer, accomplished author, and wealth coach.

In Part I, I described the importance of time freedom as criteria for starting a home business and looked at the critical difference between simply being self employed and being self employed within a network marketing opportunity.

In this issue, I am going to describe the five different types of network marketing companies. If you have ever struggled in Network Marketing, or have failed in the past, then in might surprise you to learn that it may not have been your fault. The program you work with and when you join it have a significant effect on both your earnings potential, and how successful you can become. Even people who have been in the business for decades often don't understand how important these factors are to their success.

Hopefully, by the time you are through reading this you will have a good understanding of what works and what doesn't, and be better at judging which opportunities are legit and which ones to avoid.

In the last article, I mentioned that most people are full time spenders and part time earners. They are not adequately taping into the leverage of others to accomplish the time freedom that they seek in an opportunity.

Because they don't understand this, many people become "Grinders." Simply put, these are the people who have to constantly replace their distributors because they drop out. They have to make all the presentations themselves, handle all the meetings, and pretty much do everything. If they slow down for one minute, things start to unravel in their group. They're always grinding, but the recognition, big bonus checks, and free cars and trips always seem just a little out of reach.

There is a parable about an Emperor with no clothes. Grinders are in a similar situation. They sell lifestyle and talk about residual income, but the sad truth is they don't really have either. They work night and day because they're afraid to let up. If they were to stop grinding for even for a few weeks, their income would diminish. Without the proper skills, timing, or the right company, this is all too often the case of the majority of folks out there attempting to get in a network marketing opportunity.

Even people who have been in the business for decades often don't realize they are trapped in a grinder cycle with no hope for escape. They keep grinding away, thinking that their big break is around the corner.

What they don't realize is that the situation they're in will never change...

They keep wasting money on ineffective marketing tools, squander effort going to peep-talk meetings, and waste away their precious time trying to resurrect dead distributors.

Keeping that in mind, let's look at the five opportunities out there...

Type 1 - "The Bottle Rockets"

Bottle Rocket opportunities often experience an exponential growth curve. These are illegal schemes. Although they may appear lucrative on the surface as money starts to come in, their downward trajectory is even more dramatic once they experience the regulatory scrutiny that is inevitable for schemes like these.

It's important to understand that the opportunities in this category are NOT Network Marketing programs, even though they often claim otherwise. Sometimes call 'pyramid schemes,' these would include chain letters, receipe clubs, the airplane game, the magic gas pill, and other schemes that are just excuses for people to move money to the top of the structure. They are illegal and they hurt people. Please avoid them.

Type 2 - "Matured Companies"

Matured Companies are those that hit and actually sustained momentum for a significant period of time. They are now billion-dollar-plus companies and have already created legacy incomes for people who got in early and became a reason for their growth. These companies typically offer a new representative stability and the chance for a steady income.

However, let me be quick to point out that your chances of creating significant wealth with a matured company have expired. They have reached a level of maturity that prevents someone from starting with them today and creating large bonus checks or exponential growth.

Type 3 - "Flatliners"

Flatliners are companies that have been around for a long period of time, but never hit that exponential growth curve. The only growth they have, if any, is incremental growth, usually coming from opening new markets. In the markets they have been operating in for a long time, unfortunately, they have failed to capture the imagination of the public.

There are many reasons flatliners do not reach momentum. Often it is because their products are not viable, their compensation plan does not promote the correct behavior, or (and equally likely) their management is either inexperienced or incompetent.

Of course these companies often tout their longevity and suggest that momentum is imminent. But history has shown that the companies that reach momentum today do so in the early years. It's virtually impossible to create substantial wealth with a flat-line company, unless you are willing to hang around for decades.

Type 4 - "The Pushers"

A Pusher company, or Peddler company as some call them, create more misunderstanding and broken dreams in network marketing than any other.  This is because most people are not aware of the distinction between the small business model (primarily retailing products) and the big business model (developing duplication and creating a large team of distributors that produces large group volumes).

These programs include the numerous party plan companies, phone and utility services, legal plans, discount cards, air and water purifiers, insurance, and other plans that are geared for salespeople. The big problem with these scenarios is that they completely miss the formula for creating wealth in Network Marketing:

"Get a large group of people - to do a few
simple actions- over a consistent period of time."

Statistically, over 90 percent of the population is classified as non-sales types. They don't know how to sell, they hate the very idea of it, and they're deathly afraid of rejection. They don't want to wear buttons with corny slogans on their clothes, make cold calls, and chase after strangers at the shopping mall. They will use the products themselves and they feel comfortable referring them to a select group of friends. But they don't feel at ease in a sales role or "playing store."

As a result of this, these 90 percent do not do well in the pusher companies. They may join initially after a good product experience, but they soon are out of their comfort zone and usually drop out, or remain customers but do not actively build the business.

Naturally if we want to follow the first part of the formula - get a large group of people to do a few simple actions - it makes sense that we would tailor our approach to the 90 percent, not the 10 percent. That is the fatal flaw in the pusher companies, in that their approach is geared to the ten percent - the sales types.

A strong salesperson can produce a large income in one of these situations. But it will be dependent on constant activity to replace the large number of people that drop out each month. Of course this means that they don't have any true passive income, making them destined to be grinders for as long as they work the program.

Type 5 - The Emerging Giant

The final category is the Emerging Giant and this is where true wealth is created in Network Marketing. This is an emerging company that possesses what it takes to hit and sustain momentum, and become the next billion-dollar success story. This is where both legacy incomes and substantial wealth are created.

Of course, every new company believes they are the next "chosen one." And the distributors that prospect you aren't intentionally telling you an untruth. They honestly believe what they're saying. Unfortunately most do not have enough experience, knowledge, and perspective to really understand what's required for a company to go into momentum.

If we study successful companies that have reached and sustained momentum in the past, we can look for the commonalities they all have.  Here's what I've found:

1) A Flashy and Consumable Product Line.

There are many great products in the world, but they aren't all great for Network Marketing. The best products for the business are unique, exclusive, and highly consumable. Some other factors to consider...

The average person has to be able to understand your products in a 30-second elevator speech. If you need 10 lab reports or five hours of doctor recordings for people to "get" your products, it doesn't meet the formula for creating wealth. This is the reason many of the flatline companies do not hit exponential growth.

History has shown that non-consumable products like water filters and air purifiers don't sustain themselves long-term. Likewise history has shown companies with products like these can create some initial excitement through front-end loading or hype, but they don't pan out in the long haul.

One of the other shocking truths is that one-product companies don't hold their own over the long term. Like the non-consumables, they can create some initial excitement. But there simply is not enough volume produced to sustain the compensation plan and reward top leaders. At some point they recognize that distributors in other companies with the same size organization make substantially more money than they do. So even if they love their product and their company, they ultimately make a business decision and choose to build a business elsewhere. This has been demonstrated countless times in the last decade with the dozens of magic fruit juice companies.

2) Proper Capitalization.

This one is pretty simple, yet it's shocking how many start-up ventures don't have enough money to survive the inevitable bumps in the road. Look for a company with a management that knows from the very start that they would be embarking on an expansion plan that will require millions of dollars to achieve. Ensure that this management team is able to raise the capital they need, either through private banking or by partnering with venture capitalists.

3) Management Depth.

The Management of a given network marketing company must also have experience. Look at what these individuals have accomplished in the past as an indicator of their ability to perform positively in the future.

Can the leadership build the foundation of company support that offers you the best chance to reach your goals? Do they have an all-star team of professionals to take the company to the top echelon of the industry?

4) A Compensation Plan that Provokes the Correct Behavior.

Since the Network Marketing industry began in the late 1950s, compensation plans have evolved to keep pace with the changing market conditions. Plans that worked great in the 1970s didn't necessarily perform well in the 1980s. And plans that served well in the 1990s often don't pass the market demands of today.

A good compensation plan will incorporate incorporates the very best elements of the older compensation plans of legitimate businesses, but leave out the limiting characteristics of each.

Specifically what to watch for:
• People never break away from you,
• your volume is not "washed" weekly, and
• it keeps a larger portion of your group within your pay range.

Your compensation plan should include fast start money when you begin, transitional income as you grow the network, and residual security once your group is built.

That brings us to the fifth element - the one that may be the most important...

5) Field Leadership.

The truth is, no company can put itself in momentum. This has to be created by the field leadership --the people who are actually in the trenches, recruiting, training, and supporting the team. As you look for a network marketing opportunity, consider this element to be YOU.

In Part III, I will discuss the elements that you need to succeed once you find a Type 5 company, along with some tax advantages you may not even be aware of.

(Continued in Part III)

About the author: Gary L. Vincent was born in Clarksburg, WV, USA and presently resides in WV with his wife Carla. Gary is the author of several websites and news articles. He publishes music and personal insights at www.garyvincent.com and offers free network marketing education at www.AgelJobs.com.