Online MLM Training For Starting A MLM Business
Table of Contents
Many people start businesses in order to help others and earn money. It’s not enough that you have a solution or product you are passionate about. Entrepreneurs are successful when they build their businesses around a model which aligns with their growth goals, target customers, and product offerings.
Multi-level marketing is a viable option for many. MLMs are a great way to get products in front customers faster and with fewer overheads than a traditional retail model. MLMs are able to grow by relying on the direct sale of products to consumers. A dedicated entrepreneur with the right tools and technology can create an MLM business without hiring a large staff.
The MLM model is different and therefore, the traditional startup blueprints do not apply. Use this 10-step check list to ensure that you are considering the unique aspects and nuances of direct sales.
1. Choose your product.
Spend time researching and testing products and services before you do anything. It is important that the product chosen appeals to consumers, but also inspires distributors to promote and sell it.
Find products and services that are different from others in the market. You can test interest by using formal focus groups, or informal outreach to your target audience and potential distributors. Ask about their willingness to pay in addition to gauge interest.
You should aim for products that you can sell at a margin of 5X over your cost. If you can achieve 5X margins or more, then your MLM compensation plan will be able to cover all costs and allow for marketing.
Compliance is also important for MLMs. It is important to make sure that your product or service is in high demand by customers. This will help ensure the success of your representatives. Your MLM company’s profits will come mainly from sales to consumers and not through representative recruitment.
2. Plan your strategy.
A written business plan will be essential to your MLM. It will help you define your goals, vision and purpose for your company. It will also be your roadmap to launch and grow your business. If you need to raise outside capital, your business plan will provide information that will help banks and investors assess the potential of the venture and predict when they will see a return on investment.
Do not just tick the box. Do some research and crunch numbers. You’ll thank yourself later as you face new challenges and take advantage of opportunities.
Your MLM business plans should include:
- Business Objectives: It’s great to set challenging goals, but you need to be realistic in your business plan. You should research your market in order to determine your revenue, sales, and new customer targets for the first year of business, as well as your second and third.
- Market analysis: Define the market niche, both in terms of size and opportunity. Create profiles of both your target audience and your main competitors. Analyze your data to determine where you products and services fit in and any barriers.
- A profit-and-loss forecast:Based upon your market research and financial goals as well as product and operational costs, project the anticipated revenues, profits and losses for each of your first five years. Cash flow analysis is a way to see how your money moves in and out of the business over a certain period of time.
- Marketing and sales plans:Be specific in your approach to presenting your product and service to buyers. Determine how many distributors and sales targets you will need at various points in time based on your goals and costs. Plan your marketing strategy including website design and promotion, as well as the budget.
3. Plan your compensation.
The compensation plan of your company will be the most important expense for your direct sales business. Comp plan defines how reps will earn money, whether it’s as a commission on direct sales of products or an override on product sales downline.
It is important to strike the right balance. You want to make sure that your compensation plan is profitable, appealing to distributors and reasonable at full payout. If you pay too much you will be out of business.
Your sales force may leave if you pay too little. A compensation plan expert can help you eliminate surprises and save money and time by helping you evaluate possible outcomes.
Over the last 20 years, ByDesign has worked with several excellent compensation plan partners. We are happy to introduce you to the best compensation plan partners to help develop and evaluate your business’s optimal compensation plan.
4. Secure funding
There are many options available to you when it comes time to fund your startup. Debt financing is the most common. It involves a loan with interest from a person, a credit union, a bank or a retirement plan. Equity financing is another option that MLM companies use.
Equity financing is a method whereby company owners exchange ownership of their company for cash. Equity financing comes from many sources including family, friends, investors or an Initial Public Offering (IPO). Equity financing has the primary advantage of not requiring repayment.
MLMs have used both equity and debt financing over the years, depending on their business needs, cash flows, and expansion plans. The debt-to-equity ratio, which is the total liabilities divided by shareholders’ equity, is an important metric to assess a company’s financial health. It provides an indication of stability and its ability to raise funds for growth.
5. Open a merchant’s account.
You’re now ready to start setting up the MLM operations. It is important to open a merchant account. This is a bank account which allows your business accepts credit and debit card payments in person or online. The merchant account acts as a buffer between the bank accounts of your customers and your business as electronic payments are processed.
Consider these things before applying for a merchant’s account:
- Who is the account signer? Because a merchant account works like a line of credit for borrowers, it’s essential that the person signing the account have good credit.
- Has your marketing website been launched? Launching your website will allow you to give potential processors a complete picture of your company and products.
- Does the setup fee have to be refunded? The majority of processors charge a fee for applications. Some fees are not refundable even if an account is rejected. Ask upfront.
- Do You Have Enough Lead-Time? The approval of a merchant account will take time due to unpredictable growth patterns, possible chargebacks and legal liabilities that come with MLM business models. Payment processors consider MLMs to be high-risk. Therefore, setting up an account could take longer than expected. Allow yourself enough time to start early. You won’t have to put off your launch.
6. Select your direct sales software.
MLM software is the engine for your entire business. It will help you bring your compensation plan to life, automate genealogy management, commissions and API access. You can also replicate websites, use e-commerce and party plan solutions.
No pressure! The right solution is critical to your success. Software that can support both your current needs and future ones as you grow and scale the business is what you want. There are many options and huge differences between the back-office software vendors.
Research different solutions. Search for companies that have published case studies or public reviews. Call references to get a first-hand account of the company’s customer service.
7. Keep an MLM lawyer on your side.
In the early stages of your business, it’s wise to hire an MLM attorney with experience. Attorneys with experience in the MLM sector are skilled advisors that can offer guidance on all aspects of business, from compensation structures to international expansion. You’ll want to consult an MLM lawyer as you begin to develop your distributor network.
Your company is responsible for any product or earning claims that distributors make on the market. The FTC regulates and monitors these claims and is always on the lookout to catch false or misleading claims regarding income potential or health benefits. A MLM lawyer is a resource that’s knowledgeable about the latest case law defining the regulations for the direct selling industry.
You will need a lawyer at some point. Build a relationship with an attorney before you actually need one.
8. Document, document, document.
It may not be the most enjoyable step, but it is necessary to create business documentation, including shipping policies, privacy policies and sales materials. This is what your field agents will use to establish business rules and operating procedure.
The policy and procedures manual is an essential document for any MLM business. The manual should cover 50 or more topics, depending on the business model, product, ethics, and principles. Consult your MLM lawyer (see step 7!) if you feel overwhelmed by the prospect of getting started.
They can offer valuable advice or a sample template. Do not adopt documents from another company as yours. Although they may be useful resources, you should still customize your documentation to your specific business.
Keep these key points in mind when creating documentation:
- Marketing and sales materials, whether digital or physical, are considered extensions of the product packaging. This means that product regulations are applicable.
- Protecting client data for MLM is essential. Federal law requires that you disclose how you collect and share personal information gathered in the course of your business.
- The federal law also regulates and limits how you use customer data. Ensure that your documentation, practices and information technology are set up in a way to offer appropriate levels of security.
9. Ready? Set? Pre-launch.
It’s almost time to launch, but you still have a lot more information about your customers, market and product. You’re ready to launch a prelaunch, or soft launch.
A pre-launch, also known as a soft launch, is a limited release to a smaller audience of your product or services. This can be an important step in the success of MLM businesses, as it allows them to gather insights and make changes before they launch to the public.
Pre-launch should be 90 days before your launch. You’ll need to give your audience the chance to interact with your product and build interest and awareness. Pre-launch is a period where you validate your product, its positioning, and create buzz with sneak previews, limited availability, and promotions. A pre-launch video can be a great way to connect with customers and spread the word.
A pro tip: The length of your video should be based on the price point of your product. Aim for 5-15 minutes if you’re selling a high-priced product. Keep videos under one minute for lower priced products.
Before you launch, there’s still one more thing to do. Measuring your success is important! Review the goals you established in your business plan. These goals will be used as KPIs (Key Performance Indicators) to measure the success of your launch.
Each KPI should be measurable. If one of your goals for a launch is to sign five leaders who have large existing downlines, you can break that goal into quantifiable components. What is a leader? How many people must be in an upline before you consider it “large?” What is the timeframe that you want to achieve the goal in?
Keep track of your KPIs while you launch your product. You can use the data as a tool but you should also supplement it with information gleaned by talking to your customers and checking in with representatives. You can then validate your assumptions, and make adjustments quickly if necessary.
Don’t forget to anticipate what could go well! What if you’re product becomes the next big thing in your industry? Would you be able to ramp up your supply chain and handle rapid growth? You’re already well on your path to building a successful MLM business with all the preparation you’ve done.