5 Responsible Realities to a Network Marketing Home Based Business
In her second week as a ?distributor? with one leading home based network marketing business, a Houston woman launched into a stinging tirade against her ?upline? sponsor, accusing him of misleading her on the true costs of membership.? According to the sponsor, the woman stated as her goal to earn ?5,000 a month,? but refused to spend more than the cost of the membership on her new business. ?It?s as if she thought the business would flow without any personal or financial effort,? said the sponsor, ?and once I tried to counsel her to the basics of starting a business, she got furious and blamed the company for taking her down a primrose path.?
Such stories are common and all too frequent in the growing network marketing arena. The idyllic vision of working from home with feet propped up in front of the TV after slams head-on into the reality of the costs involved in running a business. There?s plenty of blame to go around for such a misconception, but ultimately, if one wants to be successful in network marketing working from home, basic business planning goes a long way. And, no business leader should want to sign-on a new distributor who doesn?t have a basic understanding of operating budgets.
Here are 5 Responsible Realities to Launching a Network Marketing Home Based Business:
Reality Number 1
The cost of your membership in the network marketing business does not represent your total start-up operating costs. Instead, it?s a fraction of what you will need to invest and is more akin to paying a one-time franchise fee in a traditional bricks and mortar business.
Take McDonald?s. To build the Golden Arches, you will need to pay a yearly franchise fee of ,000. But that represents only five percent of your total investment in building out the opportunity just to open the doors. On top of that, there are royalty and other fees that will increase your total investment over time.
Network marketing companies operate with similar requirements. Just to ?open your doors,? you will need to purchase a membership. Often, the memberships are tiered with incentives given on the higher priced plans. This ?fee? gives you the right to represent the company and often includes some initial products. In addition, the plans may extend some operating costs such as a website, although this is usually given to the distributor for ?one month free? after which you will need to pay a monthly website fee.
But any reasonable analysis of actually working the business demonstrates deeper start-up costs that more closely resemble operating a traditional business. One of those costs is marketing. Prospecting for leads can certainly be done with nothing more than picking up the phone and calling friends, family and acquaintances. But that will get you but so far. Serious business builders will want to engage a lead generation company, one which provides quality prospects. The costs of these services can easily run up to 0 dollars or more a month, depending on the number of leads purchased.
The new distributor will need to pay for business cards, product samples, marketing brochures, internet access, phone service, and other start-up operating costs that are not often discussed by the sponsor, especially during those first initial and heady conversations.
Reality Number 2
Just as in a traditional business, the new network marketer needs to devise an annual operating budget. There?s just no way to gauge success simply flying by the seat of your pants. Responsible home based businesses should provide projections based on monthly revenues against monthly expenses. Beyond the start-up costs above, the new business will realize recurring monthly expenses that dwarf that initial membership fee.? Take the website alone. There?s simply no way to operate a network marketing company without one. Usually, the network marketing company will offer ?one month free? when you sign up, but after that, you will be assessed a monthly fee. Let?s take .95 a month for a website. Over the course of the next 11 months, that?s more than 0 dollars. If you plan to advertise online through pay-per-click ads, a budget of 0 a month, or ,800 a year would be minimal. Add to that the costs of other activities and your total marketing budget could easily approach ,000. Failing to project such costs is not responsible for any business and will lead to a disappointing balance sheet in just a few short months.
Reality Number 3
In the first exciting days of signing on as a distributor and launching your own business, it?s easy to forget the business model of the network marketing company. They make money when you spend money. Often, commissions are determined by the amount of your ?personal? and ?group? volumes. Calculations become frustratingly complex but at a minimum require that you purchase a certain amount of product per month. Moreover, some companies provide incentives for you to place your products on ?autoship? which amounts to a standing operating expense. Certainly, you can resell product, but product purchases can play havoc with your balance sheet and if you are not careful, lead to a cupboard stacked full of unopened vitamin bottles.? Understanding the company?s expectations are critical to a responsible operating budget.
Reality Number 4
Network marketing companies require a tremendous amount of well, networking. Most encourage strong participation in ?team? conference calls and online training. Understanding how your fellow distributors are approaching their business, testimonials and support from business leaders is an important element in your responsible approach to your new business. If you have gone into the business saying you will devote a few hours a week and expecting to earn substantial income, you will be sorely disappointed. Training calls alone will absorb several hours a week. Failure to take part in the sessions will undoubtedly harm your competitiveness. The bottom line is that if you are going into the business with the hope of making a few calls here and there, you won?t be successful.
Reality Number 5
The lack of a long range plan is short-sighted. Can you imagine investing in? a McDonald?s franchise and giving up only after a couple of months of being open? There are frustrations in any business, but the lack of responsible planning in network marketing will lead to huge headaches that could have been managed. No franchise owner would not operate without a business plan, but all to often, the decision to begin a network marketing career is made on the spur of the moment. Sure, throwing money out of the window can be amusing. Dollar bills are amazingly transferred into thin air by the wind.? Before signing on, a business plan that includes basic budgeting, revenue forecasts and expenses will make the difference in operating a true business and flushing dollars down a drain.
Concluding Reality
Did this article throw cold water in your face? That?s good. Stepping back and looking at the network marketing business from a more even-keeled perspective is exactly what any business leader should want in a new sponsor.? Retention rates in the business are text book.? Keeping and retaining distributors in your downline takes a lot of hand holding. But at a minimum, you should not want to do business with anyone who approaches their livelihood in such a haphazard manner.? Network marketing can reap substantial rewards, but only for those responsible enough to approach the endeavor as a true business, not some dream of sitting on a sofa in front of the TV, hoping against hope for the commissions to roll in without any investment beyond he initial membership fee.
Dave Snepp is founder of OmniDestiny, LLC, a firm specializing in network marketing coaching and development.
Source: http://guillermodelos.com/?p=1605
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