What is MLM? It is a unique way of distributing goods and services to consumers. Simply put, it is a distribution model; a way of doing business. But before we dive too deep into that, let me explain the normal distribution process for a product. All products are made by a manufacturer. In most cases, the manufacturer sells the products to a wholesale or distributor. The wholesaler or distributor then sells the products to a retailer, such as a store. The retailer, in return, sells the product or service to you, the consumer.
Each echelon in the distribution process earns a profit for their work. That means that most products have been marked up at least 30% to 100% (or more) from the time it’s made until the time it gets to you, the consumer. Some companies minimize the amount of middlemen in the distribution process, which means a smaller mark-up and a lower priced product.
MLM vs Normal Distribution Process
Multi-level marketing, on the other hand is completely different from the normal distribution process. The manufacturing company is the multi-level marketing company. It keeps the inventory, hires employees, processes payment and orders, ships orders, handles customer service issues, tracks commissions and pays its independent sales force. On the other hand, the independent sales force finds customers, sponsors more distributors and sells the products. It’s really that simple.
The money that would normally be spent on advertising, distribution costs, etc. is now paid to the independent sales force via commissions and retail profits. In essence, it is a win-win situation for the multi-level marketing company and the independent distributors. The company only pays the distributors when they generate sales, and the distributors have no earnings cap. They can earn as much (or as little) as they’d like.
Start Your Own Business for a Low Start-Up Cost
What is MLM? It is a very inexpensive way to go in business for yourself, but not by yourself. What is MLM? It is a unique business model that enables you to duplicate yourself and earn a residual income. What is MLM? It’s a hybrid business model that combines all the benefits of franchising, without the huge amount of upfront start-up capital. Simply put, it’s an awesome business model that gives the average guy the chance to go in business for himself, with minimal start-up capital and financial risk. And it’s my favorite business model.
The History of MLM
It’s been around for nearly 60+ years now. Many people continue to change their life for the better, by getting involved in network marketing. Although our industry has a pretty high failure rate, there are plenty of people who achieve financial independence by using this business model. If you have ever wanted to start your own business, but couldn’t afford to, you now have a chance. Thousands of people get involved in multi-level marketing every day. You should consider it too.
The MLM concept is used by other industries too. For instance, real estate brokers and insurance agents use a similar business model. A Real Estate Broker might have 10-20 or more independent agents selling property for his agency. They agree to pay him to be affiliated with the agency, or rent an office space from him. In most cases, the broker earns a residual off each home sale too, even though the agent did most of the work. Although the agent makes the most, the broker gets a nice cut. Insurance agencies follow a similar process.
The benefits for the agent and broker are mutual. The agent doesn't have to hire a workforce, buy or rent a building, insure it, pay utilities, hire a receptionist, or advertise the agency. He simply needs to pay a small fee to use the agency name and get started in business for himself, but not by himself. The broker, on the other hand, can duplicate himself by having lots of agents represent his agency. He earns a small cut from each agent's commission. As you can see, it's a great situation for the agent and broker.
What is MLM? It’s a fantastic way to make money, to help others and have immediate access to some cutting edge products. It isn't a perfect business model, but it offers the average person a chance to start their own business for less than $500. And it's one of only a few business models I know of that lets people earn residual income. If you haven't checked it out yet, you should.
Have your say about what you just read! Leave me a comment in the box below.
Copyright 2010-13 MLM Resource Center / All Rights Reserved. Do not steal our content. We do earn commissions from some of the products we recommend. This site is for education purposes only. We do not offer financial or legal advice.