By: Anne Guillot
1. There is only a 10% chance that a new company will still be in business two years from now:
The number one reason why people fail in their MLM business is because they get involved in the wrong company. And one key variable to evaluate a company is how long it has been in business. It is important to know that only 10% of new companies ever make it to their 24th month before going out of business. If a company is less than 5 years old, statistically the company is still at great risk of going out of business. You need to understand that joining a MLM company younger than 2 years old is exactly like putting your money on a high-risk volatile stock.
You should also watch out for new divisions of reputable companies and evaluate them by the same time standards as any new MLM company. The reason why the parent company decided to launch a product or service under a new company rather than with its already existing company is often because they want to protect the existing company in case the new division would fail.
You can also find an existing company which has just changed its distribution model from direct sales to network marketing. Again, past experience does not matter. Many successful companies went out of business when they decided to try to use network marketing in their new venture.
As far as pre-launches are concerned, it is essential to remember that on occasion, a brand new business will use a pre-launch as a way of raising much needed funds to fund the opening of the business. And those funds are in such case provided by unsuspecting new distributors very often attracted by hype and false promises. What happens when the company doesn’t raise enough capital to sustain the business? It crashes and burns, and the new distributors lose their investment. My advice is you should never pay anything to join a company that has not yet officially opened for business.
2. Building a downline would be a real challenge:
First, brand new MLM companies and especially pre-launches attract all kinds of tire-kickers, definitely not the best quality MLM prospects. Some people I know join a new network marketing company every few months. They are not really serious about building a MLM business, and are actually constantly looking for some get-rich-quick scheme or easy path to wealth. There is no doubt that you don’t want this kind of people in your team.
Then, unexpected or continual changes by the pre-launch or new company’s management, for instance with the products or the compensation plan, is not a good sign. These so called product enhancements, compensation plan adjustements or improvements are a proof that the company is still experimenting and that their business model is not strong enough. This should be a red flag. Your downline would also probably consider quitting because they feel the business is not on the right track. After all, everyone is looking for some security and stability.
3. You could jeopardize your biggest asset, your reputation:
If you sign up with a company in its start-up phase, you have to be prepared for the risk of losing your investment, your customer base, your business. But much worse, your reputation could also be permanently damaged. And people will be less inclined to follow you into another business opportunity if the last one you recommended crashed and burned. So ask yourself if you really want to risk damaging your reputation on a highly volatile startup just to make some money. Remember your name is your biggest asset, and make sure you don’t turn it into a liability.
As a rule of thumb, until a company has proven itself by staying in business for 24 months, it should still be considered high-risk, and I would not recommend any pre launch or brand new company. There are enough reputable companies out there for you to build a network marketing business without taking any high risks.