Did You Start An MLM Business to Lose Money?

You made the decision to start an MLM business so you could make money.  At least that is typically the reason people enter into network marketing.  Unfortunately, I see too many network marketers who seem to be ok with losing money month after month, because they are wrapped up in the emotional hype of the opportunity.

Profitability Matters…Even in an MLM Business

Let me talk frankly with you today, if I may.   I know marketers who spent several hundred dollars to join their opportunity.   They are spending another one hundred dollars or more per month for the autoship and the back office access.   If they get a check each month it is twenty or thirty dollars.   So month after month the pattern goes on, they are making their MLM company rich, while their MLM business continues to go in the red.

Examining the Numbers of an MLM Business

One of the first things any network marketer ought to be strongly evaluating before they join any network marketing opportunity is the production necessary to make their business profitable.   So let me us a hypothetical example to help illustrate this point.   John is considering joining XYZ Company.  The initial sign up cost for XYZ Company and the purchase of a starter kit is $500.   To receive bonuses and overrides, John is required to be on autoship for $75 per month and he also has a $25 per month charge for his website and marketing tools.  This means that should John decide to join XYZ Company as an MLM business, he will have a first year expense of $1,700 and an ongoing annual expense of $1,200.   John will not be making a profit until he has generated at least that level of income.

Now let’s take this a step further and look at how John will make his money.  We’ll assume that John receives $100 for each personal referral who joins his team at the $500 level and he also makes $5 in retail profit with each retail sale he makes.   This means that John has to personally recruit no less than 17 people to his business in the first year just to break even or he has to have 340 retail sales in the first year.   Remember this is just to break even.   Also take into account that we have not figured in costs like postage, business cards, phone charges, etc…

Now at first glance you may think this sounds easy.  In theory it should be; however, the reality of network marketing is that the average network marketer recruits 2-3 people in their entire time in an MLM business.   Sadly this is one of the biggest reasons for a high drop out rate in our industry.

If you are truly looking at an MLM business as a way to make money, then it is imperative that you begin to approach network marketing with the mind of a business person.   Evaluate the amount of production that is necessary for your to break even and then move into profitability.   Ideally you should be looking at business opportunities that will put you into profit with one or two recruits or a handful of sales.  This profitability should be obtainable in your first 60-90 days.   It is also wise to consider the ongoing costs of your business.  It may be wise to consider a lower cost alternative that would allow you to work in the same market niche with less overhead.

In the end you did not start an MLM business to lose money, but instead provide a vehicle for reaching your dreams.  Begin treating your business as a business and don’t settle for a losses month after month, simply because of emotional hype.


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