Network Marketing Is A Legitimate Business Model

          
Network Marketing Is A Legitimate Business Model
 Where in the world does any business or anybody have the right to discriminate against the business model of network marketing or network marketers? Many social media and social marketing platforms put many restrictions or will not let network marketers advertise their legitimate businesses. This is denying ordinary people to earn a piece of the financial pie. There is a tremendous focus on people being recruited into network marketing. The line of thought is most will never make money in a network marketing company and yes this is true. Most will fail at network marketing. Many will never make a dime and many will actually lose money. This is where the discrimination by social media and social marketing come from. Is it enough to deny network marketers the ability to advertise on these online platforms?

            Yes it is. These are not government owned companies and can make up rules as they please even though and obviously these rules pertaining to network marketers are misguided. Most new prospects will not do anything or very little to make their business work. Why? The first reason I will give you is this, the start up cost is not enough incentive to stay in the network marketing business. Open up just about any business and the business start up cost will be in the thousands. If the initial outlay to start a business is twenty thousand dollars the new business owner has twenty thousand incentives to ensure the business profits. Yet, according to SCORE, half of all new businesses will be out of business in five years.

            Small Business Survival Rates [i]

Small Business Openings & Closings in 2008:

·         There were 627,200 new businesses, 595,600 business closures and 43,546 bankruptcies.

·         Seven out of 10 new employer firms survive at least two years, and about half survive five years.

·         Findings do not differ greatly across industry sectors.

Where do these individuals who start up businesses with these huge investment start up cost obtain their capital? According to 2010 Business Partners.com;

Successful Entrepreneurs Use Combinations Unlike oil and water, debt, equity, self-funding, and external funding do mix well. In fact, it's a entrepreneurial secret. The best managed companies mix their financing sources and choices. Which to use, and when, becomes a matter of individual option, although there are some pretty well established precedents. Founders' personal investments, including both personal assets and family and friends' equity and loans, are usually what finances concept or seed stage companies.[ii]

As stated in the quote, “Founders' personal investments, including both personal assets and family and friends' equity and loans, are usually what finances concept or seed stage companies.”[iii] The new business owner is willing to use his or her house, their family and friends’ assets in order to collateralize start up cost. These business owners have much more to lose than does a new prospect in the network marketing industry. Would it make sense to open advertising to network marketers so the ordinary person may grow their business without the obvious road blocks increasing the network marketer’s chances of success? More importantly, to give the individual a chance to improve their life and financial situation where they would never have a chance to start a traditional business because of start up capitalization?

            Let’s make sense. The typical argument against network marketing is that it is a pyramid. Everything business has this structure. The structure is a pyramid. Follow. The owners, president, CEO, board of directors, are at the top of the pyramid. These individuals profit and receive the largest payouts from the business. Everyone else below receives less money with the least going to the employees at the base of the pyramid. The possibility of an employee ever receiving a large payout, as in golden parachutes[iv], from that business is nil. The employee never is secure in their job especially since 1970’s. “In the private sector, it's just the opposite: only one in three workers have been with their current employer for at least a decade. The average length of service for federal workers is 17 years; the average in the private sector is 3.5 years.”[v] So in corporate America, for that matter, the whole corporate world being employed is not a secure financial way of life. The individual employee is betting their company will be in business after five years, they will not be fired, laid off, company downsized sold or shut down due to bankruptcy or revenues not worth being in business.

            The network marketing company is also a pyramid absolutely. The defining difference is a new distributor may build their business larger than the sponsoring distributor. Tell me one place in traditional business this may happen. In network marketing if an individual understands the basic concepts of network marketing, learns from a successful marketer, is coachable and most importantly puts in practice what they have been taught and sets a time frame of three to five years to become successful the network marketer will likely become successful.

            On the other hand, an individual who does not posses the right mindset will never become successful in network marketing or any business because all businesses, network marketing included require certain skill sets and a business attitude. The inability to succeed in network marketing is not as costly as losing in a traditional business where thousand, even hundreds of thousands, or even millions maybe at stake. My claim here is why would an organization like EBay feel the need to become a big brother to individuals who may want to become a network marketer? Truly each individual has a right to try to improve their situation, as in the right to pursue happiness, even if it means there is a risk in attempting to start a business.

            Many detractors of network marketers give statistics explaining most people who try network marketing will fail at a rate of 95 to 99 percent.  I think that statistic is skewed because when does a prospect actually become an independent business owner? Is the prospect an independent business owner when they are first recruited or when they obtain the first level of success in the business? Why do I ask this question? Well when the prospect is first sponsored they need to be trained to start an organization. The prospect also needs to learn if they even like the products being presented to them. If a person does not like the supplier’s products it is very difficult to have a passion to want to use those products. Consequently, the prospect may never build a business. My thinking is after a prospect becomes a distributor and reaches the first level of any network marketing company they become business owners. The prospect would have used and evaluted the products, been trained to do the business and invested time and money to become a business owner. Although the percentage rate of failure would still be high, I would imagine the rate of failure would be less and equal to the norm of traditional businesses.

            There has to be quite a few individuals doing well in the network marketing business otherwise suppliers would be out of business. Fourteen companies like Shaklee (54Years) in Nexerca’s rankings of the top twenty five MLM companies would have never survived over twenty years. All twenty five of Nexera’s top twenty five had to qualify to be ranked with at least ten years in business[vi]  The problem I see with network marketing and multilevel marketing companies is they have been slow and reluctant to prove their successes and failures. Then most companies have the same thinking about opening their books. But you can look at the survival rates of companies within the network marketing, multilevel marketing companies to see the success of network marketing and multilevel marketing.

            The reasons are simple to understand. Network marketing has come a long way and with the internet most large corporations will see the undeniable benefits network marketing organizations present. First distribution, as Mari explains in a blog, (What is Network Marketing vs. Traditional Marketing),[vii] “In Traditional marketing, when a consumer buys a product or service from a retailer the money are divided among 4 sectors of the supply chain:
manufacturer -> distributor -> wholesaler -> retailer -> consumer

In Network Marketing and Direct Selling Independent Distributors market the product directly to the consumer and earn the profit that used to go to the middlemen. Consequentially the profit chain is shorter: manufacturer -> distributor -> consumer.

            The real genius is of network marketing lies in the advertising. Before one, let’s say a television is sold. The manufacture has to hire an advertising agency to advertise the television costing hundreds to millions of dollars before one television is sold if the manufacture decides to go the traditional route of bringing the television to market. I will stop there with just this example, because I would have to explain customer service, retail, shipping, inventories, and warehousing costs. Network marketing system is much more efficient and as soon as manufacture manufactures the television the supplier is able to make a call to the network marketing company and sell thousands of televisions set almost instantly without ever spending hundreds of thousands or millions of dollars to market and sell one television set.

 

            Restating the question, where in the world does any business or anybody have the right to discriminate against the business model of network marketing or network marketers? As the economy is changing and secure employment is fading away individuals will need to find income to survive. The internet is changing everything and Wall Street is trying to find more ways detach money from the working class; network marketing has the ability to level the playing field. Network marketing is a legitimate business model which is inclusive to the general population and not exclusive of the general population. Money will be earned in network marketing by the entrepreneurs who want the dream most.

           

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[i] Sources: U.S. Small Business Administration Office of Advocacy, September 2009
Survival and Longevity in the Business Employment Dynamics Database, Monthly Labor Review, May 2005. Redefining Business Success: Distinguishing Between Closure and Failure, Small Business Economics, August 2003.

[ii]  Debt Vs Equity, Which is Best? Copyright © 1998 - 2010 BusinessPartners.com

[iii]  Debt Vs Equity, Which is Best? Copyright © 1998 - 2010 BusinessPartners.com

[iv] Golden Parachute:A clause in an executive's employment contract specifying that he/she will receive large benefits in the event that the company is acquired and the executive's employment is terminated. These benefits can take the form of severance pay, a bonus, stock options, or a combination thereof.
Read more: http://www.investorwords.com/2201/golden_parachute.html#ixzz18IptCdP8

[v] HUMAN RESOURCES Government's Staying Power

By Brian Friel bfriel@govexec.com Government Executive October 1, 2001 (C) 2010 BY NATIONAL JOURNAL GROUP, INC. ALL RIGHTS RESERVED.

[vi] Nexera™ LLC — Empowering The Entrepreneur™ © 1991-2010 Nexera™ LLC. All Rights Reserved.

[vii] What is Network Marketing vs. Traditional Marketing   March 4, 2010, in Articles, by Mari

http://www.networkmarketingera.com/2010/03/04/what-is-network-marketing-vs-traditional-marketing/