When people ask this question, is network marketing a real business it’s usually in the context of becoming a distributor or marketer for an existing company. And to answer this it’s best to step back and look at what network marketing is. As a strategy for marketing products, and overwhelming as a methodology for growing their business, network marketing companies built a network of distributors. Chances are you heard about a network marketing “opportunity” via an existing distributor. Now let’s get back to the question at hand. Is it a real business? The best answer I can give you is “it’s real for the owners of the entire company”. Meaning the people behind the founding of the network marketing company, and bear in mind some of the largest network marketing firms are publicly traded and thus quite significant financially speaking, they own a real business by any definition of the word.
You on the other hand, sorry to share bad news, will not be getting a real business when you register and purchase products as a distributor from a network marketing company. While no absolute definition of what a business is exists, the network marketer is more similar in most respects to a commissioned salesperson than to a business owner. In so many important areas that define what being in business is when you are truly the founder or owner of a business, such as the ability to change the product, the marketing plan, the price, and to eventually sell the business – network marketing comes up lacking in every respect. The only aspect of network marketing that resembles being in business for yourself is that you can generate revenue without directly being involved in the sale, by virtue of the network you’ve built. Just bear in mind that network marketing salesforces see a turn-over rate as high as 70% in a single year, meaning that after you’ve invested a lot of time (in addition to money) into building a network, it will quickly erode if you stop maintaining it by continuing to recruit.
In an effort to be fair to any network marketing company’s that qualify as truly “product-driven, if the product is popular with customers it would in theory be possible to establish a more traditional looking business structure. There are examples of network marketing firms where services might also be offered in tandem with core products, thus giving distributors the opportunity to develop a more solid business. But by and large the promise of a real business is not met by the reality of how network marketing companies operate. The vast majority of sales by the company itself are made to the distributors. The newest recruits therefore at some point drop-off their purchases. Many network marketing companies try to extend the internal purchasing by recruits to maximize the earnings off of each recruit. Of course to the recruit, this means they are increasing their risk and for the 99% that do not ever see a return, it means larger losses. We’ll talk more about this topic specifically in an upcoming article exposing the clever tricks MLM’s and network marketing company’s use to “string along” recruits that are losing money and purchasing.
Overall the common confusion (and purposeful deception by network marketing recruiters in many cases) is that being a marketer is the same as being a business owner. That’s isn’t the case at all. And network marketing company’s are taking advantage of the average person who doesn’t have the business experience enough to understand what a real business looks like. Even though everyone buys from businesses everyday, and probably works for a business, until you start a business or take business training you might not really appreciate the all important fundamentals that make up a business structure.
I like to always encourage those of you who are exploring network marketing by saying that it’s great you’re thinking about getting into business. But network marketing isn’t real business in the way that starting your own business would be if you pursue and idea, form the company, register it and grow it. The lure of network marketing is often the perception that starting a real business would be too much work, so why not relax and just register for a network marketing company and buy a garage full of products. The reality as almost all new network marketers quickly discover is you’ve just bought yourself one of the toughest jobs in the world. You are now in the business of selling products directly to consumers. And what’s worse, because selling those products to real customers is almost always impossible (there is a reason these products don’t sell in stores, either pricing, quality or both!) the only way you’ll actually recover your investment is to recruit. What a recruiter at a network marketing firm really is, is a sad individual who has dropped their money into this empty pit, and the only way they can get it out is to drop you into the pit to recover it for them. And if you do that for them, now you’re going to have to go out and do the same to someone else. And who will you find most receptive to helping you out with your “exciting new business opportunity”, buying products so you can create the illusion of profits, registering as distributors to create the illusion of building a big network – of course it comes down to your friends and family. Monetizing the people whose trust has taken a lifetime to build. But which can be destroyed in several months as literally millions of failed network marketers can attest to.