Why Network Marketing Companies Fail
Learn the vital details of how to run a marketing business and why most network marketing companies fail!

Why do network marketing companies fail?

How do I run a marketing business?

 

How do I hire the right sales and marketing people?

Why Do Network Marketing Companies Fail?

 

Why do network marketing companies fail? Why do some network marketers do well? Why are outsourced sales companies different? On this page, you will discover how to run a successful marketing business.

First off, let’s figure out what is so negative about network marketing companies. We need to understand why most of them fail and how you can disassociate yourself with them.

 

Network Marketing v MLM v Pyramid Schemes

 

If you were to ask anyone why network marketing companies fail, they’ll tell you that it’s because they are a scam or a pyramid scheme. While this might be true, it is not true of all of them. Network marketing companies and mlm schemes are legal. Pyramid companies are not.

 

Pyramid Schemes

 

The problem with pyramid schemes, although they sound very enticing, is that eventually you will run out of suckers. There is never an actual product being sold in your down-line and you are making money by recruiting other marketers for your ‘business.’

 

Multi-Level Marketing (MLM)

 

Multi-level marketing is within the law as well. How is multi-level marketing legal? Well, these programs actually sell a product. According to Wikipedia, a marketing scheme is considered illegal if more money is made through recruiting other distributors than actual sales numbers. So, multi-level marketing is legal because there are products being sold. This can look different across all industries, but basically you make money off of the sales of the people that you directly recruit. That’s the key difference.

I guess the idea is that the company wouldn’t be making as much money without your efforts, so they give you a kickback. There are several examples of people who have become successful with multi-level marketing. After all, Robert Kiyosaki endorses them…if they’re legal that is.

So, what’s the difference between network marketing and MLM? Great question…not a lot.

The biggest difference is the go-to-market strategy.

 

Network Marketing

 

Network marketing companies make use of people’s existing network of friends, coworkers, family, acquaintances, etc. Once a person signs up with a network marketing company, they are free to sell their products to these people. Although they could go out and find new contacts, as in a traditional sales role, they don’t. After all, which do you think is easier?

So, why do most network marketing companies fail? The simple answer…the marketers themselves.

Not that there is anything ‘WRONG’ with these people, they just lack the training and resourcefulness to get any real momentum going. This happens across the board. The average income of an AmWay distributor is less than $5,000 annually. Why is this when there are obvious success stories of AmWay…like millionaires!? It comes down to training, resourcefulness, work ethic, dedication, and goals.

Network marketing companies will accept anyone that wants to sell their product. I’m not saying AmWay is a bad company or anything; in fact, they sell some really great energy drinks on the cheap! However, most people just don’t know how to run a successful marketing business.

why network marketing companies fail

 

How to Start a Business per DMA Portland

 

If you don’t know how to start a business at all, this section is for you. You have to start your business the right way from the beginning to dodge any potential pitfalls from the IRS down the road. According to DMA Portland, the leading sales and marketing company in Oregon, paying taxes is the most patriotic thing you can do. I think they were quoting Mark Cuban when they told me that. Most of the information in this section comes from the CEO of DMA Portland.

Let’s assume that you have everything all set up. You have your product or service (or client’s product or service) all secured and ready for the sales process. You have your marketing strategy all laid out and ready to rock and roll. What you need first is a business license and all of the legalities of running a business taken care of first. Do this before you complete your first sale. For specific details, check out this site.

In order to get all of your business licensing set up properly, just check with your local government offices to see what you need to do. You have to file both on the state and federal level. After all, they both will collect taxes on your company’s revenues. Don’t try to dodge the tax man. According to DMA Portland, "Everyone has to pay their fair share. Once you start thinking that you can try to squirrel some money away here or there, you are bound for trouble." View the original story of DMA Portland at http://dmaportland.blogspot.com. To me, you don’t need that kind of headache. Just set it up right from the beginning. Legalzoom.com can help point you in the right direction if you are clueless.

After you have your shiny new federal employer identification number (FEIN), you should be all set. You now have to get a bank account set up under your brand new company’s name in order to do business. Anything finances moved from one company to the next can be done so without paying any sort of income tax at all. You’ll pay your taxes at the end of the year on the amount you have left in your account (profit).
A quick note about incorporating vs doing everything as an individual entity, i.e. John Smith Corp vs the person ‘John Smith:’ John Smith Corp can use a dollar a lot longer than John Smith the person. If your company has an income of $100,000 your first year in business, you can spend all of it. The amount of taxes you pay against your taxable income will be zero if your bank account is zero. A bit extreme, I know, but just hang in there. If John Smith, the person, gets $100,000 as an employee, he is immediately taxed on that, giving him about half as much to spend as the company ‘John Smith Corp.’ This is one of the great benefits to owning a business. Your money can go a lot further. For more information on this, check out DMA on weebly. You'll find a lot more info there.

Now, back to business. Okay, so you have a bank account set up and you are all ‘legal’ and ready to rock. You have your products or services in line ready to be sold. Now, you have to find the right people to help you grow your company and implement your marketing plan.

 

How to Hire Sales People like Veritas Inc (Atlanta, GA)

 

First off, let me begin by saying marketing people aren’t necessarily sales people. However, all sales people are marketing people. Don’t advertise your open position as a marketing job if it is clearly a sales position. Don’t advertise your sales position if it is marketing. The reason I bring this up is that people get pissed off when they think that they are applying to some sort of a creative marketing position, but it is purely business development.

According to the fastest growing marketing company in the nation, Veritas Inc (hq'd in Atlanta, GA), people don't like vagueness in job postings. To see more on this, check out their original post at veritasincatlanta.com. According to this company, you’ll get all sorts of ‘creative’ people in to interview and they will be quite excited. However, you won’t hire any of them. That is unless they are just down for whatever.

Personally, I love people that are down for whatever, but there aren’t many of them out there. Creative people don’t like the grit and hard work of sales people. They’d rather sit in a cozy little office on a bean bag chair and think of really neat ideas for the next advertising campaign. These people are a dime a dozen. You can find them later. You need people that can IMPLEMENT your plan. They’re easy to find.

Hire the right sales people from the beginning. In my opinion, a lifetime of experience in sales doesn’t make someone a good fit for your company. You need to find people who will fit the mold. Don’t form the mold around someone’s personality just because you think that they can get you some sales. On the other hand, don’t hire incompetent people just because you ‘click’ with them. There is definitely a middle ground and you should learn to live in it. For more information on hiring people the right way from the beginning, check out Veritas Inc on tumblr. They post a lot of really great information on that topic.

The right person is someone who is ready to work extremely hard, has a great attitude, exudes integrity and professionalism, and has great communication skills. My favorite places to find these type of people are at retail stores and restaurants. Most of the time, if you show these people that there is more of an opportunity at your company than the one they currently work for, they’ll come on over. Just make sure that you have a training program that is extremely systematic and comprehensive. You don’t need these people to be the best at selling, but you do need them to be pretty good. After all, they have to make a living too.

 

How to Run a Successful Marketing Business like Blitz Inc (Bellevue, WA)

 

how to run a marketing businessAfter you have your sales people, your products or services, your contracts, and your legalities taken care of, it’s go-time. By reading through the material to this point, you have already gained more knowledge than most failed entrepreneurs who don’t know how to run a successful marketing business. Congratulations!

To really know how to run a successful marketing business though, you need to screw it up. I can’t give you the exact daily activities that will make your marketing company uber successful since I don’t know the nature of your products, services, or company culture. However, the following are some great words to engrain in your head and run your business by.

The following suggestions are from the top marketing firm in Seattle, actually Bellevue, Washington. The company's name is Blitz Inc AKA Blitz Inc Bellevue and they specialize in training b2b marketing and sales reps in the Pacific Northwest. To view the quoted material below directly, check out Blitz's blog at http://blitz-inc.blogspot.com. Also, you should check out Blitz, Inc. on Crunchbase. Their profile rocks.

Never ask someone to do something that you aren’t willing to do yourself. So many times I have seen managers who kick their feet up and ‘tell’ their people to do something or another. It may be an undesireable task, but this is the wrong way to do it. Be willing to do it if they won’t and you’ll find that your people will jump at the opportunity to help you out.

Always…always…praise in public and punish in private. Bad managers do the opposite. Great managers don’t. Don’t throw your weight around just because you started the company. Let people feel great about their individual accomplishments by giving the public praise. The same goes for team wins. However, when someone drops the ball you have to coach them on how to not let that happen in the future. Save that for private conversations.

Lead from the front and set the pace for your team. This sort of goes along with never asking someone to do something you aren’t willing to do yourself, but it is also a separate point. Get down and dirty when you have to. If your team is unmotivated or lacks the desire to win, put yourself in the game. After all, no one could break the five minute mile until Roger Bannister. Since then several thousand people have accomplished that feat. Before him, no one thought it could be done.

Don’t talk about past ‘war stories.’ People don’t care. They care how you are going to help them be successful. Although your career path might have been filled with struggles and failures, your people will become demotivated if all you talk about is the ‘old days.’ Talk about the present and talk about the future. This is what motivates people.

Focus on the process of getting really good at running your business. Failures will come, but so will victories. If you focus too much on either, you are doomed because your expectations will be swayed. So, always be a student of the game of business and keep your ego in check. You’ll go miles further in business by doing so.

View more from Blitz Inc on their reviews site. Someone who has reviewed the company in great detail talks a little bit about the management's philosophy and culture. A good read for sure. For more information, visit Blitz on weebly. You won't be dissappointed.

Hopefully, this article has enlightened you as to why companies fail, succeed, grow, and just sort of stagnate. I could write chapters of this stuff as I have been in the sales and marketing world for over a decade. I’ve seen all sorts of business models, opportunities, gimmicks, affiliates, scams, pyramid schemes, and brilliant ideas. Some of them work and some of them don’t.

Aside from the true SCAMS or PYRAMID SCHEMES where people take your money for nothing in return, all other claims are bogus. The scam claims of mlm, network marketing, outsourced sales companies, and the like are all proclaimed by ignorant lazy people who have no business having any sort of responsibility in business. As you learn how to run a marketing business, you will come across these people. Don’t listen to them. Know what you want. Figure out how to get there and don’t let anything stop you. 

 

 


Why do network marketing companies fail?

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