There is No Magic Bullet

• By: Alicia Dale
• On: 08/03/2009 07:12:34
• In: Sales Management
• Comments:

With the economy changing drastically it feels like people are frantic to make money. People that are feeling desperate and vulnerable are ripe targets for multi-level marketing (MLM) companies.

We are all familiar with multi level marketing companies. A friend or family member usually signs up for one and you will undoubtedly get a phone call. They may be selling telephone services, every day household products, greeting cards, bras, candles, makeup, or skincare lines. They usually have an evangelistical quality when they call to inquire what type laundry detergent you use or if you really understand how much you spend in laundry detergent.  Your friend/relative may talk about your relationship and how much they care about you. This is a warning sign, they are in really deep.

People do make money at MLMs – the people who create them and find people to follow them make a LOT of money. The rest of the followers supply the money they are making.

Think about the business model with your logical mind. The MLM may have you sell laundry detergent along with other household products. Their laundry detergent that is so great that it can’t be found readily or in any retail outlet will cost $10.00. The purchaser may have to join a club for $50.00 so that they can purchase the $10.00 product for $8.50 next time. The MLM seller has paid $500.00 for their starter kit which includes product, order forms, and business cards. The MLM has already made $500.00 from the seller even if the seller does not sell one bottle of special laundry detergent. If the new MLM seller signs up two sellers under him, he will get a percentage of their sales. As he continues to sign them up, he’ll get a higher percentage. With the original salesperson, his brother and his wife in his tree (read pyramid) the MLM has made $1500 and an additional $150.00 for the special buyers club. The agents are now the proud owners of an inventory of business cards, laundry detergent and paper order forms. The cost to the MLM to provide this starter kit, my guess, is about 50 bucks  per person. That’s one hell of an ROI (return on investment).

Laundry detergent is available at Target for $2.85. The MLM agent will tell you all the reasons why the laundry detergent they sell is superior and all readily available laundry detergents are inferior and people who buy the inferior laundry detergent are in the dark. If you, as the potential MLM sales person are still skeptical, they’ll move into discussing how by selling this detergent you are helping the people you love. You’re offering them an opportunity to be independently wealthy.  They might follow up with a story of how they effortlessly make money each time someone in their downline buys a bottle of product. They'll show you pictures of their big house and their last vacation. They'll wear casual clothes and act positive all the time, in any situation. At this point, you start to question yourself. You are not happy all the time, you have a nice house, but it's not that big and the truth is you are not happy all the time. If you start thinking like this, watch out, they've gotcha!

If you wanted to start your own laundry detergent company, you could probably make the product for a cost of $5.00 per unit. The market bears a cost of $2.85. In order to create a sound business model you’d have to drive your cost down and there is vast competition. There would have to be something really special about your laundry detergent to get people to buy your laundry detergent – to make a margin you’ll have to sell it at $10.00 per unit. It’s possible – maybe the product is green or doesn’t have any chemicals in it that people are allergic too, maybe the product lasts a long time. There are all kinds of value-based reasons people will buy your detergent. If you can sell your product at $10.00 earning a $5.00 profit on each one you will have to sell 20,000 units a year at that $5.00 profit per year to make $100,000. You can raise your family on that salary. It’s a nice life. To make $1,000,000 you’ll have to sell 200,000 units.

You might get the attention of Clorox. They may buy your operation since you’ve identified and developed a way to serve a niche. Now you have the opportunity to make some real money.

I like sales, I like providing a product that has value at a profit and yes, I do like helping people. I hope I’ve helped you to look at a profit model a little differently by writing this post.