Do you want to start a network marketing company? If YES, here is a complete guide to starting a network marketing business with NO money and NO experience.
Okay, so we have provided you an in-depth sample network marketing business plan template. We also took it further by analyzing and drafting a sample network marketing marketing plan backed up by actionable guerrilla marketing ideas for network marketing businesses. In this article, we will be considering all the requirements for starting a network marketing business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- 1 Why Start a Network Marketing Company?
- 2 Starting a Network Marketing Company – Market Research and Feasibility Studies
- 3 Starting a Network Marketing Company – Legal Matters
- 4 Is Professional Certification Needed to Run a MLM Business?
- 5 Starting a Network Marketing Company – Technical & Manpower Details
- 6 Starting a Network Marketing Company – The Marketing Plan
Why Start a Network Marketing Company?
If you live in the United States of America, you will agree that loads of entrepreneurs and freelance marketers are making good money from selling the products of a company or their own product via network marketing or multi – level marketing as it is popularly called.
Starting a network marketing business can be demanding and risky at the same time, but if you have done your due diligence before venturing into the business, you are likely not going to run at a loss. First and foremost, you are expected to have experience in the network marketing agency industry. It will pay you to study marketing if indeed you want to venture into this line of business.
It is very needful that you analyze the existing network marketing business in and outside of your area. Know how many there are. Also, you would be required to check the existing competition, as well as know their strengths and weaknesses. Knowing the weaknesses of the existing network marketing businesses around you means that you would be able to learn from their mistakes and in turn come up with a better and more preferred network marketing company devoid of the mistakes and weaknesses of others.
So, if you have done the required feasibility studies and market research, then you might want to venture into this business. If you have been tinkering with how to start your own network marketing business but do not know how to go about it, then you should consider going through this article; it will sure give you the needed guide and direction.
Starting a Network Marketing Company – A Complete Guide
- Industry Overview
Network marketing business is generally referred to as a business opportunity that is very popular with people looking for part-time and perhaps flexible means of earning additional income. Some of the leading network marketing companies in the United States are Forever Living Products, Fuel Freedom International, Avon Products, Mary Kay Cosmetics, GNLD and Tupperware et al.
Network marketing which can also be referred to as Multi-level Marketing (MLM) or Pyramid selling or affiliate marketing et al is a controversial marketing strategy in which the sales force is compensated not only for the sales they are able to generate, but also for the sales of other salespeople (downlines/team members) that they recruit.
In the United States of America and of course in most countries of the world, companies that leverage on the network marketing approach for compensation have been a frequent subject of criticism and lawsuits. Generally, criticism has been focused on their similarity to illegal pyramid schemes, price fixing of their products, high initial costs for registering (the amount needed to purchase marketing kits and first products), emphasis on their recruitment strategies and loads of other techniques that seem not to be plain and easy.
Interesting Statistics About the Network Marketing Industry
Research carried out by The Direct Selling Association (DSA) of which network marketing is under, shows that in 1990, 25 percent of their members used network marketing, growing to 77.3 percent in 1999. By 2009, 94.2 percent of The Direct Selling Association (DSA) members were using network marketing, accounting for 99.6 percent of sellers, and 97.1 percent of sales.
The research also shows that companies such as Avon, Electrolux, Tupperware and Kirby all initially used single level marketing to sell their products and later introduced network marketing compensation plans. The Direct Selling Association (DSA) in the United States has approximately 200 registered members, while it is estimated there are approximately 1,000 firms using network marketing in the United States alone. It is important to state that network marketing companies operate in all the 50 states in U.S.
So, if you have the intention of starting your own network marketing company, then you should ensure that you select a product or service that is easily sellable and of course, formulate a good reward system for network marketers under your scheme. You should also ensure that you conduct thorough feasibility studies and market survey before launching your network marketing company.
Some of the factors that encourage entrepreneurs to start their own network marketing companies are that the business is easy to set up and the start-up capital is indeed affordable especially if you are selling the product or services of an existing company; you can actually start your own network marketing business as a freelance from the comfort of your house.
All you need to do is to create an office or storeroom somewhere in your house and then start marketing your products and services to your friends and invite them to join the network. Over and above, network marketing has become one of the best options for stay at home mothers or anyone who intends making money without registering their own personal business or directly working for an organization.
Starting a Network Marketing Company – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who enroll with a network marketing company as freelance marketers and those who need the services or products of a network marking company are all encompassing.
To a large extent, it depends on the product or services the network marketing company is involved with. For example, a network marketing company that retails makeup and related cosmetics can only appeal to female folks and a network marketing company that retails aftershave and related products can only appeal to male folks.
So, if you are looking towards defining the demographics for your network marketing company, then you should make it all encompassing. It should include everybody with or without purchasing power within your target area.
List of Niche ideas Within the Multi-Level Marketing Industry That You Can Specialize in
Most network marketing companies tend to operate a general network marketing business that involves every business activity or services that a standard network marketing company is expected to offer. That is why it seems that there are no niche areas in the industry.
These are some of the areas of specialization a start-up network marketing company can specialize in within the advertising agencies industry;
- Selling Products
- Offering Services
The Level of Competition in the Network Marketing Industry
Surviving in the business world as a network marketing company requires more than your expertise and knowing how to conduct your business, but also how to network with key people that matters, people with influence to help you recruit network marketers with the capacity to take your products or services to every nooks and crannies of the city your operating in.
The level of competition in the network marketing industry to some extent depends largely the location of the business and of course the products you are selling or services you are offering. If you can successfully create a unique product or services, you are likely going to experience little or no competition.
For instance, if you are the only network marketing company that sells children toys or children related stuffs in your location, you are likely going to face minimal competition. The major competition you will face won’t be from fellow network marketing companies but from toy stores around you. But if the prices of your toys are competitive and your reward system for network marketers is enticing, then you will enjoy a fair share of the available market in you location.
When it comes to network marketing, distance is never a barrier when competing for customers and network marketers. Your network marketing company can be in the United States and but you may have some of the largest network of marketers in Lagos – Nigeria.
But over and above, there are several network marketing companies scattered all around the United States and in the cyber space. So, if you choose to start your own network marketing company in the United States, you will definitely meet stiffer competitions not only amongst network marketing companies in the United States, but also all over the globe.
Besides, there are larger network marketing companies like Forever Living Products, Fuel Freedom International, Avon Products, Mary Kay Cosmetics and Tupperware that determine the trends in the industry and you should be ready to compete with them for network marketers and for customers.
List of Well Known Brands in the Multi-Level Marketing Industry
In every industry, there are always brands who perform better or are better regarded by the customers and general public than the others. Some of these brands are those that have been in the industry for a long while and so are known for that, while others are best known for how they treat their customers.
These are some of the leading network marketing companies/brands in the United States of America and also in the globe;
- Forever Living Products
- Fuel Freedom International
- Avon Products
- Mary Kay Cosmetics
- Tupperware Brands Corp.
- Primerica Financial Services Inc
- Nu Skin Enterprises, Inc.
- Oriflame Cosmetics SA
- Viewer & Co. KG
- Natura Cosmeticos SA
- Herbalife Ltd.
- Ignite Inc.
- Yanbal International
- Telecom Plus
- Ambit Energy, L.P
- USANA Health Sciences Inc.
- New Era Health Industry Group, Co., Ltd. (Zhong Jian)
- The Pampered Chef Ltd.
- Thirty-One Gifts LLC
- Nature’s Sunshine Products, Inc.
If you are looking for a business that requires relatively less stress and perhaps minimal start-up capital to start, you can consider starting a network marketing business. The cost of running a network marketing company especially as a freelance network marketer selling the products and services of a company when compared to the turnover you get can be poles apart (this is applicable when you have been able to build a robust network of vibrant and result oriented marketers).
People that venture into network marketing business can as a matter of fact start the business from their home and still make headway in the business. This is why there are loads of stay-at-home moms who are active network marketers all across the United States and in the globe.
As a matter of fact, the cost of running the business process from start to finish could be restricted to the cost of making phone calls, transportation, internet subscriptions, PR and in some cases materials such as fliers, posters and digital billboards et al. With that, it is easier to place a projection on the profits you are likely going to make if you are able to successfully sell your products or services via the number of network marketers you have within your network.
Starting Your Network Marking Company from the Scratch versus Buying a Franchise
In the real sense of it, the business concept of network marketing makes it possible for anyone to become a network marketer for a network marketing company without purchasing the franchise of the company hence it will be right to say franchising does not really work with network marketing companies.
So, if you are interested in the network marketing industry, you have the option of either becoming an active network marketer with an established network marketing company or you start your own network marketing company from the scratch.
Please note that most of the big and successful network marketing companies around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success and of course you can build your own network marketing company brand to become a successful brand in your area of specialization and even go ahead to sell your products or services and recruit network marketers both at the national level and global stage.
Possible Threats and Challenges You Will Face When Starting a Network Marketing Business
If you decide to start your own network marketing business today, one of the major challenges you are likely to face is the presence of well established network marketing companies and also retailers or businesses who are selling same products or offering same services that you intend selling or offering. The only way to avoid this challenge is to create your own market; concentrate on a location that you can easily penetrate.
Asides from unfavorable government policies, just like any other business, one of the major threats that you are likely going to face is economic downturn. It is a fact that economic downturn affects purchasing/spending power. Another threat that may likely confront you is the arrival of a network marketing company or even a company retailing same products like you in same location where your target market exists and who may want to adopt same business model like you.
Starting a Network Marketing Company – Legal Matters
- Best legal entity to use for a MLM business
When considering starting a network marketing company, the legal entity you choose will go a long way to determine how big the business can grow. Some network marketing companies design their products and services for regional/community market, some for national market, while others for international market via online platform.
Generally, you have the option of either choosing a general partnership or limited liability company which is commonly called an LLC for a business such as a network marketing company. Ordinarily, general partnership should have been the ideal business structure for a small scale network marketing company especially if you are just starting out with a moderate start-up capital and you want to concentrate on a region. But people prefer limited liability Company for obvious reasons.
As a matter of fact, if your intention is to grow the business and have network marketers from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you. Limited Liability Company, LLC will cut it for you.
For example, setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need board of directors, shareholders meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your network marketing company; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.
If you take your time to critically study the various legal entities to use for your network marketing company, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your network marketing company so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.
Catchy Business Name Ideas Suitable for a Network Marketing Company
When it comes to choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own network marketing company, here are some catchy names that you can choose from;
- Extra Income Network Marketing, LLC
- Jeff Finn Global Network Marketing, Inc.
- Horn of Gold Group, Inc.
- Belarus Brothers Network Marketing Company, LLC
- The Green Products, Inc.
- Avenues 2 Prosperity Network Marketing, LLC
- Cee Plus Network Marketing Co.
- Brighton Gab Network Marketing, Inc.
- Flora Maples Network Marketing, Inc.
- Global Moms Network Marketing Company
- Mary Jay Cosmetics Ltd.
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your network marketing business.
Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own network marketing business in the United States of America;
- General insurance
- Health insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
Intellectual Property Protection/Trademark
If you are considering starting your own network marketing company, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successful run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subject to the review of attorneys as required by USPTO.
Is Professional Certification Needed to Run a MLM Business?
Asides from the results you produce, professional certification is one of the main reasons why most network marketing companies stand out; network marketers will consider it easier to work with you if they know you have the major certifications in your area of business.
You are strongly encouraged to pursue professional certifications as they will go a long way to show your commitment towards the business. These are some of the certifications you can work towards achieving if you want to run your own network marketing business;
- Certified Network Marketer
- Certified Training for Direct Sales/Network Marketing
- Certified Marketing Management Professional – CMMP®
- AMA Certified Professional Marketer
- MBA in Network Marketing
Please note that the higher your qualifications and experience (expertise), the easier it is for you to make impact as the owner of a network marketing company.
List of Legal Documents You Need to Run a Network Marketing Company
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized especially a business like network marketing company. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long arm of the law catches up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own network marketing company in the United States of America;
- Certificate of Incorporation
- Business License
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letter)
- Operating Agreement for LLCs
- Insurance Policy
- Consulting contract documents
- Apostille (for those who intend operating beyond the United States of America
Financing Your Network Marketing Company
Starting a network marketing business can be cost effective especially if you choose to sell the products or services of a company and you also choose to run the business from your home, share office space with a friend or make use of virtual office.
Producing your products and securing a standard office/production facility is part of what will consume a large chunk of your start-up capital, but if you choose to start the business on a small scale by retailing the product and services of an existing company, you may not have the need to go source for fund to finance the business.
No doubt when it comes to financing a business, one of the first things and perhaps the major factors that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for start-up capital for your network marketing company;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell of shares to interested investors
- Applying for loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
Choosing a Suitable Location for your Network Marketing Company
Network marketing business and most product based businesses require that you see physically with your clients hence it must be located in a good location; a location that is prone to both human and vehicular traffic if indeed you want to attend to loads of clients and maximize profits from the business.
The fact that you can operate your network marketing business from your home does not mean that location has little influence on the success of a network marketing company. If you have taken your time to study the network marketing industry, you will realize that network marketing companies are willing to pay expensive rents in order to stay in a busy business district; a place where business activities are at its peak.
Your clients should be able to drive down and locate your office with little or no difficulty. Vendors also should be able to easily locate your office when they have to come submit their bid/proposals, documents or for background checks et al.
Starting a Network Marketing Company – Technical & Manpower Details
On the average, there are no special technology or equipment needed to run this type of business except for customized network marketing, accounting and social media management software applications. In a bid to work out sales and marketing monitoring solutions for your clients, you might be required to design a customized software application. So also, you will definitely need computers/laptops, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves).
When it comes to choosing between renting and leasing of an office space; the size of the network marketing company you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a standard network marketing company, then you should consider the option of leasing a facility for your office; when you lease, you will be able to work with long term planning, structuring and expansion.
As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Software Apps Developer/Programmer/IT Specialist, Network Marketers/Freelance Marketers), Business Development Executive/marketing Executive, Customer Service Officer or Front Desk Officer, and Accountant.
Over and above, you would need a minimum of 8 key staff members to effectively run a medium scale but standard network marketing company.
The Service Delivery Process Involved in a Network Marketing Company
On the average, the way network marketing companies work varies from one company to another company, but ideally, a standard network marketing company is expected to first and foremost develop a product or services and then build a network marketing software app. that will enable them monitor the progress of network marketers and their downlines.
Once network marketers are recruited into the network, they are expected to pay registration fees and start-up fees (for the purchase of the first set of goods to be sold). The network marketers are required to recruit network marketers under them and they are encouraged to also recruit more network marketers as their downlines.
The truth is that if the product that a network marketing company is selling is affordable and of good quality, it will be easier for network marketers under their network to sell the products. The more products that are sold, the more money that the network marketer will make and of course the more money the network marketing company will make.
It is important to state that a network marketing company may decide to improvise or adopt any business process and structure that will guarantee them good return on investment (ROI) efficiency and flexibility. It should be noted that the above stated business cum services process is not cast on stone.
Starting a Network Marketing Company – The Marketing Plan
- Marketing ideas and strategies
Generally, running a business requires that you should be proactive when it comes to marketing your goods or services. If you choose to launch a network marketing business, then you must go all out to employ strategies that will help you attract customers and network marketers – freelance marketers or else you will likely struggle with the business because there are well known brands determining the market direction for network marketing.
These are some of the marketing ideas and strategies that you can adopt for your network marketing company;
- Introduce your products or services by sending introductory letters alongside your brochure to network marketers, stay at home moms, and residents in your chosen location.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across, so that those on the social media or those who read blogs can know where to go when they need to purchase your products.
- Create a basic website for your business, so as to give your business an online presence.
- Directly market your products and your business concept.
- Engage in roadshows in targeted communities from time to time to sell your products and to recruit network marketers.
- Join local chambers of commerce and industry for industry trends and tips.
- Provide discount days for your customers.
- Advertise our business in community based newspapers, local TV and radio stations.
- List your business on yellow pages ads (local directories).
- Encourage the use of word of mouth marketing (referrals).
Strategies to Boost Your MLM Brand Awareness and Create Your Corporate Identity
If you are in business and you are not deliberate about boosting you brand awareness and communicating your corporate identity, then you should be ready to take on whatever the society portrays your business to be. One of the secrets of larger corporations is that they are willing to spend fortunes year in and year out to boost their brand awareness and to continue to communicate their corporate identity the way they want people to perceive them to be.
If your intention of starting a network marketing company is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on the promotion and advertisement of your brand.
No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and brand boosting cum promotion to continue to appeal to your target market. Your corporate identity has a lot to do when it comes to building a business that is profitable and can last long.
Here are the platforms you can leverage on to boost your brand awareness and create corporate identity for your network marketing company;
- Place adverts on both print (newspapers and magazines) and electronic media platforms
- Sponsor relevant community based events/programs
- Leverage on the internet and social media platforms like; Instagram, Facebook, Twitter, YouTube, Google + et al to promote your business
- Install your Bill Boards on strategic locations all around your city or state
- Engage in roadshows from time to time in targeted neighborhoods to retail your products and to recruit network marketers
- Distribute your fliers and handbills in target areas
- Contact network marketers, stay at home moms, and residents in your chosen location informing them about your products and your network marketing concept
- List your network marketing company in local directories/yellow pages
- Advertise your network marketing company in your official website and employ strategies that will help you pull traffic to the site.
- Ensure that all your staff members and network marketers/freelance sales agents wear your branded shirts and all your vehicles and distribution trucks/vans are well branded with your company logo et al.