So many people ask the same question: Is Multi-level Marketing a REAL Business? Is it truly a business that can produce a living and income? Is it a REAL distribution business? It is a business that operates for the customer's satisfaction, and always looks to gain new customers?
Here is the answer: YES.
How and why does it qualify as a business? Every business has certain traits and functions that are needed to do business and stay in business. We have developed what we call the "7 Business Factors Test", and you have to ask these questions to see if it qualifies as a business. All businesses, no matter whether it is a traditional business or a non-traditional business, (such as MLM), answer these questions in the affirmative.
What are the "7 Business Factors Test" Questions?
1) Does the MLM Business distribute goods and services of some type?
Answer: Yes.
In MLM, there are goods and services that are distributed through personal distribution methods, and they are distributed directly to the customer, with no middle man. These goods and services can be manufactured by the MLM company, but usually are not. The goods and services many times are manufactured by an outside source, and then shipped by the MLM Business to the customer or distributor. Then the distributor can take the goods, and re-sell them to their customers as well.
2) Does the MLM Business have an official Office, headquarters, or structure that the business is operated out of, and with an address of some type?
Answer: Yes.
All MLM businesses should have some kind of office or headquarters that the goods are shipped from, or at least in charge of the shipments getting to the customer. This does not have to be a fancy office, but one that can get all the tasks needed to run the business done in a timely fashion. They should have a visible address on all communication.
The distributor's business is usually operated out of the home, and that counts as a structure that the home business is housed.
3) Is there an accounting structure that is set up to run the business effectively and legally?
Answer: Yes.
All MLM businesses should have an accounting function and people set up to handle all business transactions. They not only keep the books for the MLM Business itself, but also the MLM distributor as well. The MLM Business from the home should have some form of an accounting system, for tax purposes, and for profit and loss statements. Accounting also helps keep the Company and distributor aware of the health of the business and how it is doing, or not doing.
4) Does the MLM Business have easy communication to get a hold of someone if needed?
Answer: Yes.
Communication is the lifeblood of any business, and MLM is no exception. MLM Businesses usually not only have an order line, and a distributor line, but a general public telephone number that the public can get in touch with them as well. Usually at the MLM Business Office, there is someone to answer the phone as well.
And the MLM business should also have an email system that is watched, and taken care of, on a daily basis. This is not only for the distributor base, but also the customers and public as well.
5) Does the MLM Business have the needed business licenses and legal structure to do business in the states and countries they operate in?
Answer: Yes.
All MLM Businesses that have been in business for any amount of time, must have the needed legal structure and licenses to operate in every state. If they do not, they will eventually be forced to cease doing business in that state. And most MLM Businesses have some form of a corporate structure that the company operates under. That could include being a C Corporation, an LLC, or a Sub S Corporation.
Even MLM distributor needs a business license to do business in their city, so they will not be penalized if they do not have one and are caught.
6) Does the MLM business operate on a FOR PROFIT basis?
Every successful business structure, traditional or non-traditional, should operate on a FOR PROFIT basis. Even the MLM distributor needs to operate on a FOR PROFIT basis. If the MLM business does not operate in a profit mode, and loses money continually, the MLM business will not be in business for that long.
It is the same way for the MLM distributor. If the distributor does not make any money, then they will not stay in business long.
7) Does the MLM business perform all of the needed business functions to increase business, including marketing, promotion, campaigns, running specials, advertising tools, customer service, brand extensions, research and development, direct marketing, increasing brand awareness, and keeping their vendors at an honest price?
Answer: Yes.
Every MLM business operates to increase business, using all of the functions mentioned, and more. Even the MLM distributor needs to perform some of those functions, to increase their own business in their marketplace. These are functions any business needs to do, in order to stay in business, and enlarge it's operating capacity.
