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There is a lot of confusion around what is MLM exactly, also known as network marketing or multi level marketing. It may surprise you to know that many of the companies you are already familiar with, and perhaps buy products from, are MLM or network marketing companies. Of course everyone has heard of Amway but did you know that names such as Tupperware, Mary Kay, Avon, The Pampered Chef, Legal Shield, to name a few, are MLM or network marketing companies? In fact there are over 1500 MLM companies in the world.

So what is MLM? I liken MLM or network marketing to the following concept: A new restaurant opened in town and you go try it. You think it is fabulous so you tell your friends about it and some of them go try it. That’s networking. Now add a compensation component. Let’s say for every one of your friends who tries the restaurant, you get a small commission. Now that is network marketing.

Often people say, “That sounds like a pyramid”. Sure it does. Everything is a pyramid. Think of it this way. There is always a top dog (the big boss) some lower level dogs (the vice bosses) and some underdogs (the worker bees). It is legal, it is ethical and it is profitable if done properly.

MLM or Network marketing companies are highly regulated to insure they comply with a multitude of laws. One such regulation is there has to be a product, not just paper. Many people have heard the term “Ponzi scheme” in conjunction with illegal investment strategies. Wikipedia defines a Ponzi scheme as “A fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. Notice the words “rather than from profits… “

Once again, to be a legal MLM or network marketing company, there must be products that bring revenue into the company from customers.

So what makes a good MLM company good?

Do you believe in the product or service being offered?

First is the product. You will have to hold your head up high and proudly proclaim you have the best mousetrap ever invented so you better believe it yourself. In other words is the company selling a product you believe in?

So one good test is to ask yourself if you would use the product normally and would you recommend it to others? If the answer is, “no” then this company is probably not a good fit for you.

If you honestly believe in the product yourself and use it in your life, then things get a lot easier. You don’t have to sell anything, just share your experience with your friends and family.

What about support?

One of the beauties of network marketing is, your upline will provide lots of support. They are there to help you. In a traditional employee/ employer relationship, if the employee does not perform, he or she is easily replaced.

In a network marketing company, there are no employees. If you are struggling, your upline will jump in to help because their success depends on your success.

How long has the company been around?

With a start-up company like most traditional business, most will fail in the first several years. So while it may sound good to get in on the “ground floor”, most of the time it’s better to position yourself with a more established business. My personal opinion is a company that has been here 3 to 5 years has a good chance of survival and is still, in many cases a growing, vibrant opportunity.

So what is MLM?

So what is MLM? Simply stated, MLM is a business model in which the marketing is done by word of mouth rather than conventional advertising. To be legal, amongst other requirements there must be a product or service, and customers as well as distributors.

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Source by Len Mooney