Wednesday, July 6, 2011

Big MLM Tip of the Day - MLM Company Market Position


This is not as confusing as it may sound. What is the current state of the market served by this company? Are there indications of what may happen in that market in the future? 

Let me give you an example. Today, in states that have deregulated electric service, you have MLM companies popping up all over the place who are reselling power. They would buy it wholesale and resell it retail, giving their distributors a cut of the profit. 

Sounds fine so far right? Not so fast. We already have a historical reference for this. 

In the mid 80's, the same thing happened with long distance service. Bell Telephone was broken up and the market was opened to competition. MLM companies popped up almost overnight to take advantage of it. They too were buying wholesale and reselling retail, giving a share of the profits to their distributors. Most did not make it long because of the legal battles that followed the break up of the Bell companies, but some went on for a while after. 

Eventually, rates got so low that there were no margins to pay distributors. Today, with most people having a flat fee for unlimited long distance, such businesses are but a distant memory. 

It is a safe assumption that electric power deregulation will have similar results. I don't know if electrical power rates will ever drop that low, although I wish they would, but they will not have to drop far to eliminate the margins required to pay commissions. 

These companies may make a lot of money for a while, but their odds of being around 5, 10 or more years are slim to none. 

No matter what your niche, analyze what the market is doing. Do not simply listen to what the company says, do your own research. With MLM Companies selling everything from vitamins to cell phones; water filters to travel packages, be sure you know what you are getting into before signing on the dotted line.
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