Today I want to talk about another craze that is becoming quite popular in the MLM industry. Almost daily I am approached with another MLM company selling electric power. Most focus entirely on this as a company, and fall into the category of a One Trick Pony (link to my post from yesterday), which has its own set of issues. Others are existing companies who have jumped on the electrical power bandwagon. Either way, if you play with electricity, and you do not know what you are doing, you are eventually going to get a shock.
Let’s have a brief history lesson. This sort of explosion in the MLM world has happened before following the deregulation of long distance telephone service. There are some similarities here, and some big differences. Understanding these will help us get a better handle on this sort of company.
For starters, let’s look at how these MLM Companies did when telephones were deregulated. Much like today, with electric power, MLM Companies were springing up by the dozens, if not hundreds, trying to capitalize on this phenomenon. The biggest issue with this type of company, as well as the electric companies of today, is that they are only a reseller. Most successful MLM Companies have their own products, but this type of company, being a reseller, is at the mercy of the actual service provider. When that service provider changes prices, or other regulations are imposed, it can be disastrous. Such was the case for the long distance MLM Companies. In that case, competition drove the prices so low that there were no longer enough margins to pay commissions, and most went out of business. The few that survived were the ones who were ahead of the curve and jumped into other areas.
Now, these two examples differ in one major way. In the 80’s, when long distance was deregulated, the laws of supply and demand took control. As competition increased, prices went down, and demand started to rise. With phone service, people were able to adjust usage as prices changed. With electric power, this is not such an issue. It’s not as if people will decide to leave their lights on longer just because prices go down a bit. Plus, prices for long distance were not tied to so many other factors. Even with electric service providers being deregulated, there are still many pieces of legislation on the books, as well as in the works, that can drastically affect the prices of energy.
All the complex elements aside, the likelihood of electric prices ever dropping to almost nothing, as in the example of long distance service, is slim to none. The bottom line is, demand will not see the sort of increase with electric service, so prices will surely not drop. On the other hand, there are many other factors at work that cause some serious volatility. Between so much of the energy industry being traded on the Commodities market and the move toward sustainable energy solutions, not to mention politics, this is yet another type of MLM company that has a lot of potential both for fast income, and for disaster. If history tells us anything, it is that such companies can produce large income potential for short periods of time, but are not safe bets for the long term.
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