Why Do Networking Companies Blow Apart?

Let’s presume that all Network Marketing Company owners who start their own companies – want to build a life long business – one that will bring financial security to them and to their families.

If my presumption is correct – why then do so many Network Marketing Companies go out of business – and so quickly? First – my personal hallucination is that over 90% on new Network Marketing Companies that start in business this year – will not be in business five years from now.

When they go out of business – the dreams and aspirations of the distributors who worked with them – go right down the tubes also.

Why does this happen? Here are just a few of the reasons:

  1. The company owners are way under capitalized. They do not have the money necessary to sustain and build the business. A decade ago when I was approached by would be MLM company owners – I would ask if they had $6 million in the bank. Today start up for a Networking Venture – I would guess might be well over $10 or $12 million.
  2. The company owners are not business men or women. They could be experienced Networkers – having built Networking Distributorships – but they really don’t know how to build, run and finance a company.
  3. The company owners may be exceptional business men and women – who have loads of experience building companies – but have really no understanding for the field. These poor souls really don’t understand that their distributors are their sales force – and they need to be treated with kid gloves – and nurtured so they will bring in additional sales each week – each day – and each month.

    I could write for days about the stupidity of Network Marketing Company owners who abuse the field – kill their own momentum – by driving their key leaders to look for other opportunities.

  4. The company manages to get cross wise with one or more Regulatory bodies – either by the company’s making claims for their products that are not legal – or by not regulating the field – and letting the field make these same type of claims.
  5. The company owners have not gotten into their heads that they have to create a “win – win – win” atmosphere in which to build the business. The field has to win – the ultimate users or consumers of the product have to win – and only then can the company win.

    I remember three decades ago when a nice guy – a distributor I knew went to work for a new company – and he showed me this exceptional compensation plan. When I asked him about the product he shot back at me “Who cares about the product – just stack in your garage – and keep making money.” Needless to say the company he was working with did not last a year. They were out of business – the guy had burned all his business relationships – and he went back to the “Just Over Broke” world of trying to get a job.

These are a few of the many reasons networking companies go out of business. There are many more. How do you protect yourself from working with a company destined to go out of business? Easy – do not fall for the trap of “get into this new company –we’ll make millions – you’ll be at the top – just three down from the company owner” baloney.

You can never know what will happen to new companies – except you can be certain that 90% of them will not last 5 years.

For me – I would much rather get into an established company – with exceptional products – than try to work with the New Kid On The Block. At least with an established company – you have a track record to look at – and lots of satisfied and some not so satisfied folks you can talk with about the company – and their products and the opportunity for you to build a business.

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