What are the pitfalls that cause so many MLM companies to fail? How can you avoid these mistakes? What makes an MLM company successful? The mistakes we observe are all mindset problems. The attitudes and behaviors that cause MLM companies to fail are greed, stupidity, arrogance, and ego.
With 20 years experience in launching over 1,000 MLM companies, we need not guess. We observe mindset problems that cause companies to stumble on a daily basis. Out of 1,000 startups, over 90% have failed while only 10% have prospered. The reasons for the many failures are easy to see.
Greed is a killer in network marketing. Company owners create a compensation plan that enables them to keep most of the company profits at the expense of their distributors.
Owners do not appreciate their company will not grow and prosper unless they have motivated distributors who are inspired and keen to maximize the income they earn through commissions. Owners must motivate and incentivize their distributors. This produces momentum and an incentive to succeed and help the company grow and prosper.
The solution is to pay distributors the maximum amount the company can afford.
A strong word but it’s all too common. When we consult with MLM startups, we always stress the need to avoid the following pitfalls.
- Owners change their compensation plan for the worse. The smarter thing is to change it for the better. Reduced commission payments will dis-incentivize distributors and stall momentum that produces growth.
- Change product prices up or down. The solution is to set product prices up front and leave them alone. Why? A price increase makes a product more difficult to sell. A lower price reduces commission payments and motivation for distributors.
This is also a strong word but we all too often observe it with company owners.
Be mindful of your company’s position in the marketplace. Are you competitive? Do your competitors market their business and products in a smarter way than you do? Do you run analytical reports that show if you are doing well compared to other MLM companies?
Arrogance shows itself with a mindset that assumes your company is all things to all people; that you are top of the bunch and in an unassailable market position.
A good example is Yahoo who never thought they would lose their pre-eminent position as the largest search engine. Look where they are now, trailing Google and facing ongoing problems.
An egotistical mindset can lead yourself and your company astray. Maybe you make lots of money in the $200 billion a year network marketing business. If so, there’s a temptation to buy high-ticket luxury items like a yacht, a mansion, or a private jet. When the ego rules, money that should be plowed back into the company are spent on personal rewards.
Realize that your company growth and success in the marketplace was built by a dedicated sales force – your distributors. Your own contribution may be limited to time, talent, and money.
Another aspect of ego is the temptation to claim success for yourself but blame others when things go wrong. It’s the sad manifestation of the “blame game”.
The buck always stops with the company CEO. Avoid blaming distributors for not selling, recruiting well, or complaining about products. As the CEO, it’s your role to do something about it before it is too late. When something fails, you need to own it. And when your company succeeds, it’s the team who should earn the credits.
What I articulate in the video is not home-spun psychology. With so many MLM startups biting the dust, they are observations we witness all too frequently.
In other videos, we have outlined the success factors, the mindset, the attitudes and behaviors that will guide your MLM company to success and prosperity.
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