HOW TO START AN MLM BUSINESS
The Essential Steps
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If you’re attracted to direct selling as a business model, there comes a point where you start wondering how to start a MLM business. What are the essential steps to launch that provide the best possible chances of success? For answers, there can be no better resource to turn to than the Sheffield Group. With over 30 years as the industry’s top consultancy, most of our work has been in the creation of new companies. What Sheffield doesn’t know about how to start an MLM business probably isn’t worth knowing.
For this short guide, we’ll look at five key areas:
From this you can see at once that the question “How to start a MLM business” is not very different from “How to start any business.” The primary issues are the same. What makes direct selling different is your dependence on distributors: a volunteer army that you can motivate and guide – but cannot control the way you would employees.
What defines a great product for MLM is the same as what defines any great product: that it serves an important unmet need better and/or more affordably than the current alternatives. The first and most important requirement is that your product addresses a problem worth solving for a clearly defined target market.
There are other criteria more specific to direct selling. You’ll have the most success if your product:
- Has a story that needs to be told.
- Is consumable and therefore calls for repeat purchases.
- Has something about it that is unique, proprietary or even patented.
- Competes on quality more than on price.
- Has a high enough profit margin at a realistic retail price to pay your distributor force.
If your product matches all five criteria, it is probably ideal for direct selling, no matter what industry or market sector it is in.
Guiding clients on the selection, manufacture, pricing and positioning of products is a Sheffield specialty, and this is one key area where you can be sure of getting the most experienced team in the industry to guide your product strategy.
The question “how to start a MLM business” could also be phrased: “How to market a MLM business”, because marketing is the single most important key to your success. Again, many of the issues are the same in MLM as for all kinds of consumer-oriented businesses.
The foundations of marketing in direct selling include:
- A strong, attractive, well defined brand.
- Clear messaging that speaks to consumers’ hopes and fears.
- Attractive product positioning, packaging, pricing and bundling.
- An effective website and marketing materials.
What’s unique about direct selling is that your marketing is designed to support your distributor force. Some people who think they know how to start a MLM business will tell you that you don’t need marketing at all, because the distributors will do everything for you. This is far from true. You should best see your distributors as human lead generators. They place your product and story in the consumers’ line of sight. It’s your messaging and materials that will hold attention and close the sale. The purpose of marketing in MLM is to empower your distributors with the most effective possible tools, tactics and messaging.
The Sheffield Group are experts on the marketing and sales strategies that have proven most effective in the direct selling arena. Your company launch will benefit from their experiences with literally hundreds of other MLM startups.
Your volunteer army of distributors is your single most important asset. Giving this community leadership, inspiration and the right equipment to succeed is your primary responsibility as a direct selling CEO or executive. If you really want to know how to start a MLM business, you must first understand the unique role of the direct selling distributor, and the psychology and behaviors that go with it.
Distributors are of course motivated by financial incentives, so your compensation plan is central to your distributor strategy. The key here is to understand that a good comp plan encourages the optimum behaviors to drive growth. These behaviors change as the distributor rises through the ranks. Initially the focus is on simply selling the product. Then, attracting other distributors and building an organization takes equal priority with selling, Finally, the focus shifts to leadership, training and inspiration. As well as finance, though, distributors are also motivated by a sense of purpose, and by personal recognition. Developing these “soft” aspects of your business is essential to your success.
Distributors vary enormously in their level of engagement and activity. 80% of your distributors will do very little beyond making one or two initial sales. Many of these will drop out after a few weeks. Note that although they cease to be active in growing your business, they may remain loyal customers. Around 18% of your distributors can be predicted to be consistently active in selling product and building organization. That leaves a mere 2% who give a high level of leadership and who drive — directly and indirectly — the majority of your sales. Understanding this spread of distributor engagement is key to your business strategy.
Training your distributors with a simple, repeatable process is essential, as is equipping them with effective marketing materials. Your director of sales, who recruits leaders and works day by day with the field, is your single most important executive hire.
The Sheffield Group is the unquestioned industry leader in compensation plan design and distributor motivation, so there is no team better to learn from about this aspect of how to start a MLM business. We can also guide you to the best people to identify and recruit your director of sales.
The operational side of a direct selling business is again much like any other with a few key distinctions. In thinking about how to start a MLM business, you should bear these three points in mind:
- Growth in direct selling can be very rapid, and you need to ensure your supply chain is able to keep up with sudden increases in demand for product.
- Your entire operation depends on the software that implements your compensation system and manages the logistics of your distributor organization — choice of software provider is critical.
- Direct selling is governed by particular laws and regulations: you must have legal counsel expert in MLM law, and (according to your product) specialist in FDA or other government regulations specific to your business.
Sheffield’s expertise in these fields of is drawn from the direct experience as MLM executives of the Sheffield consultants, along with decades of closely observing MLM companies start and grow. Sheffield also has the best network to draw on for specialist services such MLM software and MLM law.
When you’re thinking about how to start a MLM business, one of your first questions will be the cost of launch. There’s no single answer to this, because budgets vary according to the type of product, the expertise of the founding team, and other contextual factors. However, the elements you should budget for include:
- MLM consulting (essential to ensure avoiding costly errors that cause many startups to fail)
- MLM legal counsel
- MLM software
- Initial executive team, including director of sales
- Product inventory
- Branding and design
Once launched, you’ll need financial modeling that can help you predict cash flows and manage your spending to keep pace with growth. This is an area where direct selling presents quite unique challenges. Because of the diversities of distributor behavior, and the fluctuations in energy that are characteristic of every MLM business, you need specialist tools to map and manage your company financials. The Sheffield Group has specialized in this field and has developed a highly sophisticated pro forma tool that takes into account the unique rhythms of the direct selling business model.
How Sheffield Can Help
As you can see, the Sheffield Group is uniquely positioned in helping you understand every aspect of how to start a MLM business. With over 30 years’ experience, this team has launched or advised over 1,000 direct selling companies. There is virtually no problem in the startup process Sheffield has not seen and helped its clients solve. Sheffield will provide specific guidance, and introduce the best resources, for covering all the key aspects of your launch: product, marketing, distributors, operations, and finance.
CALL US: 480-968-6199
Sheffield: Your All-Round MLM Experts
Founder Mike Sheffield is renowned as an industry leader in how to start a MLM business, with decades of experience helping companies get from “zero to hero” in the shortest possible time, and at the lowest realistic cost.
Importantly, the Sheffield Group is equipped to address every aspect of your future success — either with our in-house consulting team, or with the support of our world-class network of specialist experts.
SHEFFIELD’S IN-HOUSE CAPABILITIES
- Concept and Product Review
- Compensation Strategy
- Marketing Strategy
- Sales Pathways
- Product Positioning
- Distributor Recruitment Strategies
- Financial Modeling
- Culture Development
SHEFFIELD’S EXPERT NETWORK
- MLM Software
- Branding and Design
- Website and App Development
- Online Positioning and Marketing
- Social Media
- Executive Recruitment
- MLM Law
Your Next Step
Looking for the best possible help in knowing how to start a MLM business? Contact the Sheffield Group for a free initial consultation.
To make an appointment, simply call us, or click the Message link below.