STARTUP MLM

Product

In key respects a great MLM product is like any other great product: it meets an important need with a large potential market at a price that consumers can afford. However, you need to bear in mind the specific competitive conditions of directly selling. A startup MLM should realistically assess its product line with these criteria in mind:

1. Does our product have a story that needs to be told?
2. Is our product consumable, bringing recurring income opportunities for distributors?
3. How unique is our product? Do we own the intellectual property? Is there a patent?
4. Are we trying to compete on price (a poor strategy for direct selling) or do we hold a quality advantage?
5. Do our margins allow enough to fund a generous and effective compensation strategy?

 These criteria are more important than the particular product category you are in. Almost any type of product — or service — can be successful in direct selling if it meets most (ideally all) of these criteria. 

The Sheffield Group specializes in advising startup MLM companies on the selection, manufacture, pricing and positioning of their product line. If you’re not sure if your product or service is right for the industry, or you haven’t yet settled on what to sell, this is an area where Sheffield will provide invaluable guidance.

Distributors

Your success as a new direct selling company depends ultimately on your independent distributors. It’s therefore essential that you understand the characteristic mindset, motivations and behaviors of your growing distributor organization. 

Compensation that attracts and retains distributors is fundamental. As a startup MLM you should avoid thinking of compensation as the same as wages in a conventional business. In direct selling the function of the compensation plan is  to motivate the behaviors that drive growth. These behaviors are not uniform throughout the organization. New distributors should focus primarily on selling your products. Gradually they will expand their goals to recruiting other distributors, while continuing to make a priority of product sales. As they advance, distributors should focus increasingly on leadership: now their task is to train and guide the people who have been recruited into their personal organization. This means that your compensation strategy must be complex enough to incentivize each appropriate activity at different levels of advancement.

Not all distributors will be equally committed. 80% will make one or two initial sales and then slip out of view. It’s important to realize that these lapsed distributors may remain loyal customers. As for the rest, only 18% of your distributors are likely to remain consistently active in selling product and recruitment. Just 2% will reach the high level of leadership that drives the majority of sales. When you understand this diversity of engagement, you can plan your business, and your compensation strategy, to match the needs of every distributor. 

It’s essential that you develop a simple and repeatable sales process that can be taught to all distributors. Your director of sales should lead the implementation of this process while also focusing on attracting a strong frontline of experienced distributors. 

As a startup MLM, always be aware that distributors are motivated by more than money. Your company’s mission, purpose, story and culture have an equally important part to play. People will join you and remain long term because they find meaning as well as financial reward in your opportunity.

The Sheffield Group has a deep understanding of distributor dynamics and will gladly guide you in this most important area of your new business. We can also guide you to the best team for finding and recruiting your director of sales.

Finance

For every startup MLM, the cost of launch is a critical question. The budget needed will depend on the kind of product you are marketing, the status of your product development and manufacture,  the know-how of your executive team, and many other factors. However, you can confidently expect to budget for these costs among others:

• Consulting services from direct selling experts
• An MLM attorney
• Specialist MLM software
• A director of sales and other early hires
• Product inventory
• Brand strategy, marketing, writing, and graphic design

Dependable financial modeling will make it possible for you to predict cash flows and manage expenditures as you grow.  There are unique challenges when it comes to financial modeling for a startup MLM. Exponential growth, seasonal fluctuations and the special dynamics of distributor behavior all need to be accounted for. The Sheffield Group is expert in this field and has built a pro forma financial modeling tool that is unrivalled in the support it can give to your executive decision-making.

How Sheffield Can Help You Start Your MLM Company

Founder Mike Sheffield is renowned worldwide as an industry leader. He and his team have decades of experience helping startup MLM 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.