Evaluating Opportunities
How to Evaluate An Opportunity
 Once you have determined what you want, it is time to look for the best opportunity with which your efforts will soar.
Very little has been written on how to distinguish a great business opportunity from a fair one. Rather than taking a step forward "hoping it will work out," arm yourself with the information you need to make a wise decision and have the confidence you need to succeed. Why leave your odds of success to chance? Prepared with a few tools, you will be better able to distinguish the best opportunity for you.
When evaluating a network marketing company, it is critical to get a clear picture of the opportunity. This section is dedicated to helping you ask the pertinent questions.
Ultimately, you are trying to determine if this opportunity help you accomplish the personal goals you have for your household? Therefore, it is critical that you have defined these goals.
(See What Do you Want?)
For instance, your goal may be:
- Do we believe we have the potential to 'hit it out of the ballpark' to set ourselves and our family up for financial security/abundance by working it consistently and hard for 2-5 years?
- Or, your goal may be to bring in an additional $300 to help eliminate some of the financial burden.
Who
Who would we be going into business with? The answer to this question is perhaps more important than any other one.
What is the background of those with whom you would be going into business?
For instance, what is the integrity/personality/strength of upline and team members?
Will it be a partnership or will we have to do it solo?)?
Is the culture synergistic with our values?
What is the track record of the owners and management team? Are the Owners credible and proven? What companies have they been with in the past?
Do they have a proven business track record inside or outside of network marketing?
What is their motivation with the company?
Does the management team have experience in network marketing?
Has the management team show integrity through tough decisions? (not just talked the talk, but actually walked the walk?)
Are all the gaps filled in with strong talent?
Company
What is the Financial Strength and long-term viability?
Can the financial strength and investment of owners be validated?
When did the company start?
What is the story?
Listen for the strength of the story. If you join this opportunity, you will be sharing it a lot.
What is the branding that the company is aiming to achieve?
How many distributors is your company adding per month, how does that compare to a year ago?
Does your company track retention? If so, what is it? (Find out what period of time that retention was tracked. For instance, was that over a 6 month timeframe, 12 month timeframe, etc?
What percentage of the company is on autoship? What is the average size of that autoship order?
Product Uniqueness & Marketability
What are the current products?
What are the planned future rollouts?
What is the size of the market for that/those products? What is the demand for those products currently and in the future?
How consumable is the product?
A product that is consumed more frequently will yield a more residual payout. For instance, if you sell knives that have a life-time guarantee, how often is it that your customer is going to call you up to get another knife? Very infrequently. On the other hand, if your customer purchases a product that they need or use daily, every use puts them closer to another order.
Are the products distinct? If so, how are their distinctions protected (patent, etc)?
In the book, Blue Ocean Strategies, by W. Chan Kim and Renée Mauborgne, discuss companies who make the competition irrelevant. Rather than competing in the same space as the rest of the competition where the oceans get red for the vicious competition, Blue Ocean companies are in a space of their own. In this industry if your product is not remarkable (or Blue Ocean), you are toast. You need a product people will buy even if they were not going to be compensated to buy it.
I am constantly amazed at how many people make an emotional decision to join a company, or not join a company based on product. That is exactly the wrong way to go about this.
Search to find a mob of people raving about a product … THEN Fall in Love With THAT Product! Try to determine the direction in which the mob of people will be running and run in that direction. Some people love to work for companies with a product that fits their self-image … but they can’t make a dime on it. Do yourself a favor. Focus on the people. Focus on the market. Choose a product that everyone else wants.
How strong is the product/service offering and how frequently is it ordered by customers?
What is the average customer order size?
What is the average order size for a distributor coming on board?
What is the value of the commissionable volume in comparison to the actual cost of the product?
For instance, a company can have a product that costs $100, but the actual commissions are paid on only a $75 value of the product.
Timing
What is the timing within the marketplace and within the company?
In marketing there is a phenomenon know as the "S" curve as illustrated.
Most commonly, the four stages are described as formulation, concentration, momentum, stability.
Formulation – the time it takes a company to get off the ground. When products or services are introduced to the market, as the graph shows, there is slow and steady growth until the product reaches about 10%. Many companies fail in this stage.
Concentration – During this stage, typically before hitting $100,000,000 in sales per year, the company will either work out the kinks toward momentum, or they will fail trying. Watch for the manner in which ownership/management handles this stage.
Momentum/Growth – This is sometimes referred to as "the ah ha" point where the product gains acceptance and shoots in a relatively short time to 90%. Typically this is the phase when a company starts moving toward critical mass. Generally sales grow from $50M per year to over half a billion. Word is getting out about the product or company and people are beginning to jump on the bandwagon.
Stability/Maturity – After the product reaches the 90% saturation, it will usually level off or decline.
Keep in mind that in the network marketing industry, only eight companies have hit a billion in sales annually. Therefore, the level where the company hits stability/maturity will vary according to the demand of the product, the marketing plan, and the strength of the leadership of the company.
When do you anticipate the 'tipping point'? In his book The Tipping Point: How Little Things Can Make a Big Difference, Malcolm Gladwell describes the "tipping point". It's the name given to that moment in an epidemic when a virus reaches critical mass. It's the boiling point. It's the moment on the graph when the line starts to shoot straight upwards. Having an anticipation of the number of months before this takes place allows you to formulate a strategy around it.
Does the company have Energy or 'Magic'? When a company is in growth and momentum, there is a buzz of excitement and magic that surrounds the opportunity that will propel your efforts. It doesn’t guarantee your success, but your efforts will go further.
When the timing is right, NON-network marketers will take your product to the marketplace. Millionaires have been made in this industry JUST because of timing alone. Nothing else. I'll take timing over hard work every time.
So how can you gauge the timing?
It's not easy, but here are some tips:
- Determine your risk level. If you are risk adverse, don’t waste a lot of time, money & energy getting in too early. A large percentage of these companies fail in the first year or two.
- Don’t get in too late. You'll waste a lot of time, money & energy getting in too late. If the company is a household name, its momentum growth period occurred years ago. It has been done, but you will find the work like climbing uphill in companies like this.
- You want to get in AFTER a company has proven it has staying power, but BEFORE its momentum growth period. If you can find a company like this, and which also has the other parts of the formula in place, paddle like heck to stay in front of the wave.
Is there a plan for Global expansion? If so, what is it?
How easily will the product expand in a global market?
Because all countries have their own standards and regulations for product requirements, consider the ease with which the product can cross boarders.
Compensation Plan
Compensation plans are designed to incentivize certain behaviors from their distributors or consultants—generally to keep them active in sponsoring. Because of the differences of compensation plans, there are pros and cons to all compensation plans. However, it is important to distinguish a plan with which your efforts will go further. Let’s take a look at the most common compensation plans.
What type of compensation plan does your company have?
- Unilevel
- Binary
- Matrix
- Stair-step Breakaway
- Hybrid
Unilevel (pronounced u-knee-level)
In a unilevel, you have no limit to how wide you can build. You can have hundreds or thousands on your frontline, it is your depth that is limited. In some levels you are paid to your 7th level, while others may pay you down to as low as your 9th or 10th+ level. Some companies have implemented other methods of compensating such as check matches or volume matches that may allow you to pick up volume below the levels aforementioned.
Binary
In a binary you are building only 2 legs, but your depth is unlimited. Binary compensation plans have been particularly popular in the last decade resulting in explosive growth for many new companies.
Matrix
There are many variations to matrix comp plans. For instance, 2x2, 3x8, 5x7. The first number represents how wide you go, the second number represents the depth you get paid on. Matrix comp plans are very simple. They are generally force filled from left to right, filling in each position before moving onto the next level.
Stairstep Breakaway
The stairstep breakaway compensation plan is one of the oldest in the industry and a few old giants in the industry still have this type of plan. It is rarely used by new companies. In a stairstep breakaway you can generally build unlimited wide, but are paid certain percentages on your "group" volume. When a leader below you promotes up, they "breakaway" to form their own "group" and you have the potential of your percentage of earning on that newly formed group to be diminished. This is done so to incentivize you to continue to recruit to keep your "group" filled, or to go wide.
Hybrid
With the increased competition in the network marketing industry, many companies are taking the best of 2 or more plans and combining them into a "hybrid" plan. The most common combination includes a unilevel and a binary.
So, which is the best compensation plan? Some compensation plans are stronger than others. Here are some important statistics to consider:
- If you ask virtually any successful network marketer about their success, they'll tell you most of their income comes from 2 to 3 people in their group, often whom they did not personally sponsor.
- MLM industry statistics tell you that "average" distributor sponsors 2.7 people into his or her home-based business in their career.
- 90% of the population, or 9 people out of 10, don't like pushy, aggressive people, or being sold. And only 3% of the population likes to sell.
So, work with the numbers and you'll never go wrong. If the "magic" number that most people sponsor is 3, then any plan wider then 3 will not work for the masses. Do you want a compensation plan that works for 97% of the people or a plan that works for 3%?
I love a compensation plan that allows me to personally sponsor someone, then place them anywhere in my group to maximize their pay-out. This fosters trust, retention and working as a team.
So, avoid any comp plan that:
- Limits your strategy to place personally sponsored people where you want.
- Doesn't reward you for building deep.
- Won't work for average part-timers.
Has your compensation plan been proven?
Have any other companies utilized the same comp plan? We all want a lucrative plan, but keep in mind that the company has to be profitable too. Is it fair? If it is more generous than most, is there potential for lasting long-term without 'shaving checks' later to stay in business?
What percentage of the companies revenue is paid out to the field? Up-to or actual?
At what level in the company does a distributor begin to make money? Is that achievable with part-time involvement and if so, in what timeframes?
What other compensation related incentives does your company have?
Many companies will offer travel and car bonuses. Find out if they are paid out on the lower end of the pay plan, or the upper end. The more that is available at the lower end, the more people who are successful. Again, the more part-timers who are making income, the more successful you will be as you introduce your opportunity to others.
What is the autoship requirement?
What is the requirement to be paid. Most companies average between $39 to $100 per month monthly purchasing requirements to be paid. Anything beyond that can be considered excessive. Ask if personally enrolled customer volume can count toward purchasing requirements.
What are the maintenance requirements?
Some companies have volume requirements to hit in order to reach obtain the maximum payout. Achieving the rank is not the only critical question, what does it take to stay there?
Does the company publish a compensation summary? Some companies will publish average or range of pay and time to achieve each level within a company.
Is a position willable? If so, at what level?
Is a position sellable? If so, at what level?
The general value for a position that is sellable is generally the annual earnings on that position.
Marketing & Tools
Does the business attract men, women or both? According to the Direct Selling Association, 70% of all network marketers are women. They are the driving force and generally the purchasers in the household. It is important that a company be attractive to women. But also consider, why eliminate the other half of the population? Few men have the fortitude to pioneer a company that is 70% or more female, although some of the highest income earners in such companies have been those men.
Are the training and marketing tools strong?
Does the team have a simple and duplicable business strategy that has proven to be successful?
Walk me through the first 72 hours of training for a new distributor?
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