For this issue, it is best to look at two phases of MLM companies, start up and maturity.

Although many things can go wrong in a startup direct selling company, two factors are repeated with frequency for the failure to launch. The first factor is inability to recruit. This business is based on recruiting a successful sales force to market products. (Obviously, there are many important factors ranging from logistics to personnel to technology to quality control to distribution… and all these can go wrong as well.) It should be noted that the need for capital is in inverse proportion to the ability to recruit. A MLM company that can recruit is often positioned for fast growth and may even become a cash cow. If the company does not have that native ability, it needs sufficient capital to hire the talent to make it happen. And in the absence of the recruitment asset, a company should plan on a much longer trajectory to profitability.

And the recruitment challenge dovetails with the second major reason that companies fail at the onset: lack of adequate capital or funding. Many companies start the business without adequate capital to allow for a one or two year run to become profitable. In fact, many companies assume that they will be profitable within months or that they will not need capital for growth. The lack of buffer capital to survive the early unprofitable days of a company is a prescription for early failure.

As to mature companies, the key answer is to continuously innovate and create ways to bond with both distributors and customers. Companies that cannot grow with the market, or maintain loyalty of distributors and customers, will find that sales will plateau and ultimately decline. This is a branding business and a relationship business. Unless a mature company is ready to continually reinvent itself and stay fresh, it may find itself on a slow, or sometimes rapid, road to contraction and failure.

If you are interested in attending the Starting and Running the Successful MLM Company conference visit our conference page, view our speaker list, or get more details. All executives/owners of direct selling companies are welcome to attend. Call 800-231-2162 to register.

Our next Starting and Running the Successful MLM Company Conference takes place October 22 and 23, 2015 in Las Vegas. View our conference flyer and speaker list online. Participate in our Innovation Campaign for your chance to receive TWO FREE TICKETS to attend our next conference.

If you’re reading this blog post and the conference dates above have passed, check our website for the current conference dates.

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