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.

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When you ask prospective distributors to join your direct selling company, you are asking for them to commit their time, energy and personality to the business. What is it that makes the prospective consultant say “yes!” and join the MLM company?

Creating an emotional bond is essential to recruiting. The emotional connection to the company and the product is much more important than facts, figures and statistics. Certainly it is important for your company product to be more superior to its competitor’s products and that the company have an excellent management team and compensation plan; however, the emotional component of your business will be the basis of the final decision.

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This blog post is the companion post to the video: Why Do Distributors Stay with MLM Companies? Find out how to retain the most important asset to your MLM company, distributors.

We are often asked the questions “why do people stay with MLM companies” and “why do they leave?” Retention is essential for a successful MLM company. We are in an industry that has a lot of attrition due to the nature of the work environment. Many distributors work part time and are competing for peoples’ time. Distributors (or representatives, consultants, etc.) come and go all the time. Losing a distributor is worse than being unable able to recruit new consultants, making retention essential.

There are interesting answers given by distributors as to why they stay with the company. You may think they stay for the earnings, but income often comes in fifth or sixth place in industry polls. As a general matter, consultants usually stay with a MLM company because they are connected and bonded with the products the company sells, as well as with the company’s mission and with top management/leadership. Distributors also like to be recognized for the work that they do. Recognition is very important in the direct selling industry. These are factors that really propel distributors to stay with a MLM company.

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Just as explorer Ponce de Leon searched for the elusive Fountain of Youth, network marketing companies and distributors search for the magic factor that ensures success in recruiting and sales. Is it the compensation plan? The payout? The capitalization? Celebrity endorsement? The sizzle product? Flashy marketing materials online and offline? Famous owners?

Well, as it turns out, in study after study, all of the above factors can be very important. Companies that demonstrate these assets may very well have short-term success and occasionally long-term success. However, industry experts and observers have long since concluded that the essential ingredients – the magic formula for success – are passion and bonding. Without these essential ingredients, a direct selling opportunity can be good, but not great.

Passion and Bonding: The Absolute Essentials

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