The MLM Startup Guide
So you’re ready to launch your new MLM business. You’ve got it all planned out to the last detail. Can’t miss product? Check. Hottest comp plan to hit the streets? Check. Rock solid business plan? Check. Startup financing? Check. You’ve been working for months on end getting ready for your launch and you’re finally ready to pull the trigger.
Wait. Go back to the incubation stage of your new business, when your idea was just a spark in your head. How did you progress from that seemingly distant state to the point where you’re about to launch? It’s highly unlikely that you did everything yourself. Rather, it’s far more probable that you had a partner, or a team of partners, who all contributed, and will each share in the success of the business. Did you put as much thought and planning into choosing the right business partners as you did working through the planning around your product line, your compensation plan, your marketing strategy, and the hundreds of other big and small decisions that you made along the way?
Management of startup MLMs regularly ask me what are the top reasons why MLM startups fail. Invariably, they’re trying to gauge their chances for success by making sure they have covered their bases. They’re usually surprised by my response; from my experience, the second most common reason why MLM startups fail results from clashes among the business partners (it should come as no surprise that inadequate financing is the most common reason for failure). You see, there is a strong tendency among prelaunch businesses to focus on the sales, infrastructure, and operational elements of their companies, but to pay woefully inadequate attention to identifying those who will be the very best fit in the organization.
Don’t fall into this trap. Here are some critical issues you should address before choosing your partners (the term “partners” is used collectively to include shareholders in a corporation, members in an LLC, or anyone else with an ownership interest in the business entity):
- Do your prospective partners share a common vision and mission for the company? You must write it down and discuss what it means. Find out if any of your prospective partners don’t believe in the vision and mission and are just tagging along because they see a significant financial opportunity. If a partner does not grasp the mission and vision, it is likely to lead to clashes down the road.
- What skill set does each partner bring to the table? Sure, it’s nice to bring family members into the business, and although Uncle Joe enjoys reading PC magazines in his spare time, does he really have what it takes to oversee IT operations? Aunt Sally can keep the family entertained with her stories, but can she be equally mesmerizing in front of an audience of skeptical prospective distributors?
- Will the partner be content in a subordinate role? Among those companies that fail due to management clashes, a common problem is a collision of egos. Everyone wants to be the big boss. Avoid this by clearly delineating the roles of each partner.
- Never assume that things will always be rosy between you and your partners – they seldom are. One of the worst things you can do is assume at the beginning of the relationship that if the partners can’t agree on important issues and must part company down the road, you will be able to sort everything out when the time comes. This is a terribly flawed assumption and will result in the business getting dragged down! Therefore, create a specific exit strategy and include it in your operating agreement.
You plan on being in business a long time (at least let’s hope so!). Picking your partners is one of the most important and long-lasting decisions facing your business. Therefore, treat the decision accordingly – be deliberative and impartial, and if things don’t work out – be prepared with a well thought out exit strategy that is properly documented in the businesses operating agreement.