Is Network Marketing Right for You?

Nicole Woolsey Biggart is the former Dean of the Graduate School of Management at the University of California, Davis, and is an expert in "social network" industries. She recently wrote an article for the Bottom Line Personal newsletter in which she shared some interesting statistics on the network marketing industry and offered some advice to anyone considering getting seriously involved in it. Remember, the following applies to the network marketing/direct selling industry overall. Any individual company may experience very different results. Caveat emptor.

According to the Direct Selling Association (DSA) the current economic downturn is driving sharp increases in the number of people starting network marketing businesses. At the same time, product sales by network marketing companies have been declining - $28B in 2008, down from a peak of $32D in 2006. There are 15 million Americans working in direct sales at any given time. Commissions paid on product sales typically range from 25% to 50%, with an additional 3% to 5% paid on sales from "downline" distributors you have recruited. After expenses (gas for your car is a big one), the typical distributor ends up earning about $10 to $15 an hour. A large majority (90%+) work only part time and earn a median wage of about $2,500 a year. Those who do forge a full time career, working 40 hours a week or more, can earn $30,000 and up annually. Once again, remember, these are only averages. People do make 6 figure incomes in direct selling, but typically this requires years of work building a large downline organization.

Dr. Biggart offers the following advice for anyone considering joining a network marketing organization.

1. Know Thyself. At the end of the day, network marketing is a sales job. Is this something that suits your personality? Do you have the motivation and self-discipline to succeed?
2. Love the Product. It's next to impossible to sell anyone a product that you do not like, believe in and use yourself.
3. Due Diligence. You can't know too much about a company you are thinking about working with. Research them on the web. Talk to veteran distributors. Investigate them through the Better Business Bureau or your Chamber of Commerce.
4. Target Market. Be sure the company has a payment structure based principally on product sales to end-user consumers, not recruiting and selling to distributors.
5. DSA Membership. Companies must qualify for DSA membership, they cannot simply join. Members must subscribe to the DSA's Code of Ethics, submit to an audit and operate according to at least a minimal set of standard practices.

Network marketing can offer an incredible financial opportunity, a work from home lifestyle and unmatched control over your own time. But the industry is certainly not without its disreputable players. Be sure to do your homework.