There is no shortage of companies who want you to join their team. From beauty products to health supplements, financial services and more, there are companies everywhere who want you to sell their products.
In this article, we’re going to talk about how you can tell if that business opportunity could actually make money or not.
A Job vs A Business Opportunity
A job pays an hourly wage or salary for your work, while a business opportunity sets your earnings on your ability to generate sales, a.k.a. commission. Business opportunities may also have a start-up cost such as buying inventory or obtaining a license in your home state.
If your goal is to earn your entire living from that opportunity right away, you’re in for a huge disappointment. Just like starting your own business, it is going to take some time and effort for the money to start coming.
Multilevel Marketing
Beware of opportunities called Multi-Level Marketing (MLM). These could be legitimate, but statistics are not in your favor on making a profit.
In fact, according to the AARP, 75% of MLM participants actually lose money. Even more disturbing, the FTC places that statistic even higher at 99% of participants losing money.
Am I Supposed to Recruit More Representatives?
Business opportunities that solely generate revenue from recruiting members are called a pyramid scheme. These kinds of businesses are not only unsustainable, they are illegal. These businesses may use high-pressure sales tactics to recruit you and expect you to recruit friends or family members. If you are pressured to recruit friends and family, run!
Are There Minimum Purchase Requirements?
Some business opportunities require that you regularly purchase a minimum quantity of products to keep your status with their organization. This could be problematic if you aren’t able to sell the products before your next order.
How Easily Could You Cancel?
Before you agree to a regular purchase of products, make sure that you can cancel at any time without penalty. This will prevent you from having to continue purchasing products or pay a fee if you decide things aren’t working out.
Is The Market Over-Saturated?
Nothing makes it more challenging to sell your products than having too many people selling the same products nearby. If there are already several people working for the same business in your area, you will likely have a difficult time finding enough customers to buy your products.
One example of over saturation is the story of a women’s clothing company that started off providing great products that customers were happy to buy. Over time, they recruited too many people to sell their products and it turned previous customers into existing representative’s competition.
This over saturation meant that those who purchased products to sell no longer had as many customers since many were now also selling the same products. This led to representatives being unable to sell the products they had purchased, and still had requirements to keep buying more. As you can imagine, this over saturation caused many representatives to end their relationship with that company.
Will You Ever Make A Profit?
The goal of any business opportunity is to make money, right? So how do you investigate to see if you’re likely to make a profit? Before you invest in any business opportunity, look for the company’s Income Disclosures, and find what percentage of representatives make a profit from the business.
This video from YouTuber Kitboga helps break down how to understand an Income Disclosure.
In Conclusion
Business opportunities are just like investing, there is a risk. The only way to protect yourself is to research before you spend any money.
Ask Someone You Trust
Talk to someone you trust who isn’t involved in that organization about the opportunity. This gives you an opportunity to learn about any reputation that company may have in the community. A simple conversation could help you avoid a costly mistake.
Further Reading
- Hebert, A., Hernandez, A., Perkins, R., & Puig, A. (2022, November 25). Multi-level marketing businesses and Pyramid Schemes. Consumer Advice. Retrieved January 11, 2023, from https://consumer.ftc.gov/articles/multi-level-marketing-businesses-pyramid-schemes
- DeLiema, M., Shadel, D., Nofziger, A., & Pak, K. (2018). AARP Study of Multilevel Marketing: Profiling Participants and their Experiences in Direct Sales. AARP. Retrieved January 24, 2023, from https://www.aarp.org/content/dam/aarp/aarp_foundation/2018/pdf/AARPFResearchExecutiveSummaryFINAL101018.pdf
- Taylor, MBA, Ph. D., J. M. (2011). Chapter 7: MLM’s abysmal numbers – ftc.gov. Federal Trade Commission. Retrieved January 24, 2023, from https://www.ftc.gov/sites/default/files/documents/public_comments/trade-regulation-rule-disclosure-requirements-and-prohibitions-concerning-business-opportunities-ftc.r511993-00008%C2%A0/00008-57281.pdf
- Kitboga. (2020, April 21). The $1,000,000 multi-level marketing lie. YouTube. Retrieved January 11, 2023, from https://www.youtube.com/watch?v=HJ4eA0-2krw
