# Sorting the Good from the Bad



## ChristineSutherland (May 14, 2010)

MLM-style business is quite popular in Australia and there are a huge variety of opportunities available.

If you're considering an MLM business as an adjunct to existing earnings, or as a stand alone business, you must apply *exactly the same due diligence process as you would to a traditional business offer*.

Unfortunately most business advisers or accountants don't understand the importance of some aspects of due diligence, such as checking product or service differentiation, proof of market and price acceptance, uptake of consumables, and whether or not the business is an asset owned by the buyer, and can therefore be bought, sold, bequeathed, or a manager put in place.

Does the money keep coming after you have retired? How does this happen?

Additionally, business advisers and accountants are totally unequipped to assess the myriad "scientific" claims made for particular products. You only have to look at dud businesses like LifeVantage, and all the "special" health coffee and health chocolate being touted amongst all the other snake oil.

So you need to take responsibility yourself for due diligence in order to avoid wasting both time and money. There are definitely excellent opportunities out there but you need to be highly skeptical, and highly discerning.

Some of the questions you need to ask are:

Do I have a high level of differentiation?
Will I make profit immediately?
How popular are these products with consumers? Is there a true market?
Are sales going up, or down?
Could technology wipe me out?
Who are my competitors?
What is the reputation of the company, founders, and chief executives?
How promptly does this company deal with returns and refunds?
Where is this company going in the future?
What is the financial condition/track record of this company?
If there are scientific claims, are they validated by credible universities?
Can I really leverage myself or will I be running around collecting cash and delivering product?
What level of training is available and how accessible is it?
Who do I rely on for personal support and are they qualified to mentor me?
Is there a well-honed, simple and proven marketing strategy?

There are a number of other questions to ask, but these are the basics, and in fact if the answer to question 1 is "no" then don't even bother going through the rest because it is instantly a complete dud.

I hope this is useful, and will protect at least some people from the +90% of offers which the Australian government tells us are scams, or linked to scams.


----------



## Boboa (Mar 24, 2009)

I agree with you christine. Unfortunately over 90% of these are just "get rich quickly " schemes. 
Thanks for the post


----------



## ChristineSutherland (May 14, 2010)

Thanks for reading, Bob.

The wealth schemes (often touted as "education") as well as all opportunities which don't have consumer-driven product sales, and the pure "money schemes" (pyramid schemes in disguise) are typically promoted as "get rich quick".

However there are genuine opportunities which do have consumer-driven product sales, but which nevertheless do not pass due diligence and where it is highly unlikely or even impossible that someone will make money. The problem with most of these is that they simply aren't appropriate products for the MLM model. Eg Thermomix. Thermomix is a top-class product and I'd never slag it. However the poor distributor trying to make money from selling it has to keep finding new customers. If they stop finding new customers, they stop making money. All downlines eventually die.

ACN fits the model, but the commissions are minuscule (by obvious necessity) and the whole business is exposed to technological advances by much bigger and better resourced players.

So there must be ongoing consumables which buyers are literally ravenous for, and the product must be immune to technological change or changing consumer buying patterns.

If people will just put emotions aside and assess opportunities analytically, using full due diligence criteria, they have a good chance of identifying a solid and enduring business opportunity.



Boboa said:


> I agree with you christine. Unfortunately over 90% of these are just "get rich quickly " schemes.
> Thanks for the post


----------

