An Alternative to Franchising?

I would rather earn 1% off a 100 people’s efforts than 100% of my own efforts.

- John D. Rockefeller

On August 10th, I referenced an article about franchising. I have now decided to write about another viable alternative that allows one to build a business part-time with a lower cost of entry right from home.

What is it? Answer: Network Marketing.

I realize these two words conjure up various images such as aggressive distributors, a garage full of product that couldn’t be moved, or even notions of a pyramid scheme. This is just a few reasons many people still run when you mention “network marketing” (aka multi-level marketing or MLM for short).

The reality is that this industry is changing quickly. For instance, Warren Buffet’s company purchased Pampered Chef in 2002; Pampered Chef is an MLM company. Citigroup, a Fortune 500 company, is also the parent company of Primerica Financial Services, also a network marketing company.

If this isn’t sufficient endorsement, Robert T Kiyosaki (Rich Dad) states, “If I had to do it all over again, rather than build an old style type of business, I would have started building a network marketing business.” Why does Kiyosaki endorse MLM as a viable business opportunity?

Kiyosaki classifies network marketing as a “B Quadrant” business, meaning that the business model meets the criteria he as established for business owners. Those criteria are as follows:

1. Leverage: Can I train other people to work for me?
2. Control: Do I have a protected system that belongs to me?
3. Creativity: Will the business allow me to be creative, and develop my own personal style and talents?
4. Expandability: Can my business grow indefinitely?
5. Predictability: Is my income predictable if I do what is expected of me? If I am successful, and keep expanding my business, will my income increase with my success and hard work?

Now let’s compare and contrast with the franchise model. In a franchise system, you have the following:

• Initial franchise fee that can be very expensive depending on what business you’re considering
• Qualifications based on your personal net worth
• Continuing royalty fees paid to the franchisor
• Upfront advertising costs to promote your new business
• Business insurance
• Employees

In a network marketing business, you have:

• Low start up cost
• No net worth requirement
• Referral marketing by word-of-mouth
• No insurance or employees
• Home business tax advantages
• Equal opportunity for everyone

In closing, not all network marketing companies are the same. You will still have to do proper due diligence. Like any other business, not all network marketing opportunities will be successful. However, I encourage you to keep an open mind and think of network marketing as a vehicle to help you achieve success.

Full Disclosure: My wife and I have a home-based business in the network marketing industry. We are teaching others to build their own business and become successful entrepreneurs.