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The Thinkin' Needs Fixin'

Feb 8, 2008
Before the first line was drawn on an architect's board, thoughts and ideas swirled through the mind of the architect of what the project might look like. Even before words were spoken to a colleague, the mind had an idea. Thoughts precede words and deeds so routinely and automatically that we sometimes do not fully realize their incredible influence. This article discusses the "thinking" behind network marketing. Some of the "thinking" needs "fixing."

A quick definition: Network marketing, to me, involves direct sales companies selling products and services to customers through independent contractor representatives using a compensation plan, which includes an offer of a continuing reward to the representatives, based on the sales volume of recruited representatives.

Network marketing cannot be about selling business opportunities. "Thinking" that way leads to disaster. First--what you can do (but it is NOT network marketing): There is a body of law in the U.S. that recognizes and regulates the sale of business opportunities (other than franchises, which have their own body of law). One reason these laws do not impinge on network marketing is that what is typically charged to become a representative is less than the threshold exemption amounts in these statutes. If the cost to get in exceeds $200 to $500--this varies by state--and you obey the 22 state's business opportunity statutes that include requirements of bonding, registration, disclosure, etc., you can offer, for example, a vending machine route business opportunity and charge $5000 or more for it. Note that there is no opportunity of multilevel compensation involved. You can offer a business opportunity in the U.S. for $199 or less--THAT IS NOT MULTILEVEL--and if the offer is not deceptive, you can be legal in all 50 states. I make this point that there IS a legal "business opportunity business" in the United States that can exist, which is exempt from the business opportunity laws by having the entry price below the thresholds, or by complying with the various legal requirements of the business opportunity laws. But IT CANNOT be network marketing, because of the multilevel aspects of the typical compensation plan. Network marketers, corporate and distributor, should not even think in those terms, because of the multilevel "gotcha." Here is why: 46 of our 50 states' laws, and federal law, contain a form of anti-pyramid or endless chain prohibition against charging for the right to bring more people into a business venture. There it is--pure and simple. You CANNOT be in the "multilevel" income opportunity business, at ANY dollar entry amount. "Thinking" you can is the beginning of trouble, even before words and actions begin.

Of course, it usually costs something to become a network marketing representative, so you need to know the exception. The various laws permit the required purchase of an at-cost, non-commissionable sales or starter kit. If the company can only offer an "at-cost" kit, it should not think it is in the income opportunity business, because that is not where its profits come from. If the kit sale is non-commissionable to the upline, the field should not think it is in the income opportunity business, as the kit sale generates no commissions. Correct "thinking" has you in the nutrition business or the telecommunications business or household products business. When you define yourself by the products and services brought to the marketplace, the thinking process has begun correctly.

Does your corporation have a mission statement? Do the distributorships have mission statements? If all it says is "Help people better their lives through a great income opportunity," the thinking that led to those words needs fixing. The legal basis for the existence of the company and its distributors--the movement of products and services to consumers--has been left out. Correct thinking goes something like this: "A way to better your life with this great income opportunity flows first from an enthusiasm about the products and services and a willingness to move them to consumers. Also, a multiplier effect is available when you share the enthusiasm with other income opportunity seekers."

To conclude, "thinking" you can be in the multilevel income opportunity business has led many companies and their distributors astray. Do not fall into that trap.
About the Author
Gerald P. Nehra is an MLM-specialist, private practice attorney. He is one of only a few attorneys nationwide whose practice is devoted exclusively to direct selling and multilevel marketing issues. His 33 years of legal experience includes nine years at Amway Corporation, where he was Director of the Legal Division. He can be reached at 1710 Beach Street, Muskegon, Michigan 49441-1008, 231-755-3800, 231-755-4700 fax. His e-mail address is GNehra@mlmatty.com.
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