Create your own multi-level marketing company in ten easy steps!

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Hundreds of thousands of Americans get sucked into Multi-Level Marketing (MLM) companies each year. From Mary Kay to Amway to Herbalife to PrePaid Legal, the list is seemingly endless. Each offers its own special spin on the products it sells, but the main focus of an MLM is on recruiting new members.

MLMs live and die by the recruitment of new members, who make the bulk of the product purchases from the company. Little of the product is resold to an actual end user, but the MLM company doesn't care. The sale has been made to the distributor (or associate or representative or member or consultant or whatever term you like).

It's widely knows that those in MLMs make little money. In fact, almost everyone in the pyramid loses money. The real money makers in the scheme are those who own the MLM company. So in the spirit of giving, I'm offering you ten simple steps toward creating your very own MLM. Start yours now and cash in on all those people who are dying to hear about your "opportunity"!

1. Come up with a product or service that you can make sound revolutionary. Funky berry juice, groundbreaking face cream, or unusual financial services will be fine. The only caveat is that you must be able to make it sound like something that's never been done quite this way before. This adds to the mystique.

2. Create a commission structure (also called pay plan, incentives, or rebates) that is difficult to understand, and that pays about 8 to 10 people in an upline as soon as an associate buys something from the company. Ultimately, those in higher levels in the company reap all the rewards, and this is ideal, because it gets everyone on the bottom excited about the "possibilities" and they will recruit their little hearts out.3. Commissions must be paid as soon as the associate makes a purchase from the company. You don't care if the associate ever resells your product or not. Whether they sell it is their problem... you already have your money.

4. Avoid any talk of being a pyramid scheme or multi-level marketing company. Although those terms are accurate, they carry negative connotations and should be avoided at all costs. You could use some other term like network marketing, dual marketing, or binary compensation. If you're really clever, you'll come up with a brand new name for your "system." That way you can't be associated with any other MLM that might have a poor reputation. You'll always be different.

5. Create credibility for your business. This means getting endorsements from people who sound important. Get a business publication to write about your company and promote that article everywhere you go. Join the Direct Selling Organization... it's nothing but a bunch of MLMs who started a club, but it sounds good to consumers who don't know better.

6. Give your product or service a high price. This is important for two reasons. First, it is necessary in order to be able to pay the 8 to 10 levels of commissions that you have established. Second, it allows distributors to pretend that your product is "high quality."

7. Set up strict requirements for "moving up" in your company. The requirements must include a certain number of new recruits plus a minimum amount of product purchases by the distributors in a downline. This ensures that you will have "production" rolling in, even if people aren't selling your products or services. Associates will most likely have to bring in friends and family who buy products simply so the recruiter can move up. This happens over and over and the production numbers are looking good for the company.

8. Find "early adopters" who will recruit like crazy so you will have some "success stories" to promote to potential distributors. Most people are recruited by playing on their dreams of financial success. Those pyramid-toppers will be necessary to show new recruits that it can be done and they can have it all too.

9. Create "tools" to help distributors become successful. Almost everyone fails in MLMs, but the longer you can keep them believing that they could succeed, the more money you can get out of them. One way to keep them interested and engaged is through tools and training materials. They're little more than cheerleading sessions to tell distributors that they could someday be successful. But the distributors will pay good money to hear this.

10. Hold periodic events that get people excited and recommitted to the MLM. Since almost everyone fails, this could begin to be somewhat of a downer. These events are needed to parade around those few success stories and to pump everyone up about the company.

Above all else, make sure that those who join your MLM are always dreaming of financial freedom. That hope of one day making the big money will be your key to success as the owner of the MLM. Dreamers will keep putting money into your company and that means success for you!

Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.
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