There’s no profit in that!
There I was just minding my own business when a network marketer called me. She was out of breath and asked if I had time to talk to her for a few minutes about a great idea she had. I’m always up for a good idea, so I agreed to talk to her.
She explained her idea to me.
Her company has a minimum Personal Volume (PV) that needs to be sold every month in order to stay qualified to receive a check each month. I was following her so far. She continued. She tells me that she has been able to sell the products, at her distributor cost. Apparently, it’s a little easier to sell the products at cost, rather than the suggested retail price. Which kind of makes sense.
On the surface, it sounds like an okay idea. I didn’t want to totally discourage her, so I didn’t tell her my story …
Funny thing is that I had tried that with my very first company, Amway, many years ago. I had placed a classified ad in a local newspaper that said, “Buy your Amway products at cost.” I had 2 people call me and I wound up with 1 client. If I had gotten a bigger response, I figured I could recruit people to do the same thing and make a lot of money. Unfortunately, that didn’t work out.
I asked her one question about her business. “Are you making money in your business?”
She said, “No.”
I asked her, “Are you buying the products for your personal use?”
She said, “Yes.”
I followed up by explaining to her that there are only 2 ways to make money in network marketing. You either sell the products, at a profit, or you recruit people. I asked her if she was recruiting people on a consistent basis? She told me that she had been in business for a year and had recruited 3 people. I wanted to know if her recruits were generating any money for her business. Unfortunately, none of them were producing any results.
I told her that I was impressed that she had lasted a year without making any money. What is really bad for her is that she hasn’t generated a profit on any of her sales. She’s been losing money the entire year.
I asked her, “How long can you stay in business if you keep losing money every month?”
She didn’t have an answer.
She’ll have to make that decision on her own.
I tried to explain that her idea was not a bad idea. You do have to find enough customers anyway, why not give them a break on the cost of the products? There are a couple of things that you give up when you are willing to sell the products at cost. If you are okay with that, then it’s a pretty good idea.
The first thing that you give up is profitability. To me, that’s the most important part of being in a business. You need to be able to pay for your own products and any other business expenses that you might have. If you are able to do that then you will have enough time to find other people to recruit into to your business. If you are losing money, you can only last so long.
The second thing that you give up is the ability to convert a customer into a distributor. A happy customer should be fairly easy to convert. That is if they will get the discount on the products just by signing up with you. If you are already giving them the discount, there is no incentive for them to join. Unless they want to build a business.
We had a nice conversation and I think I gave her a lot to think about. I did make one real suggestion. I said, “What about selling enough of the products to break even on her expenses and then sell the products at whatever price she thought was the ‘right price.’” Obviously, the choice is hers.
If your business isn’t making money, you either have a hobby, a charity or an alligator who will eat a hole in your bank account. Make sure that you get yourself into profit before you try anything like selling your products at cost!
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