Do A Media Search;
Find out what the news media say about your target company. You can do this free of charge at the library researching Lexis-Nexis database. Finally, you can search by following using LEXIS-NEXIS express, which charges by the hour and by the amount of text printed out. Any articles found will be sent to you by mail, fax or e-mail as you request. Telephone number, 800-843-6476 fax number 937-865-7418 e-mail LEXIS-NEXIS.express@LEXIS-NEXIS.com
Check For Complaints
Several government and private organizations keep records of complaints made against MLM companies. These include the State Attorney’s office, the state Department of Consumer Affairs, the Better Business Bureau, the Federal Trade Commission, the Securities and Exchange Commission, and the Direct Selling Association in Washington, DC.
Use caution when evaluating complaints. Many companies generate complaints due to temporary problems which are later resolved. Whether or not the complaints were resolved is a far better indicator of a company’s ethics. Use caution here as some agencies failed to distinguish between complaints and inquiries.
Every call is registered as a complaint, even if it really is just a request for information. Be sure to ask whether the agency distinguishes between actual complaints and other types of calls.
Check The Financial Stability
If your target company is listed on the stock exchange, check it out. Public companies are often required by law to publish detailed reports on their finances. You can request an actual report directly from the company. Or you can obtain the company’s financial filings with the Securities and Exchange Commission or from Dun & Bradstreet at 800-234-3867. SEC filings can be retrieved from the Internet at www.SEC.gov Firms that are privately held may not be required to divulge financial information. You will have to do some detective work. Dun & Bradstreet supplies some information on private companies, but not all.
Try asking the target company directly for their P&L statement. Most will refuse. Call up the company’s banker and asked whether the company is a borrowing customer, and is the company timely on its payments. Also ask whether it has applied for credit, and was the credit granted. You may be able to run a credit check on the company through credit reporting agencies such as Trans Union, Experian, formerly TRW or Equifax. Reports can be retrieved through the Internet. If you’re not on-line, ask your banker for assistance.
Check the Litigation History
Find out what legal actions your company and its principal officers have been involved in. What are the amounts of the judgments, if any? Have there been state or federal tax liens? Credit reports will list others. Beware, for instance, of companies that claim outlandish miracle cures for their products. They risk unwelcome scrutiny from the Food and Drug Administration.
Also problematic are companies that promise a quick and easy path to riches, or companies that engage in front loading while pressuring distributors to purchase large quantities of inventory. They risk being investigated as a pyramid scheme. Legitimate MLM companies will not place onerous purchasing requirements for new recruits. At most, they will ask recruits to buy a starter kit. It costs usually between $10-$50. In addition you will need to make a start up product purchase.
This could include showcase packs that are discounted to familiarize the new recruit with the product line. Start up kits can contain videos, audio tapes, pertinent sales aids, distributor applications, product samples and the like. Legitimate companies will also guarantee a full refund on all products that you wish to return. They will refrain from guaranteeing high levels of income and will make it clear to new recruits that success comes only to those who work hard and sell lots of product.
Beware also of companies whose distributors boast too much about their earnings. Regulators will sometimes interpret such statements as an attempt to mislead prospects into thinking that everyone who joins the opportunity will make an equally large income.
Wise companies play it safe by discouraging distributors from flashing their paychecks. However, it is prudent to request copies of checks, annual income statements, p/l statements prior to joining as well as averaging the income of a natural distributor, who is someone that buys the product because they like and use it.
Beware if companies push distributors to build a huge down line over selling product. If there is no true product, people would not join if there wasn’t a business opportunity associated with it. Recruiting is important, but it spells bad news if it is the primary focus.
Companies whose main focus is recruiting are considered Vampire companies. In our next post we will look at the three questions you must ask that will identify a Vampire company.
So you don’t get sucked in.