Are Your Chances of Success Higher in a Publicly Traded MLM Company? - By: Wayne Wu

Is it better to be a distributor for a publicly traded MLM company? Some people intuitively think so.

Some companies like to spin the fact that they are a public company in their favour, saying they are more open than private companies What's the truth?

The truth is, being publicly traded does not mean anything if you don't know how to assess a company. It's not a selling point. Your prospects don't really care.

In fact, what prospects care most about is who gave the presentation.

The bottomline is, if you want long term success, you first need to know how to choose a solid company to build with. Don't get caught up in all the hyperbole, see it clearly for what it is.

Once you are able distinguish between a good and a bad network marketing company, choose one company and build with it for the long term.

Some people think that because a company is publicly traded, it can't be a scam. After all, investors don't buy into scams do they?

Well, YTB International (Your Travel Biz), a publicly traded MLM company, was sued in early August 2008 by the Californian Attorney General for operating as a "Gigantic Pyramid Scheme". In 2009, the Illinois Attorney General moved to shut down the company completely. That nightmare is not over yet.

In 2007, the FTC shutdown BurnLounge, another publicly traded company, because it was an endless chain recruiting pyramid scheme. This to show, a company does not have to be legit to be publicly traded.

Now, a publicly traded company must report its earnings, along with other fundamental figures. And because of that, some people think that you can properly do your due diligence from the published figures.

A privately held company doesn't have to release any figures at all. Therefore a privately held company can lie, but a publicly traded company can't lie, can it?

I wouldn't be so confident on that either. In late 2001, ENRON filed one of the worst corporate bankruptcies in history. The audit revealed accounting fraud on a massive scale. It turned out ENRON hid billions of dollars of debt behind accounting loopholes and "special purpose entities."

Companies can hire clever accountants to make their numbers look good, to entice investors to give them more money.

Public companies inherently have more overhead than privately held companies. Public companies need to hire special accountants and attornies, they need to have a public relations department, they need to hire graphic designers to make glossy annual reports, they often employ high flying CEO's who command multi-million dollar salaries.

All of these are extra expenses that a private company doesn't have.

Not matter what, the companies' only source of revenue still comes from the hard work of distributors in the field. To pay for all of their extra overhead, public companies typically need to have higher prices for their products, making it more difficult for the distributors to sell them.

Finally, a publicly traded MLM company looks out for its investors first. They must ensure that investors get their dividends. Otherwise, the investors will take their money elsewhere.

Companies often lose millions of dollars on poor decisions. When a publicly traded MLM company gets into financial trouble, it will always put the investors' interests first.

A common thing for a public company to do when it gets into financial difficulty is to stop paying its distributors through a compensation plan, and go to direct sales where commissions are only paid on the retail sales of the company's product.

Publicly traded companies will often tell you if they might one day go direct sales. They say it in their Policies and Procedures.

"[Company] reserves the right to terminate this agreement, and all associated agreements (including, without limitation, the marketing incentive programs), upon 30 days written notice, with or without cause."

Body Electric, Heartbar in 2002, Excel Communications in 2004, XLER8 in 2010 are just a few examples of publicly traded MLM companies who decided to do away with their compensation plan and stop paying residual income to distributors when they got into trouble.

It's the distributors who will have to find a new home, and work hard to build it all again. They will lose faith in the MLM industry.

It seems like I'm having a hard go on publicly traded MLM companies. There are many private companies that have done bad things too.

About the Author

The point I want to make is, don't just join a publicly traded MLM company just because someone said it's a good idea. Learn to choose wisely. Can you imagine building a profitable home based business? Click here to see a picture of what your boss will look like when you tell him "YOU'RE FIRED!"

Article Directory Source: http://www.articlerich.com/profile/Wayne-Wu/66115

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