Direct Sales and MLM

The Gospel That Isn’t, An Attorney’s Initial Thoughts

By
Clay Brewer
“The greatest dangers to liberty lurk in the insidious encroachment by men of zeal, well-meaning but without understanding.”

- Justice Louis Brandeis, dissenting in Olmstead v. United States (1928)When I say the gospel that isn’t, I am referring to the idea that continues to become ever more commonplace in the national discussion. The idea that there’s a singular way to look at something, the idea that a conclusion may be reached before the facts are later found to support that conclusion as opposed to following the facts to their natural conclusion. In my role as an attorney in the direct sales industry, I have recently been contemplating the current health of this space. These are my thoughts:While “MLM math” suggests everything is exploding upwards, the truth is quite the opposite. Without question, things are down. We’re either in a recession or rapidly approaching one, energy costs are higher, interest rates are higher, food costs are higher, budgets are tighter, and supply chains are off. Whether through a pandemic, inflation, or the economist’s oxymoronic statement of macroeconomic success can only come from microeconomic destruction, times can be tough to navigate and even more difficult to understand. This reality begs the obvious: how does a company thrive in this sort of environment? And in addition to the economic pressures faced by every consumer, we also have the critics that are lobbing grenades at any given moment.On a daily basis, it is our job to present the world as it is, not as we wish it to be. When advising clients, we try to put ourselves into the minds of regulators, the very people that are committed to finding any way possible to end the industry. The speeches they occasionally give at DSA functions where some commissioners laud the industry’s self-regulatory efforts are, for the most part, worthless. We know it, they know that we know it, yet the dance continues. The people in charge over there would love nothing more than to see our industry end. And companies are helping their case. In order to thrive during these difficult times, it’s imperative that companies be EXCEPTIONAL. It’s no longer acceptable for companies to meet “industry standards.” Whatever that may mean. Candidly, the industry standard has been low over the years, leading companies to rely heavily on field leadership to carry the baton while running with a parachute behind them. “Industry standard” is the road that leads to bankruptcy. Consumers are more discerning, more demanding, more distracted than they’ve ever been. If you think they’re going to tolerate a sub-par experience just because you’re a start-up, think again. What is a sub-par experience? Well you know it when you see it. It could be the iOS app is glitchy, it could be the colors on your website, it could be the fact that your team is operating with yahoo email accounts, it could be the fact that the checkout process requires too many clicks compared to the experience on Amazon. Take your pick. Companies today do not have the luxury of relying on field leadership to coach consumers into accepting a crappy experience. Again, companies today need to be EXCEPTIONAL. This is where we can help because this is our expertise. What are the industry standards? Without fail, this is the one singular question that arises during an initial call with a client. What clients never seem to realize before engaging our firm is that this is the wrong question to ask and that this mindset is already hindering their ability to innovate and be exceptional. Understanding the premise of certain rules, their history, and the evolving attitudes of regulators and those anti-industry folk are the blocks from which management should always begin their analysis. Our expertise is centered on this understanding.Below are some initial thoughts addressed to those currently within or seeking to enter the network marketing industry as to how an evolutionary approach can be taken within the realms of regulatory scrutiny. The approach need not be adversarial. And it’s our job to show you how. Pyramid schemes? Amway stuff? Crypto scams? These are a few of the comments I receive when I describe to the casual layperson what we all do. These types of misconceptions are what the exceptional companies should seek to make abundantly clear that they are not. And our counsel is focused on doing just that. Industry standards are not saving the industry or making companies prosperous. Industry standards are inhibiting the growth required for economic and regulatory survival. (1) Retail Sales to Genuine Retail Customers are KingThis should go without saying. But for some reason, companies seem to ignore this basic, core tenet of network marketing. A product must have serious retail value for those outside of the opportunity. Of course, those who are marketing and selling the product are likely better equipped to do so if they consume the product themselves, but this cannot be a requirement. Individuals will take the easiest route to create maximum commissions. This is an inevitability of human nature. As a result, it is important to create a generous, yet firm, compensation plan that strongly incentivizes personal retail sales and disincentivizes excessive internal consumption in order to qualify for commissions. Leadership bonuses, revenue poolings, and other rewards that appear merely tangential to one’s personal or downline retail sales have the ability to cause issues and must be presented with caution. (2) Company Agreements are, In Fact, CriticalWhen you have a business, people will post negative things and inevitably there will be opinions out there that claim a network marketing business is a scam, a pyramid, or place your other negative industry cliché here. It’s a part of the job, so be prepared for it. The real world is not Suits or Law and Order. Whenever something is posted negative about the company or an opinion is made by an outsider, a company cannot expect a cease-and-desist letter to solve everything. Contrary to popular belief, these more likely than not add fuel to the fire, give credence to the very negative opinion the company sought to silence. And, in the event a cease and desist is sent, the company best be prepared to put its money where its mouth is and enforce their rights. An empty letter will result in the lack of respect for the company and the inability to enforce any future rights sought to be protected. Policies and Procedures and other company agreements are what govern the relationship between a company and the field. These agreements are not to rubber stamp regulatory guidelines and check a box at enrollment. These agreements are what can save, or destroy, a company. By establishing comprehensive agreements, the company is (1) fully prepared to address situations that occur; (2) capable of taking appropriate action based on the particular situation; and (3) able to establish policies and procedures that specifically meet the standards under which the company would like to operate. (3) Counsel Now is Better than Counsel LaterThis point encompasses the two above along with all others. Before things blow up, it’s best to receive valuable counsel to ensure the model is compliant on paper and then remains compliant throughout the business journey. No business ever operates exactly as it is planned out, this is an inevitability of the marketplace. Our firm is best in assisting you through thick and thin to understand where you came from and where you are seeking to go. We bring a fresh, unbiased perspective to the baby that is your evolving business. We understand the sensitivity that comes with a potential change in vision, but we also understand the hard truths that enable businesses to be successful within this space. There are paths that can be taken to distinguish this industry from the cryptoqueens and other misleading shadows that seem to hover over an industry that has granted hope to so many. For further points to explore, we’ve laid out 10 basic building blocks for all startups in this space here The future is bright, so let's get started!

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