Is it a Hobby or a Business?

Ray Kroc was addressing an MBA class once. He asked them what business he was in. The class gave many answers: restaurant, hamburger, fast food. Ray said they were all wrong. While McDonalds sold hamburgers as a way to raise money, his business was really real estate. Ray Kroc knew that the product he sold was secondary to the location of the retail outlets. An old adage in commercial real estate is that if you need retail space and can’t afford to pay for the traffic analysis reports and demographic studies, just open as close to a McDonalds as you can. McDonalds never allows a franchisee to open a store in an unprofitable location.

The question then is what business are you in when you start a network marketing home based business? Are you a vitamin distributor, a long distance telephone service provider or even a seller of jewelry or cosmetics? If that is the case then you are either running your business like a hobby or you haven’t figured out what business you are really in yet.

Avon, Mary Kay and Cookie Lee Jewelry are very successful companies. My wife enjoys many of their fine products but most of the distributors in these companies are playing at running a business. In most cases the fine ladies who peddle the jewelry, cosmetics and perfume from these companies are very happy making a few hundred dollars a month. The business is not a livelihood for them. It is more of a social event. They get to visit friends, play dress-up and have fun talking about the toys in the catalogs. This is the definition of a hobby business. If this is what you are looking for, then you need to focus on your product—because a hobbyist plays at making money.

If you are looking to make serious long-term money at network marketing, you must treat it like a real business, not a hobby. While product is important, it is only one of several things you need to consider before investing your time and money.

Let’s go back to McDonalds. Why did Ray Kroc say he was in the real estate business? Does McDonalds make the best hamburger in the world? No. Is their variety of fast foods the largest of any major chain? No. Are they the absolute cheapest or most expensive chain? No. Yet, McDonalds is number one in the world. How does McDonalds sell more hamburgers than anyone else with a mediocre product? It is very simple…location, location, location.

McDonalds’ restaurants are placed in strategic locations. They perform extensive traffic studies to confirm that enough cars drive by. They measure foot traffic on the sidewalk. They make sure that the bright signs and banners are easily visible. They do everything possible to make sure that enough families will go by the restaurant and the restaurant is seen by the kids. Why? Because the kids will pester their parents to go there to buy them a hamburger and a toy! McDonalds is in the real estate business!

Now let’s look at your business. Why did you decide to look at a network marketing opportunity? Was it to sell vitamins, long distance service or jewelry? Probably not. You started looking because you wanted something you don’t have today—financial freedom. You wanted the time to go to the kids soccer games, to travel when you want to, to pay off the home faster. Those are then things you dreamed of, not a specific nutritional product.

Now, the business of network marketing is to build an organization of other business builders. You are paid for the success they achieve. Do you ignore the hobbyist or the retail customer? Of course not. You need them to buy your product or service. But your search will be for the business builders. Remember, you will need to talk to hundreds of people to sign up 75 distributors, of whom only four or five will account for the majority of your profits.

Thus, your search for a home based business must be like McDonalds. You must not think you like a hobbyist and focus on the product. Focus on the business instead. Just like McDonalds, who studies and researches each location before allowing a franchisee to spend hundreds of thousands or even a million dollars for a restaurant, you need to research your business like a business and plan for the long term.

What do you look for? Several key factors:

Product Type – the type of product the business you choose has a tremendous impact on your future ability to generate income month after month.
Company – is the company stable and capable of long term growth or will it die like most network marketing companies after a few years.
Management Team – an often overlooked item in a persons business search, does the team of leaders in the business have the experience to grow the company and what have they done in the past.
Timing – when is the best time to join a company, when it is just starting out, when it starts to grow wildly or after the organization matures? There are risks and rewards to each.

The problem is that most people consider these factors only after they have decided to join a company. Instead of looking at the core elements that will guarantee long term growth and stability, most people focus on the flashy product features. The product is important, but too many companies had what appeared to be a great product and lacked the foundation to support the growth their product produced. The product features to focus on are:

Is it unique?
Is it profitable?
Is it consumable?
Is it exciting or emotional?
Is it flashy or marketed nicely?

The last thing to consider is how you make money or the compensation plan. The reason this is the final consideration is that all viable network marketing companies will use a variation of only a couple different plans. Anyone who touts the pay plan is hiding flaws somewhere else in their company. If the company is stable and is poised for growth. If the product is the best available—the pay plan will make you money. Some pay plans pay better then others in different circumstances. This is not the major factor in choosing a company, but in how you may run your business. Don’t confuse the function with the purpose. The purpose of a pay plan is to pay you for your success, the function is to force you to build your business in a particular way to maximize that payment. You can deal with that as you build.