Introduction

My name is George Shears. I'm a retired psychologist and psychotherapist and I've spent most of my adult life mentoring people to be more successful in their lives.

For the past 4 years, I've been involved in network marketing and I've continued being a mentor in this new arena. My main mission in retirement is to promote physical, mental, emotional, spiritual, and financial health in every way possible.

I've learned a great deal through the school of hard knocks in network marketing and I believe that I can now help guide newcomers in this business to avoid many of the major mistakes that I've made. This article, along with several others I've authored, all have this common aim.

Quite frankly, I'm appalled at the extremely high rate of failure for people who enter this industry. It's commonly estimated at around 95%. There are many reasons for this tragic statistic, some of which I've addressed in other articles. In general, however, they tend to boil down to the fact that many people jump into a network marketing company "with their eyes wide shut," as the saying goes, and are VERY poorly prepared to build a business.

Accordingly, many people choose to join a company for the wrong reasons and simply don't know how to recognize a really solid company that will provide them with a stable, long-term means of generating a high-level residual income. At the end of this article, I recommend an exceptionally valuable resource for identifying these premier companies.

In searching for a such a company to join, however, it's equally important to recognize some of the main red flags that are prevalent in this industry. Here are a few of the most important ones to be aware of and either to avoid completely or--at the very least--to investigate very carefully.

Ground Floor Opportunities

These are as common as dandelions in the springtime and are typically presented with a lot of fanfare and hoopla designed to create a feeding frenzy. Unfortunately, a large majority of them are also like dandelions in the sense that they quickly lose their attractiveness and fade away. To carry this analogy even one step further, they sometimes "blossom" again quite quickly in the form of still another "ground floor opportunity" promoted by the same entrepreneurs.

The seductive attraction of these start-up companies is that those who get in at the beginning will "make a killing." The main fallacy in this is that stable long-term residual income is completely dependent on the long-term viability and ongoing growth of the company. If the company folds after a short time--as happens with a majority of these new start-up companies--the possibility of residual income will disappear like a morning fog.

A small fraction of these companies, of course, WILL be successful and the people who get in at the beginning WILL have huge financial success. As with all new and highly speculative enterprises, however, the odds are highly stacked against you with new companies of this type; so if you join one of them, I strongly advise that you be fully aware that you are at high risk to lose the money and time you invest and it's quite likely that you'll have to start all over again.

Companies That Offer A Single Product Or Service

Many uninformed people confuse legitimate network marketing companies with illegal "pyramid schemes." The former are always distinguished by marketing one or more bonafide products and/or services. So, if there is no real, usable product or service, then it's clearly a scam.

Many network marketing companies, however--especially the new start-ups--often have a single product or service to sell. This puts them on very shaky ground, of course, because their future depends completely on the ongoing consumer demand for this single product or service.

Many new nutritional companies fall into this category. They're much like a new store that has a single product on its shelves. If that product is one-of-a-kind, in great demand, and proprietary or patented, the company may have long-term success--especially if it quickly develops a larger product line. As a rule of thumb, however, it's wise to consider companies of this type to be very high risk until they've survived for at least two or three years.

Companies Whose Products/Services are Clearly Secondary To The Business Opportunity

A simple way to determine whether a company falls into this category is to find out if a majority of former distributors stop using the product or service after they drop out of the business. To the degree that this happens, the basis for long-term residual income is eroded and the company is, therefore, not a good choice. Often, the answer to this important question is intuitively apparent. The higher the quality of the products/services and the more unique they are, the more likely it is that former distributors will continue to buy them as customers.

Companies That Have A Low Rate of Distributor Retention

A necessary condition for generating a stable long-term residual income consists in building a large distributional team. The higher the drop-out rate, the longer it's likely to take to reach this goal and the less stable one's residual income is likely to be. It's very important, therefore, to get accurate information about a company's average retention rate and to avoid those companies that score poorly on this important criterion.

Companies Claiming To Generate Income Automatically Without Developing Personal Relationships

The essence of all network marketing consists in personal relationships. So if income is generated purely through some kind of automatic system, it doesn't really qualify as network marketing and is likely to be very short-lived.

Opportunities That Are Promoted as Get Rich Quick Schemes

Believe it or not, success in ANY form of business requires a high degree of motivation, persistence, dedicated commitment, willingness to make major sacrifices, and downright hard work for a period of at least 2 to 5 years. Promotional campaigns that promise or imply quick financial success with minimal personal investment of time, energy, and/or money are the largest red flags of all. You are well-advised to run the other way real fast whenever you encounter one of these--which is likely to happen very often.

Taking The Next Step In Your Due Diligence

As a complement to this list of important risk factors, I strongly advise you to become familiar with the equally important earmarks of truly outstanding network marketing companies. Two highly successful network marketing veterans, Paul Birdsall and Joel Broughton, have prepared an excellent recorded presentation on what they consider to be the 7 critical criteria that define such premier companies. You can access this free, objective analysis at the website listed below.

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