You are a Champion!
This section (MLM Startup) gives tips on how to start an MLM company (not how to run a successful Distributorship) for those who have the desire to build a successful MLM company. Hopefully you can avoid some common pitfalls in starting a company because the majority of startup companies will fail. Just remember, some will defy the odds and that is the reason for this section of my blog. I hope to write a host of articles for this section.
CPA’s will tell you, through experience and published statistics, that most companies fail because they are under capitalized. However, there are ways to find capital if the business plan is sound. Often, rapid growth kills many businesses because people underestimate how much cash it will take to run a business. Maintaining positive cash flow is a very key element to success and nothing will eat up cash faster than uncontrolled growth. Therefore, even wild success can create failure for the unknowing entrepreneur.
In my opinion, most companies fail because they don’t have the right management team or leaders in place and haven’t correctly defined their own position in the organization. As Clint Eastwood said, “A man has to understand his limitations.” Your understanding of self will have a great deal to do with your success. Building the right team begins with understanding your own skills and going from that point to build a strong team. In my organization the Lone Ranger or Superman need not apply.
Often, startup companies get the reputation for only being built around strong dominant personalities that carry the load for the new company. People like Bill Gates and Steve Jobs come to our mind and we will readily admit that companies have stages and many large companies have different management teams for different stages of development (startup, growth, maturity, and death). Often, a strong entrepreneur can’t take the company successfully into the maturity stage because they may lack management skills or key people. Recognition of this fact is not a fault in the individual because often a later stage management team doesn’t have the skills to get a startup business off of the ground (they may hire experienced people to do that for them). They may have the management skills to run a large organization, and (since one of my degrees is in Business Management) I will just tell you upfront–this section is not at all about that broad body of knowledge! Also, I am a CPA but this section is not about accounting and taxes! It’s about MLM startups and not about buying a business or the finer points of how to manage a large business.
So you are not a Charismatic Leader? It’s very good that you recognize that fact upfront so that you don’t waste your time trying to turn yourself into one and get on to the task of building a business or get out of the way of the Organization Structure! I’m not saying that being Charismatic is not a worthy goal–life is short.
There’s a real advantage to realizing that Charismatic Leaders will be drawn to your MLM organization if it’s developed properly. In other words, have you carefully designed your fishing bait (Compensation Plan)! Yes, strong leaders who understand first hand how to build a large Distributor organization will be key to your MLM business. However, that is not the job of the CEO (assuming you will be the CEO). Please note: “Even if you have those leadership skills that’s not your job as the CEO, and you won’t have the time to make that your job if you are doing your job as CEO!”
Startups have the advantage of starting fresh with the management team. Generally, when new top management is installed in an existing company the jobs of “all” the existing management will be in jeopardy over time and this can be very disruptive to an organization (tearing down before beginning to build up).
This is a Key question: “What is the top management structure?” Peter Drucker: “Top-management work is work for a team rather than for one man. It is quite unlikely that any one man will, in his own person, unite the divergent temperaments which the job requires. Moreover, it will be found, when the top-management tasks are analyzed, that there is more work to be done than any one man can do…To recognize the team nature of the top-management job is particularly important in the small business. The one-man top management is a major reason why businesses fail to grow.”
Also, your company will need a functioning board of directors. Peter Drucker, the “Three Functions of the Board:
- The enterprise, first, does need a review organ. It needs a group of experienced people, people of integrity and stature, people of proven performance capacity and proven willingness to work, who counsel, advise, and deliberate with top management.
- An effective and functioning board is needed to remove a top management that fails to perform.
- Finally, the enterprise needs a ‘public and community relations’ organ.”
Developing a good Team will be time well spent towards avoiding management by crisis.
