DONUT HOLE THINKING

Plan First and Avoid MLM

You are sure to picture the ultimate breakfast dessert staple, the donut. Not the kind that are filled and look like small cakes; no, the traditional donut with a hole in the center. For a donut, the hole in the center makes it special. For a person considering a small business, a hole in the center spells trouble.
Good planning is the precursor to profitability. For many people trying to make money the fastest and easiest way possible, planning is not an activity they embrace. If the idea can’t make money immediately, they are not going to do it. Hence, you have the hole of the donut: no substance, just air.
Good planning leads to profitability. Understanding what the customer wants versus needs, what are the features versus benefits and how to target your market leads to success. Knowing these factors takes work, including but not limited to, reading, researching and developing the skills to implement your business plan.
The donut hole represents wishful thinking. Everyone likes a success story where a person just shows up and “Bam! Instant millionaire.” Herein lies the lure of multi-level marketing programs (MLM). These programs are generally illegal as they are Ponzi schemes designed to benefit the “founder” and take money from unsuspecting willing participants.
MLM starts with “tier one” where you want to be recruited if you are lucky! The first tier generally makes lots of money. For the most part, by the time you are invited to enter, tier one is as distant as the moon. As long as more levels can be created, the more likely it is you will get paid. But, there is no way of telling if the downline will continue to grow. Typically, you are hyped to join now because positions are filling fast.
You are being trapped in a donut hole as soon as you are asked to pay to enter the program. Once you pay, even the smallest of amounts (not very likely), you’re hooked and will continue adding more money to the pot with the hope more downlines will join.
I had two such experiences (losing about $100 total; not bad considering). The first almost hooked “opportunity” came with the lure of selling products for improving health. The central product was an air purifier. You needed to create an inventory and the minimum purchase was around $2500. Of course, if you bought more products, you get additional bonuses and your own “team” of persons working “for you.” To spend over $5,000 would be easy and the bonuses would be many.
I’m sure you can hear the cash registers ringing as people, desperate to start their new career and pay bills, use their credit cards to “load up” and start their own downline. To be a star in this venture, you needed to sell more and more products every month. To convince you, there are pictures of smiling people standing by their Mercedes with their boat in the background.
Unfortunately, you need to picture basements across America stacked with these so-called hot ticket items guaranteed to make you a millionaire overnight. No Mercedes or boat, just a Donut Hole!
Most people find once they get through their “warm market” (relatives or friends who can’t say “no”), selling is hard. Face it: if selling was easy, more people would be doing it. Top sales people get commissions and have an inventory of products sold exclusively though their efforts. The big difference between them and MLM is that they don’t buy the product in order to sell it.
My other limited experience in MLM was with an online “newspaper.” Once again, a “small” fee will put you at the top of a downline that will fill quickly. To help build your downline even faster, you can purchase people to be placed under you. I was routinely bombarded with related offers guaranteed to make me money while I slept. Donut Hole!
I can say that I am lucky to have learned valuable lessons about donut hole thinking without losing a great amount of money. I know there are many people that are not so lucky. Here are my rules for you to consider before you jump into a small business opportunity:
1. If it is too good to be true, it probably is; Donut Hole!
2. If it is a franchise opportunity, work with your small business council or the local chamber of commerce to determine if the franchise can grow (and maybe find out why it hasn’t already been attempted)
3. If you are asked to invest money to obtain a downline or to receive products to sell, walk away
4. If you think you have a great business idea to pursue, first work with someone close to what you are planning to do and second, find a mentor to help you with your idea
5. Most businesses fail within two years not because they were bad ideas or people were “stupid”; most people underestimate the time and effort it takes to be successful; be sure you can hang in there for at least 5 years and use set-backs as learning experiences
Finally, don’t fall in the “guru trap.” No one is out there waiting to be your best friend and show you how to make money while you sleep. Entrepreneurs, who make significant money with an idea, sell that idea and get on to the next project. They are not waiting for you to call or write!

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