Wave Three Hunt: Find The Skeletons

Experienced businesspeople always do their homework before entering any binding agreements. They check out potential clients and partners, using a host of standard tools and techniques. Apply the same methods when investigating any network marketing opportunity. They don’t guarantee a successful partnership, but they increase your chances dramatically of finding out any serious, hidden skeletons that a company might be hiding.

Your first step should be to check on the companies FINANCIAL SOUNDNESS. Many growing networking companies die because they are undercapitalized. They use the profits from today’s sales to buy inventory, hoping they can cover all their payments to distributors out of next month’s money. Sometimes they get away with it. But more often than not, this leads to bankruptcy.

If you’re looking at a public company, all you have to do is pull a Dun & Bradstreet report, or request an annual report from the company itself.

When investigating a company, never ignore danger signs such as lawsuits, rumors, and regulatory security. Check out every allegation. But remember that controversy is not only inevitable in a young, fast-growing company; it can be one of the hallmarks of success. Check for complaints, and find out if the company was able to resolve those complaints.

Check the “people trail” and the “paper trail.” The people trail consists of suppliers, distributors, company officers, lawyers, owners, and accountants. The paper trail consists of financial and legal records. For people trail, get contacts! For paper trails, get credit reports! Ask the company accountant if the company is facing financial problems. Ask the company attorney how long he’s represented the company and if there are pending legal cases; whether as plaintiff or as defendant. When you check litigation reports, be sure to do the same for the individual who started the company.

Of course, many are comfortable relying upon a few references and a LOT of intuition. That’s all right too, if you want to take the risk. But remember Corey Augenstein’s warning:

“Going into opportunity meetings or talking on the phone, you ask a lot of these questions, and they just don’t have the answers.”