Financial freedom. Make your own hours. Be your own boss. No experience necessary! Sounds great, but network marketing isn’t just a lifestyle, it’s a business. And while previous experience may not be required, make bad business decisions and you’ll soon be out of business. Treat it like a business even before you start and lay the groundwork for success.

Whether it’s $500 to sign up, or $50, or even free, you’ll be making a significant investment of your time and possibly money to promote and grow your business. Don’t make an impulse buy – it’s not a new pair of shoes, but a carefully considered business decision.

The first step in any business deal is “due diligence,” an investigation of all the key aspects of the deal. If you’re considering a multilevel or network marketing opportunity, ask these six questions to determine whether the venture is worth your time, effort, money and commitment.

1. Who Is Your Upline?

What do you know about the person who introduced you to the opportunity? Can you trust him or her? This person is going to become your closest business associate. Will you be comfortable working closely with him or her for a long time? If you don’t know the person well, ask for references—talk to other distributors about their experiences.

What about the company founders? Have they been successful and reputable in their previous businesses? Does the company have a clean track record with the Federal Trade Commission? What have been the outcomes of any major lawsuits against the company?

You don’t need to do formal background checks, but use the tools that are readily available—public records, search engines, references, online communities and forums.

2. What Is the Product?

Does it address a real and common need? Would it sell well in a retail store or via other traditional distribution channels? Is it priced competitively? Is it clearly differentiated from the competition? Are any claims of effectiveness backed up by legitimate scientific research?

How much do you know about the industry? Will you be able to become a knowledgeable and convincing representative to prospective customers? Is it something you will use yourself? You can best represent the product if you can share your own experiences and results.

3. When Will You Start Making Money?

Some people will claim that you can be making a living from the opportunity almost immediately. Others may tell you that it takes many months or even years to show a profit. Both extremes should be suspect.

You should generally be able to recoup any investment and start earning income within just a few weeks—that is, if there is a real demand for the product. Making a living is another story. In the beginning, you need to be able to work it part-time while pursuing other steadier income sources. Will you realistically be able to do that with this company?

4. Where Is the Product Promoted?

Is the company advertising to help create awareness and demand for the product? Is it in reputable publications? What about the company web site? Does it provide basic information or only refer visitors to a distributor?

Are there any restrictions on where and how you can promote the product? A wide-open policy is more flexible for you, but for everyone else, too. If you’re prepared to be highly competitive, more flexibility can be to your advantage, but if not, you may prefer a company whose policy is more restrictive.

5. How Were You Recruited?

Were you approached as a prospective customer, with just a mention of possible income, or were you hard-sold on the business opportunity? A successful networking company has to get repeat business with happy customers, not just recruit more distributors. Happy customers will be drawn to become distributors.

Unless you’re specifically attending an opportunity call or meeting, or you initiate the questions yourself, an initial focus on the income opportunity rather than the product should be a red flag for you.

6. Why Are You Getting Involved?

This is perhaps the most important question of all. If you think it’s going to help you out of a cash crunch, forget it. If you think you’re going to be rich in a year, well, it’s fine to have a vision, but don’t bank on it. On the other hand, if you really believe in the product, that gives you the best likelihood of success with it. Also, if you’re doing it to supplement other income, it’s far more likely that the results will meet your expectations.

The answers to these questions are not absolutely right or wrong, and no one answer should determine your decision. The point is to make sure that you’re going into it with your eyes wide open. Many people have made a lot of money in multilevel and network marketing, but many more have ended up wasting a whole lot of time and money chasing a pipe dream. The best way to ensure your success is to make sure you’re getting into the right opportunity for the right reasons in the first place.

SCOTT ALLEN is a technology entrepreneur and consultant
and co-author of
The Virtual Handshake: Opening Doors and
Closing Deals Online. He was also the subject of our
lead story in May-June 2006.