MLM Software

By Dan Jensen
  2000

(reprinted by permission of the author from presentation to DSA 2000 Fall Sales Conference)

Computer systems in Direct Selling companies become the glue that binds the office departments together, a "core" around which the business is built. No successful Direct Selling company has ever sustained their success without a well-designed computer system behind it. Likewise, there are many Direct Selling companies that have failed due primarily to the lack of a good computer system. Don't let your new venture become just another statistic. Choose your software vendor wisely.

What is a good Direct Selling computer system?

There are three major pieces to any computer system:

No successful direct selling company has ever sustained that success without a great computer system behind it.

  • The equipment or "hardware" is comprised of the main "server" which does most of the "thinking", disk drives to store the business information, work station computers, and printers for reports. Fortunately, the cost of equipment has declined drastically in recent years while the performance and capacity to process business information has increased many fold.
  • The operating system software makes the computer work when you turn it on. It comprises the programming language that the business application software is written in, the commands necessary to create a back up tape of the data to avoid loosing all the information, and many other commands necessary to simply keep the computer working as conditions change. Without an operating system, the computer is nothing but plastic, metal, chips, and silicon. Operating systems include Windows 98, Windows NT, Windows 2000, UNIX, Linux, AIX, and scores of others.
  • The application software is the most important part of the computer because it is the piece that determines how you run your business. The hardware and the operating system are of little importance compared to the application software. This software provides input screens for order processing, creates your commission checks, prints downline genealogy reports, and provides look up information to handle distributor inquiries when they call the office. In short, this software is the core of running your business successfully. It will make or break a Direct Selling business. Your procedures and policies will have to conform exactly to your software or you will be forced to change the software, sometimes at considerable expense, to conform to your policies and procedures. This is one reason it’s so important to choose wisely the software you use.

The greatest mistake companies make in this area is to think they can save money by writing their own software. Not only does this take years to do, but it can never reflect the experience and know how that packaged Direct Selling software contains. Why reinvent the wheel? Would it be worth the risk of losing the business to poorly designed software resulting in incorrect commission checks, errors in tracking a person's downline records, lost orders, and so forth? Those companies that elect to write their own Direct Selling software often find later on that they are vulnerable to the programmer who wrote it. What if he moved away or became injured or sick? What if he took another job at a higher wage? Never let someone convince you they can program a Direct Selling software system in weeks or months. It's never been done successfully before. Why should you believe it could be done, now? Companies such as Jenkon have spent many years writing Direct Selling software that works right the first time, every time, and offer it to the public for a small fraction of what it costs to create it. It's the best money you'll ever spend.

How do I choose a good Direct Selling software package?

While this report does not have the space to address this subject fully, a few suggestions should be noted:

When you have your tax return prepared, do you go to an inexperienced person, or do you find the most competent one who is also reasonably priced? Compensation plan programming is not something inexperienced programmers should be doing.

  • Choose a reputable vendor. There are many fly-by-night software companies that make many claims of experience, know how, and software gadgetry. Unless you are willing to be a guinea pig (and put your business at risk), choose a vendor that has a proven track record. Track records are built over many years of working with Direct Selling companies, not just selling a software package a few times. Indeed, only having a small handful of clients may speak more about a company's persuasive abilities than their actual know how and skill. Above all, check out at least six references. Remember that vendors will be eager to provide only their best references. Always get the names of other companies from these first references that you might call. You might be surprised to find a different story when you call companies not included in the reference list.
  • Visit the software company's office. When you choose a Direct Selling software package, you not only choose the software, you also choose the vendor's support services. If the vendor is not able to provide support services acceptably, what will you do when you need to change your compensation plan, or add a new input field to the order entry screen? Jenkon has serviced over 800 Direct Selling companies since 1978 and has yet to find one company that has not needed support services at some time after the installation. There is only one constant among all Direct Selling companies - they constantly change things! And your software will need to be changed as well.
    While at the vendor's office, meet the vendor's people that will service you. What kind of people are they? How long have they worked for the vendor? If you find they are relatively new, either the vendor has little experience, is growing rapidly (in which case you may have trouble competing with other clients for good service), or has high staff turnover. All these can mean trouble for you as the vendor may not be able to handle your needs quickly and competently. Be willing to pay for experience and competence. You'll pay far less in the long run. If you think knowledge is expensive, try ignorance!
  • Avoid very small software companies. Small software companies, to compete with larger established firms, must offer software at bargain prices. This often puts them on shaky financial ground during their most critical years. Many Direct Selling companies, trying to save money by purchasing software from these small software houses, find themselves virtually abandoned later on when they need assistance. The problem is that servicing one highly successful client can consume virtually all of the human resources of a small software company leaving the other clients out in the cold. It can take months (or years) to train competent software technicians on a Direct Selling software package. The more deadly problem, however, is that smaller companies tend to go out of business without warning. The Direct Selling industry is especially brutal on small software companies and has caused a number of firms to close their doors leaving their clients high and dry. If you value your business, stay away from the small vendors and stick to those with staying power and track records.
  • Buy a software package that allows you to create your own reports. Many packages force you to live only with those reports they put on the menus. Managers must resort to running large reports to answer small questions or concerns instead of small exception reports on demand. Small exception reports can be reviewed quickly and accurately. Large general purpose reports can take hours to review and digest; this is not a wise use of a manager's time. The computer industry has adopted a standard in modern software engineering that allows non programmer users to type free-form queries on a computer terminal. In response, the computer provides specific and focused information according to the query. For example, suppose a manager wants to see a list of all the distributors in Florida with a group volume of $5,000 or more. Most modern software systems would allow the manager to type a relatively simple command sentence to obtain the report.
  • Make sure the company can program your compensation plan. Compensation plans are complex and take massive amounts of experience to program properly. When you have your tax return prepared, do you go to an inexperienced person, or do you find the most competent one who is also reasonably priced? Compensation plan programming is not something inexperienced programmers should be doing.
  • Do you plan to expand internationally someday? If so, choose a software package that incorporates international issues such as currency conversion, language translation, cross border sponsoring, V.A.T. tax reporting, and foreign address formats. Is the software also available in other languages so your foreign speaking staff would not all need to speak English to use it?
  • Buy software that can work on bigger computers as well as a PC. While personal computers are terrific for starting a new company, they are not cut out for larger successful Direct Selling operations. Most personal computers allow only one person to use the computer at any given time. Networks allow PCs to be linked together and can grow to become quite powerful and large. Most large Direct Selling companies have either a large minicomputer with several hundred workstations attached, or larger mainframe computers. In either case, if you expect to be successful, don't limit yourself by choosing software that only runs on PC computers.
  • Compare features. Software is designed to handle specific business issues and often has a great deal of difficulty dealing with matters outside the original design. It's difficult to force a software package to do things it was never intended to do. Wise computer buyers compare features and capabilities, side by side, of one package to another. Ask the vendor which features they consider are unique to their package compared to others. A package that is missing an important piece will never be a bargain at any price. As you compare software, use the feature list of the package that has the most to offer, and compare the features of the other packages to it, feature by feature. You'll be quite surprised as to how many "holes" the other packages might have.

Remember that you aren't just buying a computer; you are buying software, expertise, emergency support services, programming services, and starting a long term relationship. Choose your software vendor wisely. Of all the aspects of a start up Direct Selling business, don't be tempted to penny pinch in the computer area. If you do, you may cripple your chances for success.


About the author, Dan Jensen is the founder of Jenkon International of Vancouver, Washington, (360) 256-4400 an acknowledged leader in technology systems for the direct selling industry. He is widely recognized as one of the foremost experts on mlm software, and is a frequent lecturer and writer on the subject. Visit the Jenkon site at www.jenkon.com


Jeffrey A. Babener
Babener & Associates
121 SW Morrison, Suite 1020
Portland, OR 97204
Jeffrey A. Babener, the principal attorney in the Portland, Oregon law firm of Babener & Associates, represents many of the leading direct selling companies in the United States and abroad.

www.mlmlegal.com

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