I was speaking with a telephone prospect the other day regarding her inquiry about starting a home based business. She really needed to make extra income but was skeptical about investing yet again because of two prior experiences in which she had lost her money. I asked what had led her to choosing those particular businesses and she simply said the following: "They sounded good." Sounded good??? "O.K." I said. "But how did they look?"

This is an unfortunate and all too common conversation. You can avoid the mistake of possibly throwing your money away simply by doing a little homework and using the common sense approach outlined below.

These 5 key points are essential for you to research before investing both your time AND money in a home based business.

1. Does the company have a track record?

While it's entirely possible to succeed in a start-up, it's also very, very risky and more likely that you'll experience a rough ride in the beginning while the company irons out the kinks. What is your personal time table for achieving your financial goals? If they are more immediate and you are a novice as well, then think hard before joining any start-up. Investigate a company's recent history (2-3 years) to determine whether its operation is tailing off or taking off. You want to catch a company on the upswing; one that is experiencing verifiable growth and momentum. All boats rise with the tide!

2. Do the principals have a track record?

Find out who's running the company! Good, smart, successful business leaders have a history that can be identified. Would you invest your time, money, and future in following a failure? Everyone leaves clues and a trail. Make sure the people you're trusting are tested and have passed the test.

3. Is the company publicly traded and/or a member of the DSA (Direct Selling Association)?

If a company is publicly traded it is a glass house. As talented as we may be, none of us has the ability or the resources to investigate and scrutinize a company quite like the SEC (Security and Exchange Commission). The DSA is an independent national trade association located in Washington, D.C. It fully investigates a company's background before it can qualify to be admitted as a member. A company having one or, even better, both of these components will help ensure that you're investing in a business that operates ethically and is both credible and legitimate. If not, watch out!

4. Is the company's compensation plan tested?

In general there are four basic types of compensation plans that exist in Network Marketing and others that are a hybrid or combination of the four. I won't discuss the details and merits of each of the different plans (although I definitely have a preference) because that's not the focus of this article. But whichever plan exists, make sure it's proven or you may end up greatly disappointed. Are people getting paid on time and are they getting paid the full amount earned? How often has the compensation plan changed, if at all? Are there numerous complaints and reports of discrepancies between the reps and the company? The answers will be able to help you assess the viability of the company's business plan and its financial stability and commitment to the long term.

5. Who is your support team?

Can your sponsor/upline provide you with the right leadership and training in order for you to achieve success? Remember, the person who's enrolling you may themselves be new. That's alright, as long as there are experienced, caring, and supportive individuals that are willing and wanting to help. Not just lip service, but true leaders who have a system in place and the ability to walk you through it. In our business, these leaders have a vested interest in your success and know it! How do you gauge their sincerity and effectiveness? Talk with them. Talk to others on the team. Ask questions. Meet with them if geographically possible. Again, successful people have a history that can be verified. You're not just choosing a business, you're also choosing the people that will be your daily mentors and business partners, and that decision is VERY IMPORTANT.

Our industry is very special because it offers great rewards to anyone with a dream and a consistent effort towards achieving that dream. More time with family, more money, no debt, a better quality of life, a comfortable retirement... FREEDOM! These are the things all of us want and you are absolutely right to pursue them. However, if you are just like the woman who twice lost her money, then the problem is not in your dreams... it's in your research!

Companies, management, business plans, products and services, are both good and bad, successful and unsuccessful, whether they exist in Network Marketing or Corporate America. Good opportunities are out there and you CAN find what you're looking for in a home based business. Just remember to do your homework! That way you can make an intelligent and informed business decision that will be the right one for you and your family.

Copyright (c) 2008 Larry Zimberg