If a market is large and already exists, then the new business may be able to steal market share away from other competitors by providing something new or more efficient. If the market is small, but growing quickly, then getting in quickly may allow the business to be the leader and eventually be the largest player in the future market. If the sales are growing quickly, it will allow the business to spread overhead costs out over more sales, increasing the profitability in the future. Sales growth is a historical measure, so it should be available. In the both cases the new business must offer something different; uniqueness, price, quality, or service. The distributorship must distinguish itself in someway from the competitors.

It is usually presented as the first two, but the main focus is the networking feature, B. The primary market would be defined as "people looking for a small business to own", and the secondary market is "all consumers in the retail market".

So now you need to find out about our target market of "people looking for a small business to own" and how fast it is growing. Who would have historical information on how fast this segment grows? Many companies support this market today. Companies like Subway Sandwich shops, Kinko's copying, McDonalds, Pack-Mail, and lastly Amway to name a few. Since Amway administers the issuance of distributorships they are in a position to have all the historical data on number of new distributors each year and the corresponding annual renewal rates of distributors.

It would be very helpful to have this information to understand the size of the target market, and how successful this particular player (Amway) is in the market. Having this information could help you make average estimates as to how quickly you could recruit new distributors, and how many distributors will be with you at the end of the year. This information is critical to formulating your business plan. Successful companies in this market make it a matter of policy to make this information to available to businessmen. The availability of this information is critical since the businessmen making the business plan needs accurate information to approach banks and investors to finance the business. Ask your upline or Amway for the distributor statistics. To accurately formulate your business plan you need to know, for the country where you want to focus;

Researching the other competitors who are out to server the primary market " people looking for a small business to own " you will find two main classes of competitors. Those being franchisers (like those listed above) and Multi-Level-Marketers, (MLM's). The two differentiate themselves mainly by cost to acquire the business. MLM's serve those customers who have very limited capital resources and could not afford to buy a traditional franchise as well as finance the large fixed costs associated with such businesses. Since the cost of acquiring an Amway franchise is only the cost of the kit and the annual renewal fee, Amway in this respect is very competitive. The lack of employees, a separate office, low overhead, and low overall investment is the most competitive offering in this market. This is the best deal out there, from an organizational and fixed cost standpoint. There are no receivables, everybody pays cash, there is not inventory to manage or finance. Even though it is the best deal out there it doesn't mean that the business is competitive. Like Amway, you could buy goods at Wal-Mart and try to sell them to your friends, and still have low overhead, no receivables, and no employees. You would still not be successful, because you won't be competitive on price! Once you are deep in the system there is however an opportunity to market promotional supplies such as books and tapes, and motivational weekend events to your downline. The sales of these items can be very profitable.

Researching the other competitors who are out to serve the secondary market " all consumers in the retail market", I found through comparing only on price that the Amway distributor has a tremendous disadvantage. See: Price studies on main page. In order to ensure a competitive business advantage in the secondary market, the Amway distributor will need to compete on something besides price, possibly quality and service. You must go back and identify the size of that market segment that desire things other than the best price.

Ask how the Amway distributorship could compete. Quality? Service? How would I reach and educate the target customer? How would I educate them about better quality products? In house demonstrations, free samples, use of the Amway Brand Name? How would I server the customers better? Do I have a better and wider selection, do I have a better returns-policy, and do I have faster delivery, than the competitors? These are the questions that must be answered to ensure you have a competitive advantage and not just be another "me-to" distributor of goods and services.

An Amway distributorship will have little to no variable costs relating to product sales. We can assume there are no bad debts to write off as % of sales. You can put all promotional expenses into overhead.

An Amway distributorship could have, in theory, no fixed costs or overhead costs, except for the annual Amway renewal fee. The SA4400 information handed out by distributors from Amway, "approved" by the FTC, shows only the gross income of a distributorship from rebates and bonuses. What is left out is that the significant overhead costs, as a fraction of income. When a distributorship is run according the to how "successful people" run their businesses, one can easily realize the following expenses-->. Typical "system" related overhead costs. Most people looking to make a little extra money will be surprised when they find out to follow the plan and have a successful distributorship they would be expected to spend $3,600+ the first year in distributorship related overhead costs. The "system" is promoted because that is what the successful people used to build their businesses. All are told to strictly follow the "recipe" or "system" and everything will go according to plan. You have no way to know what works best so you will have to assume the worst case scenario and use $3,400 as the first years overhead cost. Subsequent year's overhead may be reduced since there are few one-time expenses.

The overhead cost cited do not include any increased costs for purchases a distributor makes for self-consumption, over what he would have spent at a local store. I have proven to myself that to blindly buy everything from the Amway distributorship would on average cost me 40% more.

To prepare a business plan you need estimated revenues and estimated expenses. The overhead costs are detailed above.

To accurately forecast how your distributorship might grow, it will be good to use historical data from the people who have used the same system before. Since the system is used throughout Amway, just the data from the corporation would be useful enough. The Amway Corporation should have all sorts of statistical information about the average and median times to break certain pin levels. Histograms would be an enormous help to show how the normal distributor performs against the, always-present minority, exceptions. Detailed statistical information on rebates and bonuses would be very handy for estimating the rebate and bonus income for various pin levels. This would be extremely useful in estimating the costs of downline rebates as well. It is always better to work with real life data than try to make up your own. Even though this data should be available inside Amway, I'm sure you will not be able to get it. It may not be in their best interest to reveal the facts.

Another way to see how good their system is. Ask to see detailed financial results of your uplines business. If the business is indeed profitable and they are asking you to reproduce what they have done, what harm is it to show you the books? If it is such a good business, and they want to share it with you, why not share everything? Including the financials? If you go to buy an existing business, you will certainly ask the guy selling the business to show you the books, wouldn't you? How is this business opportunity any different?