There are many factors to consider when choosing a direct sales or network marketing company. The financial health of the company is an important, often overlooked factor. Here are some tips that will help you evaluate a company’s financial health and help reduce the risk of losing your business due to a company’s poor financial performance. Find out how to uncover hard-to-find information, how to surmise financial health from other information, and how to use the information you find.

It’s easy to find information on publicly traded companies (those that sell stock to the general public). They are required to disclose specific information, including certified financial statements. These reports are readily available to the public and provide information about the company’s assets, profits and losses, expenses, investments and other information that can help you assess their financial health and likelihood of continued success.

Many direct sales and network marketing companies are privately owned companies, which means they have no legal obligation to disclose any financial information. It may be much more difficult to get fiscal information about these companies.

There are private companies that offer at least some financial information to the public, which is a good sign. A struggling company isn’t likely to reveal that information if they aren’t required to.

When the company doesn’t provide fiscal information, here are some things you can do to try and ferret it out.

1 – Call the company leadership and ask pointed questions. What is their annual sales revenue? How is the company financed (reinvesting profits, investors, loans)? How long can the company survive on just its current equity? What other assets or investments do they own?

You may not get direct answers to any of those questions, but sometimes the reaction to the questions can give you an indication of the leadership’s business and money management skill and experience.

2 – Research the company leadership. Who owns the company? Who runs the day-to-day operations? How experienced are they? Have they taken other companies to success or failure?

3 – Is the company owned or backed by a bigger, more experienced company?

4 – Are the company’s products, websites, and printed materials professional looking? Are their consultant agreements, policies, and procedures thorough and well written? A professional appearance can indicate that either the company is experienced or they have the finances to hire experienced people to develop the materials.

Use the information you gather to evaluate the likelihood that the company will be profitable and therefore in business for the long term.

If the company seems to be in complete chaos and totally unprepared for the financial responsibility of running a company, it’s probably not worth risking.

If you expect decent profit early on in the business, a high risk may be tolerable. And if the opportunity will provide knowledge and training you can transfer to another business, the risk may be worth it. Or if you can build your own customer base and downline that will likely follow you to a new venture if necessary, you might be willing to risk more.

But if your success and profit will take longer to build or you aren’t prepared to deal with a possible business failure, you need a company that looks like it has staying power.

And remember, your financial investment isn’t the only thing you might lose. You’ll be investing considerable time and effort and more importantly, risking your reputation. If the business fails you’ll undoubtedly have to deal with disappointed customers and team members, as well as face your own emotional response.

All business is risky. Evaluate the company’s financial health and determine how much risk you’re willing to take.