Whether you are brand new to the idea of working from home, or you have been in the home-based business industry for years, it is important to get the right information before joining a company.

Perhaps you’ve been in a party plan company that shut down, and you’re looking for a new opportunity. Or maybe you’re a new mom searching for a way to earn some extra income, but you have no idea what questions to ask before signing up for a home-based business.

With decades of experience in the home-based business industry, our team has seen and experienced all kinds of different companies. We’ve compiled a list of questions you can ask to make sure you get all the information you need before investing money into a party plan, direct sales, or any other kind of home based business.

This list is not exhaustive, but it will help you get started. Ask these questions when you meet with someone about a potential business opportunity, whether in person or by phone. If the mentor or recruiter is not able to answer these questions, or if you are not satisfied with the answers, do not feel any pressure to join the company!

5 Questions to Ask before Signing up for a Home-Based Business

How long has the company been around?

This is important information to know, as many companies that are brand new seem exciting and appealing. They often come out with phenomenal compensation plans and wonderful products.

However, the majority of companies do not survive past the 5 year mark. So while that brand new, “ground-floor opportunity” might sound good, it is possible they may not be around several years from now.

What types of products or services is the company promoting/selling?

This is key information to understand before signing up for a home-based business. Many companies have exciting products, but they are extremely expensive, or have a very niche market, or are not backed up with research and science.

Find out as much as you can about the type of products and services the company sells before you join. Consider whether the products are things that the average consumer would need to use already, or if they are more luxury products, which someone might buy once but not again. In addition, find out if the products are based on sound research and science, or if they simply have lots of exciting testimonials.

What is the reorder rate for products?

This question will likely trip up many consultants and recruiters. However, getting an accurate answer to this question can significantly impact your decision. So ask them: What is the average monthly reorder rate for your company? How many customers who shopped this month will shop again next month? If those numbers are impressive, a company will publish and document that information.

If you want to develop a solid residual income, then partnering with a company with a high reorder rate is going to get you there much faster. In many home based-businesses the reorder rate is minimal.

For example, if you order several kitchen gadgets this month, it’s unlikely that you need to order them again next month. However, if you order household products, skin care, and vitamins or supplements, it’s likely that you will need some of those products again the next month.

How is the compensation plan set up, and how quickly can you start getting paid?

Find out what you need to do to receive your first paycheck. Ask the person recruiting you what you can expect to receive based on the number of hours you are willing to commit. And find out exactly what you need to do to reach that goal.

If the answer doesn’t make sense to you, or if you aren’t able to get paid until you reach a certain level of the business, then you may want to consider another option.

Additionally, find out if it is possible for you to earn more than your “upline” (or the person who sponsored/enrolled you) if you end up working harder than them or reaching a higher level of the business. Or will your recruiter always earn more than you?

We recommend looking for a home-based business that rewards the producer, not just the upline or the people who “got in first”. Make sure that you are going to be paid fairly for your work, whether or not you surpass one of your leaders or sponsors.

What is the startup cost, and is any of it refundable?

We left this question for last because honestly, it’s the least important question on the list. If you find the correct business for you, then investing some money to get started is reasonable. However, this question is still important, and you shouldn’t sign up with a company without understanding the costs involved.

So first, find out what the cost is to simply get started in the business. Then, ask how much it costs if you want to build a business quickly – are there additional business supplies and materials you need to purchase?

Do you need to buy catalogs, gifts for hostesses, etc? Or can you start the business with your products and business materials supplied by the company?

Additionally, it is a good idea to inquire about the refund policy. Ask if there is a refund option on the products if you are not satisfied, as well as on the business materials, should you decide the business is not the right fit.

Once you have gotten these questions answered, you will be able to make a well-informed decision about joining a home-based business.

You may need to check into a few different options before finding the best fit for you. If you need more help deciding, you can check out our post about 5 decisions to make before working from home, or contact us to find out the details about working with the Life on Your Own Terms team.