Dun & Bradstreet Ratings Explained
First off, if an Amway distributor has used a Dun & Bradstreet rating in their presentation, they have violated the rules of the Amway Business Compendium and should be notified of the violation. If they persist, then Amway should be notified so that the problem can be resolved.
But, now that you know that Amway has a high rating -- What does it mean? What significance does it have to you as an Amway distributor (or for that matter any MLM business)?
Well, I can't answer those questions. But fortunately, I got an email from someone who IS qualified. You may remember on the previous page, I have a link to Fugi Saito's web-site. Fugi is a self-employed management consultant and prior to that, he was a Senior Business Analysis at Dun & Bradstreet for five years.
After reviewing the information on my web-site, he sent me this article which he wrote sometime ago and has also given me persmission to post it here. You can easily verify the information contained in this article at a public library because many of them carry D&B rating manuals.
I highly encourage you to visit Fugi's web-site. He discusses the good, the bad and the ugly things about MLM's and things that you, as a network marketer, should consider before getting involved.
You all have seen the advertising copy:
DUN & BRADSTREETS HIGHEST RATING -- RANKED #1 BY DUN & BRADSTREET - 5A1 RATED BY DUN & BRADSTREET
And so on and so on...............
So really, what does a D&B rating mean? More important what does it mean to me as far as MLM goes?
To understand what a D&B rating is, you first have to understand a number of things. What it is for? How is it used? What is being examined?
D&B is a business reporting agency. It writes reports on businesses for other businesses. The D&B rating is a credit appraisal of the company.
If a supplier in Toronto Ontario gets an order from Breton Alberta, and they have never dealt with that company before -- a credit manager must make a "risk" assesment on whether he should ship, grant credit terms, or deal with this company. He needs a "reasonable" assurance that if he sells to this company he will get paid. To this end one of the tools that he uses is his D&B Reference Book and looks up the company's D&B rating.
The standard D&B rating is composed of 2 parts.
The first is an estimate of the financial strength of the company based on their net worth. Try to think of it like this. All that I have minus all that I owe is my worth.
The ratings for estimated financial strenth are as follows:
There is also a second part to the rating. It is a credit appraisal of the company. This information is based on a review of the financial position, history of the company, it operations, any legal activity, the company's banking relationship, it's debt handling and its relationship with other suppliers.
The information is gathered by interviews, records of payment performance, and examination of courthouse records for the publicly filed documents on suits, judgements, liens, bulk sales and discontinuancies.
D&B can also issue an estimated appraisal and is also in 2 parts.
There are other companies that do not really fit into the business catagories as outlined by D&B and they can be rated by the number of employees. For example an ER1 rating is 1,000+ employees and an ER8 is only one employee.
There are 3 other ratings that might appear. "INV" means that there isn't any current information on file, and if you want to know about the company and investigation should be requested. A "FB" means that the company is a foreign branch. Usually the credit manager would then request an international report on the head office. A "--" means that there is not enough information available to classify the company.
So what does this all mean to a Network Marketer?
First off the D&B ratings gives you a picture as to how good the company is to *sell to*, not how good the company is to *buy from*.
But it does give you some "clues" as to the company. You know that if the company is rated, they have submitted a financial statement. That there is information about the principles available, and how good they are in paying their debts.
As well, how long they have been in business and legal actions "should" be listed. I say should because the reporters who do the investigations are under time constraints and the information might be dated as well. There can also be litigation listed in other jurisdictions or internationally that is not reported, or actions against related companies or concerns that might be contingent liabilities.
If the company has any kind of net worth, that means that they have operated at a profit. This is a good thing for any company to do!
What the D&B rating does not mean
Let me explain.
One of the most important things that the D&B report does not give is the attrition and the reorder rate. It does not tell you how many people tried and failed, or how many people are actually using the products that the company has sold.
A load is anytime you are required or encouraged to buy more product than you will use. If a company requires or encourages people to buy more product than they will use the D&B report will not tell you about all the people who are "garage qualified". That is people who have bought the product and are now storing it in their garages, basements or spare rooms.
As far as YOUR business is concerned a company that requires no load and has a high reorder rate and a low attrition rate is a better choice than one that has a $3,000 or $4,000 load that you are encouraged or required to buy, and a monster attrition rate with nobody reordering.
In other words, the COMPANY is profitable, it sells a lot of product, but the independant distributor, who has bought the product, now cannot get rid of it.
Remember: A D&B rating is a rating used by credit managers etc. to help them determine how good a company is to sell to.
It is not a rating that provides you any information as to how the company is to buy from, or how good of a business that they are for the Network Marketer to be involved with.
CAVEAT EMPTOR
www.oanet.com/homepage/fugi
Main Page