You have probably asked the question, “What is an MLM opportunity?” At some point in your life, if you are looking to earn extra income, you have likely come across some MLMs. In this post, I’m going to discuss MLM opportunities, and why you should really investigate them further before you jump in.
The Definition of an MLM
What is an MLM opportunity? You have no doubt heard about MLMs, even if you don’t really know what one is. Some of the most well-known MLMs are Amway, Avon, MaryKay, Nuskin, and Herbalife.
MLM stands for Multi-Level Marketing. According to Wikipedia, “MLM is a marketing strategy for the sale of products or services where the revenue of the MLM company is derived from a non-salaried workforce selling the company’s products/services, while the earnings of the participants are derived from a pyramid-shaped or binary compensation commission system.”
The MLM Sales Strategy
In an MLM strategy, there are potentially two revenue streams: One from selling the products, and the other, getting a commission from sales of your “down line” people. Down Line people are those that you recruit to sell and to recruit more people. In other words, you get a sales commission from your own sales, but you also get a commission from the sales of the people you recruit. The commissions get higher and higher as you get more levels below you.
Often, down-line people are required to buy large quantities of expensive inventory to start their MLM business. And often, periodically, they are required to buy a certain quantity or dollar amount of product to keep their MLM status active.
You Have To Buy Inventory
I know that one of the MLMs I was involved in required an initial purchase of $600 wholesale worth of stuff, with a $250 wholesale purchase every quarter. If you missed the mark on a quarter, your next quarter purchase was at full retail price. So, you absolutely could not afford to let sales drop at any time.
As a result, I was stuck with hundreds of dollars of unsold inventory, and I was broke, And I couldn’t EBay the stuff, or sell it on Craigslist, because the MLM had rules against that.
How To Spot an MLM
- If there are down-line people, it’s an MLM
- If you are told that you will earn a larger percent commission than your down-line people, you might be in an MLM
- If there is more emphasis on recruiting people than there is on selling the product, it’s likely an MLM.
People Fail At MLMs
“According to a report that studied the business models of 350 MLMs, published on the Federal Trade Commission’s website, at least 99% of people who join MLM companies lose money.”, according to Wikipedia
Here are some reasons why people fail at MLMs:
- MLMs are often sold as get-rich-quick schemes. When people don’t get rich right away, they quit.
- People don’t realize when they take on a MLM business, that there is a lot of work involved.
- There is a cult mentality. It feels like you need to drink the Koolaid, and if you don’t take part in the Koolaid, you become a social pariah.
- Some people just aren’t made to be a salesman. Not everyone can do it with effectiveness.
- People don’t want to bother their friends and family with a sales pitch all the time.
- There is a high rejection rate from your prospects. Some people have a hard time being told “no” over and over again.
- Only the guy at the top makes the money. The person at the bottom does the hard work, but the people at the top reap the benefits from the work of the down-line people.
MLMs Work For A Few People
If you understand that you will be putting out a substantial amount of money, and a huge block of time and work, then you can make an MLM opportunity work for you. You must be a born salesperson, who can sell “ice cubes to the Eskimos”. You must be willing to push the line of friendship with your neighbors and family, to the point of being annoying. And you must be ruthless with your sales pitch, recruiting people who you know can’t afford to lose money, as 99% of people who start an MLM business do so. It takes being somewhat of a fake person to do MLM sales. If you can do that, then you would be perfect recruit.
My Own Experience With MLMs
As a young adult still living at home with my parents, I was pushed to join the MLMs my parents were always involved in. They were heavy into Amway. They sold solar panels for Jesus. They got involved with a term life insurance outfit. Those were just a few that I remember. And even after I was on my own, I got involved in a large makeup and skin care conglomerate MLM which shall remain nameless here.
Funny story: I was kind of on my own as a consultant of said MLM, because I lived in such a rural area, and my up-line person lived 3000 miles away. So most of my training had been over the phone. There came time to go to a conference of said MLM consultants.
I was told it was a “consultant dress” affair. Consultant dress for me was just to dress nicer than jeans and t shirts, because where I lived, I visited ranches out in the mud and snow. Anyway, when I went to the meeting, I wore a nice pink paisley skirt with a white blouse and dressy demin jacket. But everyone else was in a black skirt and jacket, a suit!
I never felt so out of place in my life. No one spoke to me! It was the strangest feeling. Not only that, but the meetings were all about praising the founder of the company, eating her sugar cookies and touching her dress as she passed by. It all screamed CULT!
I didn’t stay in for long. I was left with a boat load of product, and because consultants have to pay for all the sales materials, samples, and consultant tools, I was stuck with that too.
Wealthy Affiliate is NOT an MLM
Wealthy Affiliate is a small business platform, where you are taught how to get a business website up and running, but you are also given the opportunity to promote Wealthy Affiliate’s product. You do receive a commission for every person who purchases a membership through your influence. However, this is not a tier system. If you sell a membership to me, you receive a commission. If I then go and sell a membership, I get a commission, but you do not. You get commission for those you convert, and I get a commission for those I convert. If I were to leave Wealthy Affiliate, but the people I recruited stayed, nobody would get a commission from my sales. Those sales would go back into the company.
After reading this, if you still feel that an MLM opportunity is right for you, then go for it. However, there are better ways to invest your start-up money, and definitely better ways to make extra money for retirement and grandchildren. And please don’t fall for the get-rich-quick angle of the MLM. Like every other job you could do, it takes work and sacrifice. Put your money and skills to a better, more worthy cause. Join Wealthy Affiliate!
Hello, I really appreciate your time and effort on writing about MLM opportunities.
From your article it’s obvious that these so-called MLMs are merely pyramid schemes in disguise. I always knew that most people don’t make any money with this sort of business model, but I’m kind of surprised that 99% of MLMs fail which is a higher number than I expected.
I definitely agree that there are better ways to invest your retirement money. Thanks for the article.
Thank you so much for reading and commenting. Yes, I knew before that people lose money from MLMs with my personal experience, but I didn’t know the number was so high either. And yes, I think you can get away with a pyramid scheme if you call it an MLM. It irritates me to no end that MLMs will prey on people just for the money and don’t care if they can’t afford it. Well, anyway, thanks again for visiting my site and commenting! Rhonda
Hi Rhonda, you have explained MLM well in this article. I am glad I found your article because I want to make sure if the company I was eyeing to join is an MLM company. With all the characteristics of an MLM you mentioned, I think that company is sure is an MLM.
I think I am going to take a look at that Wealthy Affiliate program you mentioned. How much does it cost to join?
You can join by clicking here. The premium membership costs just $49 per month, but if you sign up in the first week, you get your first month for $19 on me! You get to try the program for a week, and you can go one with just the introductory membership if you want, which is free, or you can move on the premium membership any time. I would really love for you to check it out. Thanks for visiting my site and for your comments! Rhonda
I used to quite confused about what MLM really is. I have heard about how people who join Amway are a part of MLM but I have never really study about the term and what it really means. Thank you for putting such comprehensive content. Now that I am fully aware of this model and I will be sure to stay away from it because it sounds so scary. I have heard about story where people spend tons of money to swallow the stock that they weren’t able to sell so that they hit the mark as you mentioned in the article. This is a terrible way of making money and yet it is way too risky. In my opinion, affiliate marketing is a far more stable way to make money. Anyway, thank you for providing useful information.
Hi Jayden, thanks for commenting. Yes, I think affiliate marketing is the way to go, for the huge reason that you don’t have to buy a bunch of inventory. I really like that you don’t have to swallow your inventory, like you say. Thanks again for reading and commenting! Rhonda