When most people think about Multi-Level Marketing, they envision slick-talking, insurance salesman-like people pushing their products at everyone in sight. Maybe some of you have even tried MLM’s, didn’t get insanely rich overnight and gave up thinking, “I must not be cut out for this business” or “this is the last time I fall for one of these schemes”.
Part of the reason that many people don’t make any real money with MLM’s is that they go in with unrealistic expectations. It’s not really even their own fault either. Alot of the ads you see out there are promising some pretty appealing stuff; overnight riches, insane profits, quit your job today. If it were really that easy, wouldn’t everyone be working in their pajamas and retiring at 30?
Want to know the truth? You can make money with MLM’s. Good money. I know, I make good money.
So what’s the secret you ask? It’s not really a secret. If you think about it, it’s really just basic business technique. The problem is that the true nature of MLM’s can be clouded by all the hype, and people that aren’t well-suited to this business join up thinking it’s their ticket to financial freedom. Let’s look at the pros and cons, and you can decide if an MLM can work for you.
PRO: When you join an MLM company, you are basically starting a business. But it’s kind of like a franchise. You’re using the tools that an already-successful company has tested, used and proven to be effective. You’ve got a great product (I’m assuming you’ve chosen a program that does, in fact, offer a quality product). All of this already gives you one of the biggest benefits of MLM programs: you don’t have to deal with the manufacturing, the packaging, the shipping, the inventory, the order-taking. Your focus is on the advertising, and because of the power of the internet, this is literally at your fingertips. In short, the company does most of the work for you.
CON: This very fact can actually be a drawback for some people. It goes back to unrealistic expectations. Because it seems so easy, some people think that they don’t have to do anything, that the money will just start rolling in once they sign up. You laugh, but I’m telling you that I see this happen every day. In fact, more people don’t do the A-number 1 thing that you must do 
which is to place at least ONE ad. It would be like planning a great party with the best caterer in town, but not sending out any invitations and hoping that guests would just come stumbling by. The bottom line? You do have to put in time, effort and sweat equity, just like any other business.
PRO: Promoting an MLM program allows you an extremely flexible business. It really can be done in your spare time. Most of that sweat equity is spent in the beginning; planning, organizing, placing your initial ads, etc. Once you have the foundation in place, most of your time is spent finding new ways to promote your business. You aren’t tied down to a 9-5 schedule, you don’t have to attend meetings, wear suits, be at the mercy of your boss.
CON: It is imperative that you follow up religously. By following up I mean not only with your leads, but with your downline. This is the absolute key to turning a little trickle of sales into a real source of income. The secret is in your downline. Most programs offer at least a 2-tier commission program. Many go much deeper. Those who are making the really big money are the ones who teach, mentor and follow up with their downlines. Personally, I wouldn’t classify this one as a con, but I know that many would. If YOU want to be successful, then make THEM successful. And what about your leads? You’ve probably heard it before, but I’m going to say it anyway; on average people have to be exposed to your information 7 times before they will buy. The good news is that so much of this process can (and should) be automated. If you only use one tool to automate your business, then make it an autoresponder.
CON: If you absolutely can’t handle rejection and/or can’t stick with something unless it gives you immediate results, then MLM’s are not for you. Most people give up before they’ve even given it a chance. Even with a “killer ad” it’s still a numbers game, and persistence will pay off. If nothing you’re doing is working, you have to make changes, test, monitor. Then you have to make more changes, test, monitor. Then, when you find just the right ad and just the right places to post them, they might suddenly stop pulling. Remember, this is your business. You’ve got to keep changing your approach as your audience changes. Look how quickly companies change their commercials. They’re responding to the changing market. This is why Jack was blown up, and it’s also why he’s Back.
Always do your homework before you sign up. Ask for references from existing associates. Contact the BBB and see if they have any information on the company, good or bad. Be sure to read all the information that is presented to you.
So what’s the moral of the story? MLM’s can be a viable source of income. They can be for you if you are persistent, organized and enjoy helping others, but they’re not for everyone. Take stock of your skills and your expectations and you will be able to make an informed decision rather than wasting your time chasing something that’s just not for you.
Some useful resources:
- The Better Business Bureau- They have an alerts section and local BBB information.
- The FTC has a lot of information on which MLM’s to stay away from. Just by doing a search at their website for multi-level marketing you can get a ton of information. You can find out which companies are or were being investigated or taken to court by the FTC, and lots more.
- Cagey Consumer-Keep on top of the latest scams, and investigate hot topics like Internet fraud and travel scams.
Tags: business start up, get rich quick, home based business, Home Business
I’m fully agree. I makes some money from MLM too. As what Robert Kiyosaki said, MLM is the best way for people with no capital and knowledge to start business. Stay in line with all seminars and classes, and for at least five (5) years!
I agree with you. And, I have had success with MLM’s/Network Marketing companies. I am now involved in one that is amazing. It has me distributing a free software download that helps people save money on what they have to buy anyway. I don’t sell anything and the person I give the software doesn’t buy anything from me. I don’t even ask them for an email address or a credit card. Everybody wins in the proposition. So, one of the keys to success is to find something you really believe in. If the product ads value to the person’s life you wont have any problem making money.
MLMs are for the most part a loosing proposition. The biggest problem is they make you look at only as the cash coming in and try to keep you from looking at the cash going out. A friend of my bragged about his $1000/month MLM until the day he couldn’t put gas in his car; turns out that he was spending $1100 to make that $1000 ie loosing $100 a month. He wasn’t making a PROFIT.
“The 10 Big Lies of Multi-Level Marketing” by Robert L. FitzPatrick is a must read as is “Overthrowing the Dreaded Business Failure Rate” by Johan Holmberg.
The reality is 99.5% of people LOOSE money with MLMs; to put that in prospective there is a 90% chance that a traditional business will close its doors in 5 years and THAT number includes businesses that close with PROFITS. I would say 0.5% vs a minimum of 10% shows that MLMs are fools gold.
It’s definitely the minority of people who make a decent income with MLM’s, but I wonder where you got your figures? Specifically “The reality is 99.5% of people LOOSE money with MLMs”. I have many colleagues who earn good money with their MLM companies. As I stated in my article, I also earned a decent profit with an MLM company. I find it hard to believe that I just happened across so many of the other “.5%” that made money with MLM’s.
I truly believe that most people who fail in business, not just MLM’s but in businesses in general, do so because they lack one or more of the essential qualities that are necessary for success: Drive, ambition, organizational skills, a great work ethic, self-motivation and last but not least– common sense.
Wow, such a negative connotation on MLM. I’ve personally found success with it and I encourage everyone to consider this regarding pyramids… It’s important for people to realize that just about every business model in life will take the form of a pyramid. This has been going on since the beginning of time. In any case consider the fact that at the bottom level of any company you have your representatives and common laborers. Above them, in fewer numbers, you have supervisors, managers and people who oversee. Then above them, in even fewer numbers you have your executives up to the CEO. This is no different than any kind of “pyramid” that you’ll ever find online except for the fact that you have a better chance at succeeding in mlm than you do at becoming CEO.
I expressly stated where I got my information from and you still asked where it came from–sad really. The smoke and mirrors MLM supporters use to confuse structure with method be laughable if wasn’t so dangerous.
The key difference is limit. The standard business pyramid is limited to how many levels it can support on a given customer threshold. MLMs on the other hand say that every customer is potential employee. But this adds more levels to the whole structure and eventually you get to the point where the next level requires more people then exist on the planet and there is no way for that level to succeed.
Worse you talk to these people about FICA (OASDI and HI), FIT, SIT or 8109 and they look at you like your are speaking Greek. Not knowing what these are and why they are important will really hurt you in a MLM.
@BruceG: You weren’t clear on where those figures came from but I’m assuming you are quoting from the book you mention? I’m sure you realize that just because something is printed in a book it doesn’t make it a fact.
MLM’s are not for everyone, but my personal experience with it was success. Of course success is a relative term: I didn’t make millions, but neither did the company claim that I would. I did make an income though and was in a position to be able to put what I earned into a new business that I was starting on my own.
The old “MLM’s are not for everyone” plus anecdotal evidence catch phases. Been there, done that, and got the freaking T-Shirt. The one thing I don’t understand is why Rod Cook wants to fight the FTC’s revival of the idea to drop the $500 minimum limit and require the Business Opportunity Rule to apply to every form of Business Opportunity.
If MLM are the great new wave they claim then they should be able to probe it and if they have been pulling the wool over people’s eyes all this time then the $500 minimum limit needs to be dropped.
Very useful info. Thanks!…
Here are some scholarly sources that show MLMs are a loosing proposition:
Bloch, Brian (1996) “Multilevel marketing: what’s the catch?” Journal of Consumer Marketing 13:4 pp. 18-26.
Cruz, Joan Paola; Camilo Olaya (2008) “A System Dynamics Model for Studying the Structure of Network Marketing Organizations” (this peer reviewed paper confirms the 99% failure rate of MLMs)
Some businesses are not made for logical thinkers, and MLM’s are one of them!