Let’s talk about multi-level marketing, also known as network marketing or direct sales. I know so many of my readers are looking for something different to do work-wise and I’ve been there! Looking at all the alternatives to the normal 9-5. That’s been me my whole adult life. Or maybe during this difficult economic time you’re looking for any work you can find. MLMs are all over the place, but still misunderstood. So many people have embraced MLMs, myself included, that I really would have thought they wouldn’t continue to be viewed as they are by so many people.
Multi-level marketing, in my opinion, is a genius business model. Not just for the actual owners, also for the representatives/members/consultants. And I know you’re thinking it, so I’ll go ahead and say it now. The structure of MLMs is that of a pyramid but it is not to be confused with pyramid schemes, which we’ll talk about. For now, just stick with me.
I have been a part of several MLM companies in the past. I’m not anymore but my decision to leave each one had absolutely zero to do with the the structure, the companies themselves, or the teams I was a part of. They were totally personal reasons. I am an advocate for network marketing. Now, let’s get into clearing up the confusion about MLMs.
What is an MLM company
Legitimate MLM companies are set up to provide a complete product and branding for individuals to sell person-to-person for a commission. In a legitimate MLM, everyone profits from the work they do. They also allow each individual to recruit other individuals to sell person-to-person. When that individual recruits someone, they are then responsible for supporting and training that person, and in turn, they are compensated with a small commission on what anyone they recruit sells. Which continues to grow as their team grows, this is usually capped at a certain point (albeit a high point in most cases). MLMs invest in their salespeople with plenty of free training and they sometimes allow as much growth in income as a person is willing to work for.
What is a pyramid scheme, really?
First of all, pyramid schemes are illegal. This means, if you have heard the name before and it hasn’t been shut down yet, it’s not a pyramid scheme. It’s impossible for a company to get established these days using a pyramid scheme. But since so many people are still so sceptical, I’ll explain further. The structure of MLMs and pyramid schemes are similar. But the main characteristic of a pyramid scheme is that members only make money by recruiting more members. There are two types of pyramid schemes:
“Naked” pyramid schemes:
The so-called naked pyramid scheme gets it’s name because they aren’t actually selling anything. They claim you will be investing in a no-fail opportunity, something that you’ll want to get in on because it’s going to end up making you a bunch of money in the future. But the money you “invest” doesn’t go toward investment at all, but to pay the “investors” before you until it eventually collapses and someone (the someone on the bottom) loses their money.
Product based pyramid schemes:
This is the one that people get confused with legitimate MLM opportunities. In a product-based pyramid scheme, as the name would suggest, there is a product to be sold. What makes it illegitimate, is that you get very little profit from selling products and are required to continue to recruit new members. Again, the focus is on more membership fees being collected. You’re also sometimes required to keep a large amount of inventory that you often can’t sell.
How to spot a legitimate MLM company
Some people believe there is no such thing as a legitimate MLM company just because they don’t like the structure or maybe they tried it out and expected it to be easier, but it wasn’t so it must be a scam. The corporate bosses/founders/owners are making big bucks and the people below are working their butts off to make a living by selling the company’s products. Hmmm, that sounds oddly similar to…every other business in the whole entire freaking world.
Anyway, the easiest way to know if an MLM is legit is that you can sign up to sell the product and never recruit a single person if you don’t want to. You’re simply selling a product for a commission. If so, you have yourself a legit MLM opportunity. That doesn’t mean the opportunity to grow a team isn’t offered. It just means it’s not required. The second hint would be a requirement to keep lots of inventory. A good MLM may require a certain amount of PV sales (personal volume) per month. But that’s typically a very small amount and I believe a good practice because it keeps you using and testing new options of the products that you are selling. You need to be proof the product works to be a good salesperson.
With that said, not all legitimate MLMs are created equally. There are more things you should take a close look at before choosing to partner with a MLM company and start your own network marketing business.
What you should find out about an MLM company before signing up:
Keep in mind, the answers to these questions speak to the integrity and legitimacy of the company. Asking them will give you a clearer understanding of whether or not you should pick a specific company to work with. There are more personal questions you should ask concerning joining an MLM and if it’s right for you individually. Today, we’re focusing on the choosing the right company.
How do you earn money and what do you have to spend?
We just talked about this, but there’s more to consider here. I’m assuming you are interested in building a sustainable business, not just looking for a hobby (which is totally fine too). With that in mind, you’ll need to look at this with a critical business eye. Take a look at commission percentages on sales, recruitment (if you are interested in building a team), advancements in rank, and how that changes your commission, bonuses, etc.
You also need to look at what you’ll need to spend to get started and then each month to remain active. Your profit margin is important because network marketing for a serious business builder is no walk in the park. Just like building any other business, it requires a lot of work. You need to know exactly what your profit margins will be. In the world of MLMs, you will find commission percentages anywhere from 5-30%. Some starting on the lower end of that and increasing as you begin to reach different ranks. You are rewarded for your hard work, just like any other job or business should do. Always ask to see the company’s income statement and their commission/rank structure.
What kind of training and support will you receive?
This is really more of a question for the person recruiting you. While all the MLMs I have experienced have offered their own training at the corporate level, it’s the individual team your a part of that will make all the difference. Do they create their own training based on their own experience, successes, and failures? Do they offer one-on-one support when needed? Having a good up-line in direct sales is crucial to your growth.
What are their policies for members/reps/consultants (different companies use different terms)?
Do yourself a favor and just get the whole large and small print policies and the company’s representative (or whatever term they use) terms and agreement. This will include a ton of information, some of which will be common among legitimate MLMs and some may be a red flag for you. You’ll need to weigh your own pros and cons. In the policies and agreement terms, you’ll find everything from terms for quitting and if you can or can’t return after that to if you are allowed to sell another product while you’re signed up to sell with that company.
Who does the MLM structure work best for?
I already said it, but I’ll say it again. I’m an advocate for MLMs. I’m a big fan of the structure for several reasons.
- It’s a business opportunity for those who don’t have the capital to start a business on their own and/or have little to no business/sales knowledge.
- It’s a great platform for someone who wants to start a business but isn’t necessarily a creative or business-minded person — basically a business in a box!
- It works for those looking for a part-time or full-time income. Your results are typically commensurate with your commitment and effort.
- In most cases, it offers a community and support system that is unlike any other business/job will ever offer.
MLMs can work for a lot of different kinds of people. But there some defining characteristics that will help you succeed or cause you to fail. Keep in mind, I’m still speaking as if you are interested in building a business, not just selling as a side-gig.
MLMs work if you:
- Aren’t looking for an easy, get rich quick business (because that doesn’t exist, no matter what anyone tells you)
- Understand the concept of getting what you work for and take responsibility for your results, or lack thereof
- Realize that MLMs are not different from brick in mortar businesses in that they are not built overnight and growth is typically gradual
- Believe in possibility — you will see that other people in the company you are looking at have succeeded, which means you can too
- Treat it like an actual job — if you work your business like a business, it will grow like a business
- Actually like the products you’re selling
- Have a full understanding of how MLMs work
Why we should all trust and support our friends who do multi-level marketing
If your friend opened a boutique or fitness studio in town, or even an online store, would you shop there or use their services? You would probably be at their grand opening, sharing their business posts on your social media, and buying up all their stuff. You’d be telling everyone you know the owner of that place!
Someone serious about building their network marketing business is going to network and market. Again, if a person posted about their brick and mortar business on social media daily or even messaged you to invite you to a sale, you probably wouldn’t be bothered at all.
I think that MLM/network marketing/direct sales got a bad rap a long time ago and now just the words themselves have a negative connotation because a whole lot of people won’t try to understand them. Other types of companies pursue you aggressively daily. They’re putting ads in your face constantly.
You better be careful what you say around your phone, type on Facebook, or search on Google. You’ll have ads shoved in your face from every angle, specific to what a computer has decided must be your interests based on your behavior. And people think network marketing is icky and annoying? A real person, just trying to make a living for their family, talking to you about the product they sell is not icky. People get all in a tizzy because a network marketer sends them a few messages or talks about their products “too much.” Then in the same breathe click on the Facebook ad that keeps popping up in their timeline to buy what a computer has convinced them they need (by repeatedly showing it to them). I do it too, so no judgement here. I’m just saying. Let’s give these network marketers a break.
The personal element of network marketing
This is another reason people are turned off by MLMs. All those companies who are targeting you with ads don’t have faces (they do but they don’t lead with them). I think the personal element of network marketing gives some people a lot of guilt because they don’t want to tell an individual, small business owner and probably a friend that they don’t want their stuff that they’re working so hard to sell. I have felt this way many times.
It doesn’t have to feel bad. Most network marketers I know have no delusions that everyone they talk to will want their product. But they don’t know where you stand until they talk to you. You can be honest, clear, and firm about it from the beginning while still being supportive and kind. It will make all the difference in everyone’s experience.
That’s not to say that there won’t be some people who harass you. They shouldn’t be doing that. But those who are just doing a reasonable amount of networking and following up, interact with them and let them know what you really want/don’t want as if they are running a business. Because they are.
How you can support your MLM/network marketing friends
These are people trying to pay their kid’s medical bills or put themselves through college. Maybe a wife trying to carry some of the financial burden for her husband or bring in some extra money to build a savings for their future.
I’m definitely not saying you should buy products from every network marketer you know or buy things you don’t want or need. But you can still support your friends by referring people who might be looking for what they sell. Share a post every once in a while and buy from them when you can/want to. Even just encouraging them that they are doing a great job goes a long way. Take it from someone who has been there, it can feel like you’re talking to a wall sometimes. Support your friends through the ups and downs of their network marketing business. just as you would with the ups and downs of a brick and mortar business.
Share your thoughts and questions in the comments below!