When I was 16 I attended a few recruit meetings for an MLM company. If you’ve never been to one, let me tell you, they are pretty convincing. Fancy charts, graphs, and high income earning reports were all put in front of me. Promises were made of easy, quick, and huge income amounts, all for just giving an pre-made presentation which would lead to selling their ‘highly-sought-after’ product.
I bought into it and went full steam ahead with the company. I just ‘knew’ I’d make tons of money.
Well, reality finally hit me after I had given my presentation to the promising prospects on my contact list. As embarrassing as it was to try and sell my neighbors and family an expensive product, I pitched the presentation to them. And although they were very gracious, none of them wanted it.
I had no help getting leads. And since my neighbors, family, and friends all kindly turned me down, my lead pool had been exhausted. I knew that I was not going to make money with the limited marketing knowledge and lead generation skill that I (a 16-year-old) had. So despite losing a lot of time, money, and some pride, I decided to call it quits.
Since then, I have been approached by many pyramid and MLM companies. I have been pressured by their sales representatives to join in with them (so they would profit off my join-up fee and my personal connections). I’ve been tricked into attending MLM meetings for something advertised as entirely different. But I was much wiser. My first experience with the MLM company I had joined was enough for me to realize that I needed to be very careful with this type of income set up.
Pyramid and MLM companies are typically designed to saturate the market with their goods and sign on as many people as sales agents possible. But eventually the market cannot handle more product and people no longer sign on. When this happens they are forced to close their doors.
Before these companies close a few representatives at the top are wildly successful and make great money, but everyone else below them cannot achieve that same success. It’s a sad setup because if you are not one of the first who signed on with an MLM you will (in almost all cases) never be as successful as they claim you can become. There is a reason why these companies are referred to as pyramid schemes, the playing field is structured so those at the top get richer and those who sign up under them can never make it to the top.
That said, MLM companies are not all created equal. Some have a much better system in paying their salespeople, some put less pressure on their agents to recruit, and some may even have wildly popular and helpful products (i.e. DoTerra Essential Oils just to name one). So, although there are a handful of MLM and pyramid companies that aren’t really too risky, many are. So how do you know which is which?
Here are five things to ask and research into before joining any Multi-Level-Marketing or Pyramid company:
1- Most MLM companies charge upwards of $300 to even get started with them. What are the sign-up costs? Account for utilities, time, travel, and other less obvious expenses. Are you willing to lose your investment if no one buys your product or signs up underneath you? If so, proceed. If not, stop and reconsider.
2- Most MLM companies force you to continually buy their product in order to keep getting paid. Do you have to buy products every month or few months in order to be compensated for selling them to others? If so, will you be able to afford the cost of these products if no one buys from or signs up under you? Do you need the products you are basically forced to buy and if so, can you get similar products of the same quality for much less elsewhere?
3- Most MLM companies sell items that are considered luxuries: body wraps, facial creams, time shares, etc. many of which have bad reviews online. Read reviews on multiple sites before getting involved. Most of your buyers will read online reviews. So be sure to look carefully at reviews both of the product and from sales agents who are no longer actively selling. If the company and its products are badly reviewed, run for the hills.
4- Most MLM companies require you to find everyone who signs up, buys, or joins. Is this company going to help you generate leads? Or are you responsible for everything? If so, do you have the skills necessary to generate lead flow? If not, be warned that it will be hard to sustain income. It is important to work for a company that shares lead generation responsibility with their sales force.
5- Most MLM companies require that you have a huge stock supply of their goods in your home or storage. This often places a large financial burden upon those just starting up. How much of an investment in the product will you need to make in order to be a successful salesperson and can you afford it?
I used to be completely anti-MLM and anti-Pyramid scheme companies. I rejected having people who worked for them participating in my money-making series on my blog. I have since decided that all MLM’s are not created equal. Some of them have been around for a very long time and the way they structure their company makes it easier for a sales representative to benefit.
For the few honest MLM companies that have been around a long time, these questions should all be answered to your benefit. If not, I’d steer clear.
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Edward Wallace says
Thanks for the articles! I also write about multi level marketing, and I too am hesitant to list them all as a pyramid scheme. I do believe they all, or most, fit under the intentionally misleading and deceptive umbrella. Although they may have a product that is in demand, they sell the idea of becoming rich, working less hours, spending more time with the children, but leave out the information pertaining to how much work goes into generating leads, and marketing. I personally believe that without a doubt a few times a year, the market saturates, and people drop out because they just cannot afford to stay in. Those that already make a decent wage, may last a little longer as they tend to stock their shelves (product loading). I would love to have you check out my blog at advertisetruth.blogspot dot com if you get a chance.