Let's just get this part out of the way right now.
Yes. Some people make money in direct sales.
Yes. Some people get rich doing network marketing.
No. Multi-level marketing not illegal.
That doesn't change the fact that MLM, network marketing, direct sales, or whatever you want to call it is a horrible way to start a home based business. While some people have gotten rich doing this type of work, the vast majority of people lose money doing this type of “business venture”.
And no matter what your recruiter says, you are not your own boss. You are a salesperson for a company.
Don't believe me? Try to make changes to how the business operates!
Table of Contents
- What Is MLM Anyway?
- Deception Is Key To Recruiting New Members
- The Many Problems with MLM
- MLM & Cults
- How to Start a Legitimate Home Based Business
What Is MLM Anyway?
Let's take a look at what MLM is before I delve into my utter distaste for it, and why I try to steer as many readers away from it as possible.
MLM stands for Multi-Level-Marketing. If you break down the meaning of these words, it is “multi level” because there are many ‘tiers' or ‘levels' to the commissions system of any MLM program. Though each specific group has their own set of rules and payment options, the general idea is that the person who referred you to the program (and those that referred him or her) are your UPLINE, and those people that you bring into the group are part of your downline.
It's this downline/upline structure that forms the basis of how commissions are paid. In MLM programs I've seen, there are predetermined terms about who receives what percentage of sales. Very often there's a series of bonuses for recruiting X amount of members and achieving a certain volume of sales within a period of time.
More often than not, there is an extremely complicated structure known as a “compensation plan”. These documents can sometimes be over 20 pages long and include videos to explain how exactly you get paid. The confusion that arises from this, and a focus on bonuses like vacations, luxury cars, and lifestyle changes encourages people to sign up without really understanding how it works.
Listen to the Experts
MLM Is A Product-Based Pyramid Scheme
MLM is often touted as a ‘home based business' because technically, you don't need to go into an office or ‘to work' in order to make money. How you market the program is going to depend on your strategy, and may include cold-calling, marketing to friends and family, holding seminars or courses, YouTube videos, or marketing through websites.
Looking at it in the way I described it up until now, MLM may seem like a somewhat legitimate program. It's not.
Let's take a look at the upline downline structure, and you'll see what I mean.
The similarity to a pyramid is not your imagination, because MLM is a pyramid scheme. The only difference between a pyramid scheme and MLM is that this ‘new version' has found a loophole in laws that made such programs illegal.
By promoting ‘products' in the pyramid, technically these marketing programs are not illegal. On the books, what you are marketing can vary from make-up products, to magazine subscriptions.
The type of product doesn't really matter because what you are really selling is a chance to enter the group. One of my major gripes with network marketing companies is the the products are garbage and they are overpriced. Essentially, you are marketing the ‘home based business' idea, and whatever physical product that changes hands in the transaction is not the focus.
MLM junkies swear up and down that there's a difference, and throw a tantrum when I say it's a pyramid. I can feel the tears in their comments. The funny thing is that these companies make it so easy to compare it to a pyramid when they draw pictures of downlines and how money is earned. Some places try to get clever and mix stuff up with a “forced matrix”. Putting a few pyramids together is still a pyramid.
Deception Is Key To Recruiting New Members
When your friend approaches you with a business opportunity, you probably felt pretty weird, right? I mean, how often does a person try to recruit new members to the workforce? Have you ever seen an employee of Home Depot or Wendy's be like, “Hey man, I love this job. You just gotta come here to work. Let's meet this weekend and I'll tell you how to land a job there”.
That's because there's multiple levels of deception going on, and the people involved in these pyramid schemes have been tricked into thinking they are doing you a favor. Here's a couple or their Jedi mind tricks they pull.
Is Corporate America A Pyramid?
No. This is the dumbest thing I've ever heard. MLM zombies will try to convince you that the corporate structure for most companies is a pyramid too. They say there's one CEO, then the board or directors, below them the managers, and lastly the workers. The CEO makes the most money, and the workers get the scraps.
It seems to make sense at first, until you realize that each of those jobs does something different.
The job of the CEO of Apple is not to be in the Apple Store and sell iPhones. The manager manages employees and doesn't talk to the board of directors. Employees of Apple do not recruit more employees of Apple.
Now imagine that Tim Cook's job was to get employees into the Apple store to sell iPhones. Not only him, but the board of directors, the managers, and the employees all focused on finding new employees for Apple. It would be a totally different company, no?
Watch with Caution: Pyramid Seller Job Shaming In Action
Much of what's done to convince new recruits that direct sales is a better way of life a regular job means you're just a wage slave. Working a 9-5 basically makes you dumb, and you're a bad person because you don't see the opportunity in front of you.
Hey, I dislike a boring job as much as the next guy. In fact, I work from home because I hate having a job so much. But there's nothing wrong with having a normal job. Some people like being in charge. Other people like clocking out a 5PM and not having to think about their work. (As a business owner, you are constantly worried about things).
What they don't tell you is that a lot of folks join MLM with their last dime, only to find out that it's not as fast or easy to make money as they thought. Many older folks are scammed out of their retirement money, in hopes of increasing their fixed income payments. Joining an MLM company can often cost you $10,000's of dollars.
The next thing they'll say is that “It takes money to make money”. That may be true in some cases, however, I would encourage you to pay some money to read a few books on network marketing before you get involved. If you still want to, go right ahead. Maybe you can be one of the .05% that become millionaires. But I think after reading about it and some of the horror stories that people get roped into, you might think twice. At least give yourself a chance to learn a bit more about it.
If your sponsor is pressuring you to do the deal now, there's a good chance that they are in some debt or in desperate need of sale.
The Many Problems with MLM
There are a number of problems with this type of business structure, and with the business itself. Let's just jump right into it.
1. Very Low Success Rate
Most of the times these programs will tell you the success stories of how some person makes thirty thousand dollars per month doing this. While I'm sure that such examples exist, they are anomalies. Most of the time when someone joins the network, they immediately try to get family and close friends involved, hence the assumption that you can ‘start making money immediately'.
The truth is, without training on how to get online, get a website, and get it ranked in Google, you are just going to be another person throwing “parties” to invite your friends and try to sell them stuff. Either that, or you'll be the annoying person cold-calling me informing me of a wonderful new business opportunity that I have the chance to get in before it explodes in popularity.
2. Never Ending Upsells
You can bet that whatever fees you pay in the beginning is not going to be the only money you spend. There is intense pressure to join inner circles, special training, sign up for seminars, get 1 on 1 support, buy into higher commission levels, and so on.
Starter fees are just the beginning. While it may seem cheap to pay somewhere between $20 to $100 dollars to join a home based business MLM program, special training and other fees quickly start to run into the $500 and $1000 dollar range, with some ‘retreats' moving into the $10,000+ range.
Typically there is intense pressure to join higher levels of the program, and they are not shy to push your emotional buttons, making you feel as though you are missing a ‘once in a lifetime' opportunity, and that if you don't sign up within a certain period of time, you will never get this chance again.
3. Scam Networks
Most of the folks that have success with MLM are the ones that have grown their downline for many years, and have a group of people that follow them as they switch companies. Then they tell you stories about how they made $100,000 per in their first 2 months of business. What they don't tell you is that they laid 5 years of groundwork to establish this network. They also don't tell you how many of their recruits are successful.
4. Misleading Information
No matter what an MLM program tells you, there is going to be more to the story. They will usually entice you with promises of ‘easy work', ‘fast money', and ‘guaranteed success'. These things sound nice, but as the saying goes, “if it's too good to be true, it probably is”. As I said above, while some individuals may have earned unusually fast and large amounts of money, there is probably more to the story than you know, if the story is at all true.
Misleading information is not limited to the recruitment scheme though. Products are often misleading too.
Part of the power of MLM is the diffusion of responsibility. A company like Herbalife can say in writing to never promote their health products as a way to cure illnesses. However, that's just in writing, to save their ass. When a higher-up IBO talks to a group of potential recruits, they can say whatever they want. As long as it's not recorded, there's really no way to catch them lying.
Then their recruits perpetuate the misinformation about the products, and so-on down the chain.
If anyone gets caught going against company policy, they get booted from the program, but ultimately, Herbalife is not responsible because it was the individual that broke the rules. Many times it doesn't even get that far since the products are sold to friends and family, this stuff doesn't get reported.
5. Unstable Future
Not only are MLM programs banned from many spots on the internet, but they are illegal in some countries. In other places, they fit into a gray area. There are some extreme cases of members submitting to pressure to ‘go all in', and selling homes or cashing in retirement funds to meet the requirements only to lose everything. Lawsuits usually come about in such cases.
It's very rare for an MLM company to maintain hype and profits for long. Many dissolve within a few years, other fade away and their CEO or Grandmaster or whatever you want to call him starts another company. Most people spend time jumping from biz op to biz op, looking for fresh meat. In MLM, it's either kill or be killed. There is no “work together” like they tell you. Eventually the downline runs dry.
A few have survived, like Amway and Herbalife, but they are surrounded in controversy, and it's well known that few few people actually make legitimate income.
Do you want to base your business on something that could go bankrupt or become illegal in the coming years?
MLM & Cults
If you are reading this post right now, steaming, already planning in the comment section how you are going to tell me that I'm oh-so-wrong, uninformed, and an idiot…then list at least 3 reasons explaining how network marketing is a legit business and I am the true scammer, you might have unknowingly been sucked into the MLM cult.
Yes, MLM recruiting is very similar to cult recruitment tactics, and much of the brainwashing is done in the same way. This is how people sink thousands of dollars into these systems until they one day ‘wake up' without any money or friends, and a sickening feeling they've been duped. Here are some similarities, as taken from MLM The American Dream Turned Nighmare
1). ‘Milieu control’ — the attempted control of everything an individual experiences (i.e. sees, hears, reads, writes and expresses). This includes discouraging subjects from contacting friends and relatives outside the group and undermining trust in exterior sources of information; particularly, the independent media.
2). ‘Personal or mystical manipulation’ — charismatic (psychologically dominant) leaders create a separate environment where specific behaviour is required; leading to group members believing that they have been chosen and that they have a special purpose. Normally group members will insist that they have not been coerced into group membership, and that their new way of life and beliefs are the result of a completely free-choice.
3). ‘Demand for purity’ — everything in life becomes either pure or impure, negative or positive, etc. This builds up a sense of shame and guilt. The idea is promoted that there is no alternative method of thinking or middle way, to that promoted by the group or by those outside it. Everything in life is either good or bad and anything is justified provided the group sanctions it as good.
4). ‘Confession’ — personal weaknesses are admitted to, to demonstrate how group membership can transform an individual. Group members often have to rewrite their personal histories and those of their friends and relatives, denigrating their previous lives and relationships. Other techniques include group members writing personal reports on themselves and others. Outsiders are presented as a threat who will only try to return group members to their former incorrect thinking.
5). ‘Sacred science’ — the belief in an inexplicable power system or secret knowledge, derived from a hierarchy who must be copied and who cannot be challenged. Often the group’s leaders claim to be followers of traditional historical figures (particularly, established political, scientific and religious thinkers). Leaders promote the idea that their own teaching will also benefit the entire world, and it should be spread.
6). ‘Loading the language’ — a separate vocabulary used to bond the group together and short-circuit critical thought processes. This can become second nature within the group, and talking to outsiders can become difficult and embarrassing. Derogatory names, or directly racist terms, are often given to outsiders.
7). ‘Doctrine over persons’ — individual members are taught to alter their own view of themselves before they entered the group. Former attitudes and behaviour must then be re-interpreted as worthless, and/or dangerous, using the new values of the group.
8). ‘Dispensing of existence’ — promotion of the belief that outsiders — particularly, those who disagree with the teaching of the group — are inferior and are doomed. Therefore, they can be manipulated, and/or cheated, and/or dispossessed, and/or destroyed. This is justifiable, because outsiders only represent a danger to salvation.
Now think about all the network marketing companies you've been involved with. Here's a few questions to ask yourself.
- Have you been told to leave ‘toxic' people out of your life?
- Are you constantly shown pictures of success stories and industry leaders?
- Have you been told that you are unknowingly poisoning your body/mind?
- Not sure about this one.
- Have you been told the power of Product X and how it's going to change your life?
- Have you been shown a compensation plan with language like GV, PV, BV? How about Gold, Platinum, or Diamond Distributor Status (or similar)?
- Have you been told that today is that start of a new and better YOU?
- Do you troll the internet looking for MLM-haters and tell them how wrong they are in the comment section?
Simply said, most of the time there is no value in the products of these companies. MLMers will go on and on about what a wonderful set of products the company has, but there's ALWAYS an upsell to the membership and ability to sell these product. The case is almost always that you can make some money selling the products, but make a ton more recruiting sellers.
In essence, by joining an MLM, you are marketing the ability to market their company. This is not a product that helps people, or that they can derive any value from. You recruit recruiters, and they recruit recruiters.
MLM nuts will often exclaim that so-and-so company is part of the DSA, or that the FTC would have shut them down already if it was illegal. I'm not saying that it's illegal. I'm not even claiming that people don't make money. I'm just saying that it's a flawed business, with failure baked into the model in order for a
How to Start a Legitimate Home Based Business
Home based businesses are real. You can sell real products that people want. You can choose the products and services you market based on your own interests or passions. You do not have to work for only ONE company, promoting any ONE thing.
Sometimes, you don't even have to sell anything if marketing is something you're not interested in. Being able to monetize your personal hobbies requires a bit skill and knowledge, but it is totally possible with the help of the internet.
Unfortunately, internet based businesses are often mixed up with some of the other BS out there like MLM, but an affiliate based business can bring you sustainable, residual income, and possibly even replace your job.
It will take hard work and commitment to build such a business, but it's very possible to do so. In fact, I have done it, without any recruiting!