Making Money On The Road

Is Multi-Level Marketing A Scam?

There are some very big names and promises being made in the world of Multi-Level Marketing, Network Marketing, or direct sales. I am pretty sure anyone who has ever been approached, myself included, has been promised a life of luxury and fortunes if you joined their company.

Big Name Companies

Truth be told there are many successful companies that have been around for many years. Companies like Amway, Mary Kay, Avon, and Tupperware and they do quite well. That is the top level people do well.

The fact is despite having a similar structure to a typical corporation or business, most people lose not make money in MLM’s. The chart below represents the numbers of a recent study done on the percentages of people that make money with MLM’s.

Those are not very favorable numbers. It’s definitely a red flag to those looking to get into Network Marketing. Why are those numbers so low? On the surface, the network marketing system seems like a great structure. Why are so many people failing?

So What Are The Differences Between A Typical Company and An MLM?

On the surface, they appear to be somewhat the same. They just use different titles. In big corporations, you have different levels of titles from the C.E.O. and the fancy titled supervisors, all the way down to the entry-level worker. Each level performs its own job with the intention of bettering the company. 

You May Even Get A Raise

If you’re a supervisor you recruit/hire people to help out in your department with the intention to make the company more money. You train them and the better you perform your job, the more money you can potentially make. Maybe you will get yearly raises or maybe you won’t. It depends on the company.

An MLM Company

Within an M.L.M. company, you also have a structure. The C.E.O would be the person(s) who originally founded the company. You will have a varying amount of “employees” under the C.E.O. Instead of supervisors and employees, they are called independent contractors. Within these independent contractors, there are different levels.

Similar Positions Different Names

Instead of higher-level employees being called supervisors, they are typically called your upline. Different companies will use different terminology for levels such as bronze, gold, or ambassador. Everyone else will just be called consultants (equal to employees in a typical corporation).  Again, different companies will use different names for these levels.

Typical Corporation

  • Different Level Positions
  • Paid Hourly/Flat Rate Salary
  • You Are An Employee

Typical MLM

  • Different Level Positions
  • Paid By Commission/Recruiting
  • You Are An Owner

Corporation=Steady Paychecks

Working for a corporation you will receive training, a paycheck, possibly medical benefits, and if you do well a raise. Most larger corporations also offer some kind of vacation and/or sick time. Although you may have some say, it will ultimately be up to the company executives to give you a raise or not.

MLM=Paychecks Depend On You

When you are involved with an M.L.M. you are NOT an employee, you’re a business owner. This means you will not have to wait until your company is good and ready to give you a raise to make more money. You will also not have to ever worry about being laid off!!! On the flip side if you don’t work you don’t get paid. 

Corporation= Produce Or Get Fired

When you work for a corporation you are expected to work in accordance with making the company money or doing things depending on making that company more efficient. If you perform well you may or may not get rewarded monetarily but you will generally keep your job.

Climbing The Corporate Ladder

They might perform some training but if they do it’s going to be how they want it, not how you would like to do it. Another problem with working for a corporation is other employees have no problem throwing you under the bus to better themselves and climb the corporate ladder.

Stability

Years ago most people took jobs with large corporations for stability. They went to work for 20 or 30 years, were loyal to that company, and in return received some kind of retirement package. Ahhh, those were the good ole days.

Nothing Is Guaranteed

Today, nothing is guaranteed. There is no loyalty among 99% of the companies out there. Things like retirement packages and continuing medical benefits after retiring are a thing of the past. You can work 20 years and be replaced in a blink of an eye with nothing to show for it!!!

MLM= Produce or Starve

Unlike working for a corporation, your success or failure is directly related to YOU. Your upline is not your supervisor. They are more like your mentors. They want you to succeed. If you succeed, they succeed. No one is stepping on you to climb the corporate ladder per se.

It’s Your Business

There is no one telling you what to do and how to do it. It’s your business. If you wake up and don’t feel like working, you don’t. There are no raises, medical benefits, or retirement programs provided by a company. You are responsible to set yourself up with these things. 

No Income Limits

On a positive note, if you perform really well your income potential has no limits. You can make more money than your up-line (supervisors by comparison) and work whatever hours you want.

Since it is your business you will promote the products and try and recruit like-minded people into your business to help it grow. You could compare it to being franchisees of sorts.

If you are promoting the products for others to buy, it only makes sense you should be using them yourself. If you do not use the products because you don’t like or trust them, maybe you are promoting the wrong company. You must believe in the product you are selling.

Recap

Corporation

  • Steady Paycheck
  • Produce or Get Fired
  • Definitive Hours

MLM

  • Fluctuating Income
  • Produce or Starve
  • Work Your Own Schedule

So Is It A Pyramid Scheme?

Pyramid schemes work by someone getting another person to invest money. Then that person invests money and so on and so forth. There is no real product to be sold. 

It’s all money-based and eventually, you will run out of people to get to invest and the whole thing collapses with the last ones in losing the most money. Sometimes products or services are sold but generally, you are just investing your cold hard cash. There are usually no quality products sold.

Franchising?

A legit MLM company is NOT a pyramid scam. You are selling quality products and recruiting others to do the same. You can equate that to franchising. You will need a good balance between the two to succeed.

That being said, some people do extremely well with MLM’s but the overall majority does not.

Suggestions If You Still Want To Get Involved With An MLM

That being said, for as many good M.L.M. companies that are out there, you have just as many scammers. Being your own boss is not for everyone. I have a few suggestions if you are going to try an M.L.M. company:

  • Do your research!!! Try and go with an established company with a long track record. Start-ups could be the “in thing” at the moment but could fizzle out in a couple of years leaving you high and dry.
  • Believe in the products that you will be selling. If you are joining a company but can’t stand the products they sell, you will not do well. If you believe in the products or services you are selling, you will be excited when you talk to people about them. They will pick up on that excitement. If you don’t use the products, why should they?
  • Do not listen to anyone that tells you that you will be a millionaire in 6 months. A good solid business takes years to build. M.L.M. is not a get rich quick business. If you are promised a million dollars in 6 months run do not walk away from them.
  • Be wary of any company that wants you to spend hundreds of dollars a month to keep your membership. It’s one thing to buy and use the products but another to have a closet full of “widgets” that you will never use just to remain a member.
  • MLM’s have a very high failure rate. They also have a bad reputation which could have you fighting an uphill battle from the beginning.

Final Thoughts

The bottom line is M.L.M. is not necessarily a scam but as with other business ventures, you must be very careful and do your research. The failure rate on MLM’s are very high (see chart above.) 

Failure could be due to several reasons. It could be because of faulty or inferior products, or a requirement to buy a large number of products monthly, or the company itself goes out of business. 

Another reason people fail though is themselves. They believe they will become a millionaire and travel the world within 6 months. When this does not happen they quit. They also think it will happen with no work done on their part. This can happen when you start ANY business. You have to be realistic, set goals, and work hard/smart.

If you have any questions or comments on the above article, feel free to leave them in the comment section below.



Leave a Reply

Your email address will not be published. Required fields are marked *