Are multilevel marketing schemes too good to be true?
You can be your own boss, work less, and make money. Sounds too good to be true? Multilevel marketing (MLM) schemes thrive in isolation as the suddenly unemployed seek easy income gains. But do you know what you are signing up for?
There is no easy way to describe what a multilevel marketing (MLM) business is. People in MLM might call this direct selling or network marketing. Typically, MLM is a large organization of hundreds of people selling products and services such as beauty products, candles, cleaning products, and books from home.
MLM can be easily identified by three dimensions:
You will need to buy a starter kit to join MLM and become a salesperson. The kit will include some of the products you will be selling, catalogs that you can use to showcase the products to potential customers, and may include the cost of a personalized website.
You will earn money by encouraging others to sign up to become sellers and purchase a starter kit. They are known as your subordinates. You will also receive commission on sales. You usually also make some money if your employees are doing well.
Often, MLM sellers use social media like Facebook to connect with potential customers. Or they can host parties either on the Internet using Facebook or Instagram Live, or in real life, where the goal is to showcase and sell their products.
Is MLM a good way to make money?
It may be tempting to join MLM, perhaps to earn extra money on the side. Or, you can see it as a stepping stone to starting your own business.
However, in reality, making money on MLM is difficult. You must consider:
How much does it cost to join MLM (this may include buying an expensive starter kit or purchasing stock in advance) ?
How much do you need to sell to get your Starter Kit back?
How much do you need to sell per month to start earning commission?
How much time do you need to spend on work to earn a commission. Is your hourly rate even close to the minimum wage?
If there is a minimum amount you need to sell each month to remain an MLM representative?
How much do the products cost to buyers? If you were a potential buyer, would you think this is a bargain price? Or would you look for more profitable alternatives?
How many people are already representatives of the same MLM in your area? If you have too much competition, it can be difficult to sell products in your area.
Do you need to hire people to the company to make more money?
Are you ready to constantly pester your friends and family to get them to buy your products or join your MLM? Are you going to have to make bold claims that aren’t scientifically proven?
Before joining you, you must realistically assess how much money you can make and how long you will have to do it to make that money.
It would be helpful to talk to someone you know who was previously an MLM member. Or perhaps you could join a Facebook support group for former MLM members. You can also ask these questions to your MLM recruiter, but remember that they stand to benefit if they manage to enroll you in MLM, so you may not get fully transparent answers.
Beware of any MLM that makes unrealistic claims that you can get rich quick. If something sounds too good to be true, it probably is. You also need to consider the impact this will have on your relationships with friends and family, especially if they form the bulk of your client base.
What is the difference between MLM and pyramid schemes?
Pyramids are illegal. The pyramid scheme does not sell a product or service. Instead, the only way to make money is to attract other people to the scheme. This means that most people who join the pyramid scheme will lose money. Only a few people at the very top of the pyramid will make money.
MLM can have a similar pyramid structure, however a legitimate MLM will sell a real product and there should be a way to make some money (although not necessarily a lot) without hiring others in MLM. However, in many MLMs, it is far more profitable to hire others than to earn commissions on sales.
What can I do if a friend or family member is an MLM member?
If a friend or family member asks you to buy their MLM products, it will probably be difficult to refuse. Even if you think the products are overpriced, poorly made, or just not what you usually buy, it is tempting to buy something to support them in what they think is legitimate business.