You’re scrolling through your phone and you see someone dancing in one of your social media apps. Why is she dancing? Because she’s so happy she makes a five-figure income every month selling stuff from her phone. And you can too! Ask her how!

What is she selling? What company does she work for? Well, she doesn’t tell you any of that. Not right away, at least. Most network marketing (or multi-level marketing) representatives are told NOT to tell you about their product right away. They want to get you hooked first on the dream of what they have to offer you:

• The idea of owning your own business. (Spoiler alert: it’s not your own business. You’ll be an independent contractor and you’ll have to file your own taxes at the end of the year.)
• Time freedom. You can work whenever you want. (Spoiler alert: You’ll be working all the time, and you’ll most likely be working for free.)
• You can work from anywhere. (You will work from everywhere.)
• The amount of money you can make is unlimited. You can make as little or as much money as you want. (Income disclosure statements prove otherwise.)
• You don’t have to recruit. (Then why is she doing it? In most MLMs, you can’t reach certain ranks if you don’t recruit. The real money is in recruiting.)
• The products sell themselves. (Then why does the company need representatives/independent contractors?)
• You can win trips/retreats/bonuses. (As an independent contractor, you have to pay taxes on those, so they aren’t free. Sorry.)
• It’s not a pyramid scheme. Those are illegal. (Hmmm.)

Gross. Who would fall for this, right? Well, a lot of people do, obviously. According to Webinarcare.com, 8% of Americans have participated in a multi-level marketing company (MLM), also referred to a social selling or network marketing.

Back in my day, before social media, MLMs usually had a different approach. Mary Kay, Pampered Chef, and Tupperware hosted parties in people’s homes. (Other well-known MLMs include Amway, Cutco, Pruvit, LulaRoe, Young Living, Arbonne, Monat, Beachbody, Herbalife and so many more.) Now, many MLMs take to Facebook to host online parties or sell directly online. But whether or not the representatives are required to hold onto inventory or not, or regardless of how the independent contractor is selling their product (in person parties, online parties, social media, via website), there are a few ways to determine whether or not the company in question is an MLM:

• The contractors/reps make money off recruitment, either from bonuses or receiving a percentage of sales from the downline.
• There are no qualifications to join.
• You have to buy a starter pack, a kit, or pay a sign-up fee.
• In most cases, you have to recruit in order to achieve certain ranks within the company.
• The reps are the biggest customers.
• The business structure is shaped like a pyramid.

If it looks like a pyramid…

Why are MLMs sometimes compared to pyramid schemes? In many of these MLMs, independent contractors can make more money by recruiting (either through bonuses or by making a percentage of their downline’s sales). In fact, some of the leaders at the very top (the upline) don’t have to sell any products at all because they have such an extensive downline of hundreds of people working below them—that they make a lot of money off their recruits. This is why many people compare them to pyramid-schemes. In fact, there have been several MLMs (Herbalife, for example) that have been forced to restructure because the FTC found them to be pyramid schemes.

Another aspect of MLMs that is controversial is the fact that most people in MLMs make very little or even lose money. According to AARP, 47% of the people who participated in a recent survey reported they lost money in an MLM. In fact, if you look at the income disclosure statement on an MLM’s website (if they have one), you’ll likely notice that most people in an MLM don’t make much money. For example, a look at the MLM company Pruvit’s website shows this direct quote: “The average annual income for a Promoter in 2020 was $1,136.54, and the median annual income for all Promoters in 2020 was $0.”

Some MLM’s can be very aggressive with their promises. They promise that anyone can make as much money as they want in “the business.” They say you can replace your 9 to 5 job and find “time freedom” by working in an MLM, but according to most MLMs’ income disclosure statements, that’s simply not true. Only the very top leaders make enough to quit their day job. These promises of wealth just don’t pan out.

Another controversial aspect of the MLM world is “cult-like” vibe that seems to be pervasive in some circles. For many people involved in MLMs, it isn’t that serious, right? I’ve bought MLM products. I didn’t even know they were MLM products when I bought them, or what an MLM was. Who doesn’t have Tupperware products, or some Pampered Chef in their kitchen? Most people have had a brush with and MLM or even sold their products and made a few bucks.

But there’s a darker side to MLMs where people have gone into serious debt, racking up credit card debt to buy products (essentially becoming their own customer) into to achieve a rank. I’ve heard of people joining MLMs with the promise that they could “work the business during the pockets of time in their day,” only to be pressured by their upline to spend hours per week on Zoom training calls. They’re encouraged to harass their family members, friends, and acquaintances or social media to try to sell products or recruit people for their downline. The MLM takes over. But all that doesn’t sound so bad, right? If you don’t like it, just quit.

For vulnerable people who are lonely and might not have a friend group in the “real” world, the MLM can become a built-in social network. When they join, they’re instantly love-bombed by their upline and peers, receiving welcome messages, invites to private social media groups, and offers of help getting started with their business. Instant friendships.

Imagine being a new stay-at-home mom. You’re at home with a colicky baby. Lonely. You get a “hey girl” message business opportunity. You don’t know if you’re interested, but she assures you that you can fit it in during the pockets of your day, and you can meet some other moms. Suddenly, you have an entire group of people who understand what you’re going through. They’re telling you you’re doing the right thing by starting your own business, because now you can stay at home with your new baby. You can bring home money and support your family, all from social selling on your phone. Your business isn’t taking off the way you’d hoped. You haven’t made any money. Maybe you’ve even lost money, because you had to buy a starter pack and some products for yourself. But you don’t want to quit. Because you don’t want to lose all your friends. You just need to read some self-help books and work on your mindset. When you finally quit, you lose all your friends. They were just MLM friends. Not real friends.

MLMs are all about mindset. They like to talk about working on yourself and often toss a little religion in there for good measure. They say prayers at their conferences and preach about how God wants you to succeed at the business. I’m not saying there’s anything wrong with prayer, but this blending of religion and business makes it doubly hard for people to leave the business when it isn’t working out. They become convinced that it’s more than a money-making opportunity. It’s spiritual. God wants them here right now, in this business, in this season of life. And that’s where it gets a little cult-like.  

And then there’s the drama…

MLM circles have lots of drama. There are those who rise to the top of MLMs, making it to top ranks and raking in some good money. But those top ranks are difficult to maintain. Their downline might quit or move to a different MLM. And this has happened recently with a huge group of Monat reps quitting and moving to a different MLM. I can’t imagine what it would be like to have your income entirely dependent upon the people below you. Or to have a six-figure yearly income suddenly drop off to nearly nothing. There are those in the anti-MLM community (we’ll get to that in a minute) who say they’re only getting what they deserve; that these people who were basically making money from off the backs of their downline didn’t really earn that income to begin with. Maybe that’s true. It seems like an MLM is a very precarious business model. I can’t imagine relying on people below me to recruit and sell in order to make a living. I’d rather just work a 9 to 5. It seems like all the “time freedom” ain’t all it’s cracked up to be.

So, who are all these anti-MLM people?

The anti-MLM commentators are people who educate about the MLM business model. They produce Youtube videos and read horror stories sent in by people who have left MLMs. Some of the stories are quite interesting. After watching some of the content provided by these creators, I have gained an entirely new perspective about the world of multi-level marketing. I think, on the whole, most people who join these companies realize early on that it’s an unsustainable business model and bow out, only losing the money they put in for a starter fee. But, there are some instances where people lose thousands of dollars, their self-esteem, and even friendships.

If you’re interested in learning more about MLMs, or would like to listen to some of these horror stories, I would suggest watching some videos by Hannah Alonzo. She is very level-headed and approaches the topic in a very reasonable way. I’ll leave a link to her channel in the “Sources” section at the bottom of this post.

Conclusion:

Most of us have to make money to survive. Whether that’s working at a traditional job, starting your own business, or joining an MLM, it pays to do your research. As long as you know what you’re getting into, that’s what matters. I believe multi-level marketing companies have a very challenging business model to say the least. It’s definitely not for everyone. I couldn’t be successful in that type of business, but then I wouldn’t feel comfortable going into any type of commission-based job. I like a traditional job where I know when and how much I’m getting paid. I like knowing I’m going to get paid for the work I do and that my wages aren’t dependent upon whether or not someone deep within my downline decides to recruit someone, or whether or not someone on my social media decides to buy some shampoo. I’m not that adventurous.

If any of you have ever belonged to an MLM or have a crazy story about an MLM, I’d love to hear about it. And if you want to read a very interesting story about an MLM leader, please tune in tomorrow. I’ve got one for you.

Sources:

https://webinarcare.com/best-multi-level-marketing-software/multi-level-marketing-statistics/

https://consumer.ftc.gov/articles/multi-level-marketing-businesses-pyramid-schemes#MLM

https://www.aarp.org/aarp-foundation/our-work/income/multilevel-marketing/

https://www.youtube.com/c/hannahalonzo

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