MLM (Multi-Level Marketing)
DisclaimerEven though Entrepreneeds occasionally use affiliate links, we do not link or promote any Multi-Level Marketing schemes. These articles are intended to give you as much information as possible if you are considering signing up to one.
Some systems under MLM are illegal and are designed in a way that is financially risky. Do your own due diligence before joining or promoting anything to ensure you’re not breaking local law or being scammed.
MLM stands for Multi-Level-Marketing. An industry that has mixed opinions, due to the many illegal ponzi schemes and pyramid scams that have operated under the pretence of a legitimate MLM structure.
As with anything though, there is good with the bad. If you can wade through the bad companies, pop-up businesses and the internet marketing sharks you can find something legit that can be a great fit for you. Tread with caution though – The main route of entry into MLM’s are via other members selling a business opportunity. These marketers aren’t monitored like call centre staff are, so miss-selling can slip through the cracks more often than not. And even though there are thousands of decent, good hearted marketers out there who will advise you wisely there are also a lot of pushers who’ll sell you anything for a commission, regardless of whether or not it’s right for you. Read on to gain a better understanding of MLM. There are many different types of MLM and knowing the differences can save you a lot of money and research.
Direct Sales companies (such as Avon, Younique, Actiderm, JuicePlus) involve selling a line of products manufactured by the company themselves to your own customers. You may recall an Avon rep going door-to-door in the last few decades – this has changed greatly thanks to Social Media and the internet – but the idea is still very much the same: Sell products, sell the business opportunity, and get your team members to do the same.
Whilst this does not suit everybody, it has enabled a huge amount of stay at home parents to have a career and more income. Whether they work their business part or full time, there has been an undeniably good effect on the economy and on the families it has benefited as a result. Companies such as these have played a clear role in the sharp increase of people working from home.
Direct sales can be very competitive so don’t just jump right in, make sure it’s suitable for you first. Just like you would with any potential new job role or business start-up. Selling through Social Media seems to be the more popular method over door-to-door sales now. Make sure you know the basics of Facebook if you intend to compete on there, and before joining ANY direct sales company, make sure that you are able to return any unsold goods should it not work out for you. There are additional things to check with Direct Sales companies, the DSA have a full list on their website here – Ask The Right Questions
It is also important to note that Direct Sales has a very low success rate for the average person. Many have never made back their initial investment, and many have not been able to obtain a liveable wage by solely selling MLM products. Experts and statistics have even gone as far as to say that 99.9% of people fail at MLM.
Arguably, it will have a lower success rate due to it being targeted towards people not usually seeking to own a business (such as stay at home parents and people with full time jobs looking for extra income), but the statistics are not great for MLM overall.
And in my personal opinion, it will always be a better route to start your OWN business rather than a franchise that has very little individuality. As with being a business owner with a direct selling company you will have very little control over many aspects of the operation – stock, brand image, freedom.
By freedom, I am of course referring to the fact that you are locked in to many companies you join – In the way that you are not allowed to be a representative of any similar company – So if you were looking to head the way of being a beauty consultant, you would be limited to selling one line of MLM products – Or risk termination of accounts.
Lastly, there is a very well known stigma attached to MLM of peer pressure. Many instances of leavers being “cast out” for simply deciding to stop selling products. This doesn’t happen all of the time, some anti-MLM sites will really burn the pitchforks when it comes to emphasising the psychological cult-like behaviour found in a few groups and networks, but be careful nonetheless.
For a bit more further reading, I recommend this article here. Whilst it’s very much on the negative side of the MLM equation, it does present some very interesting facts. The writer, Robert L. Fitzpatrick has been writing about MLM for a long time.
Also, I came across this very interesting article all the way from 1995 on The Independant about MLM, and a lot of the points are still very valid today. Worth a read if you have an interest in MLM.
[x_alert heading=”Direct Selling Association ” type=”info”]The DSA is the official UK site for all things Direct sales. Regulations that companies have to follow, advice, news, and even a handy Jargon Buster! I Highly recommend having a read if you’re a member of any direct selling company. www.dsa.org.uk[/x_alert]
Digital Product MLM’s
Another form of MLM would involve selling a digital product. Such as training and online tools to enable you to make an income from things such as e-commerce or blogging. Whilst it is in no way necessary to join an MLM for training on e-commerce or blogging, some people enjoy the style of following planned out training and having a support network in the form of an “upline” or “team” to ask for guidance. There are benefits of being in-the-know when things happen in your industry, and by being part of a MLM then it is likely that you will have information passed down to you. This can save you valuable time and effort if you find a decent team and company.
Revenue Shares or Rev Shares
Finally, Revenue Shares. These are companies promoted in the same way, but promise to get a massive return on your investments. For example, one company might say “Deposit £100 with us and withdraw £150 in 2 weeks.”
What you’re being sold, is no less than the promise of a savings account on steroids. There is no economic sustainability with these systems. You need to ask yourself a few questions if you’re considering joining one. You may also know this type of business model as a HYIP (high yield investment program).
Firstly, where does this extra £50 come from in those 2 weeks? More importantly, if these guys had a way to turn my £100 into £150 in 2 weeks legally and safely, why aren’t they just doing it for themselves and their family? What was the need to open it up as a company or MLM?
Some companies counter claim that they didn’t have the money to do it for themselves, hence trading with their customers money. Not likely. The money it would have cost them to set up their website, their business, their payment processors, their computer systems, and every other cost associated with starting a business they would have definitely had several thousand pounds available to begin with.
What we usually see (and you can Google all of this yourself for proof) is that the payments are being taken out of new members subscription payments, leaving the last ever batch of members for that company with no earnings or even their initial deposit to take back. Sometimes the owners even run off with the money (look up Achieve Community), and sometimes they just get shut down by the authorities and liquidated (Banners Broker, RevStar Global).
The point is that they’re extremely fragile, and essentially are a ticking time bomb. If you’re trying to build a reputation as someone who can help others earn money, then Rev Shares are the quickest way to destroy that. Imagine you were recruiting for one, and you had 15 friends join. 5 get paid and 10 lose their deposit, the next business you try to recruit for (and you can be sure you’ll be onto another company when this one goes), do you think you’ll have all 15 join you again?