One of the topics I get asked about a lot is the question if Multi Level Marketing is a legitimate business model?
Another name for multi level marketing is network marketing. The idea of this business model is to combine franchising and direct selling. It is a technique where the business creates a contractor relationship to the individual who wants to broaden his business.
All of the members make their income based on the sales they have attained in that particular service or product. The added benefit too is that it also includes the sales of the person that they themselves have signed up to join the business. Most of the time the person who recruited the members in the first place and have good sales of their own are the ones who make more money than the people they recruited because they get commissions on their sales as well as the sales of the ones they recruited. Sounds complicated I know but in theory, it is very simple.
Most people get multi level marketing confused with pyramid schemes or Ponzi schemes, which in most countries are illegal for obvious reasons. Mainly due to the bad image brought about by these illegal schemes, many still prefer to call their businesses as affiliate marketing or something longer like home based business franchising.
They way that money is earned is through commissions from selling a particular product or service in a legitimate way. In legitimate MLM companies, you cannot earn a commission form sign up fees. MLM is always in the bad books because of such questionable recruitment processes. Most MLM’ers get their sales from the members they signed up and their families and friends and these people are considered as the end users of the product or services as well as their distributors.
In the early 1980’s there was a wide shakeup of the MLM industry and its pretty much well regulated now in most countries.
However, the question remains if MLM is a legitimate business model. The answer is yes it is but if you think you can leave your full time job today and start earning excellent money and buy yachts and fancy cars in no time like they all lead you to believe in their seminars, think again. I speak from personal experience with being involved in several of such MLM ventures. While the products were usually very good, most of them were very expensive and to get repeat business turned out to be very rare. To give you an idea: I started with one MLM company and in 3 weeks, I had over 30 people on the health product. However, it was out of the reach of the ordinary end user and the only way they were able to get it cheaper was to become a ‘distributer’. Most people didn’t want to get involved so they dropped off. I eventually ran out of friends and relatives to approach and after awhile, they all saw me coming and went the other way.
So, the bottom line is this. To actually make it in the MLM world, you need to push and push and push virtually doing it full time. This ‘do it in your spare time’ is absolute nonsense and it DOES NOT work. Don’t get fooled by the fancy sales talk, videos, presentations, images of wealthy people outside their mansion or sitting in their million-dollar sports car. Those are NOT real. However, just like with any business, if the product is good, the service is fantastic and as long as you have the mentality of giving your customers what they need, it can be a rewarding business.
It’s still the old ‘I have a product and its damn good so please buy’. They give you money; you get a percentage and every ones happy.
Don’t be sucked in to the false promises of instant riches with multi level marketing. It very rarely happens and if it does, its usually the person who started the company is the one making the huge dollars and not you!
Check out the video below that explains clearly the differences between MLM and a Pyramid Scheme.