A few years ago, someone I was working with told me that they had a friend that wanted them to get involved in a side business. The lady was a single mom of two, that came to America as a refugee. She was barely scraping by, working diligently in a factory just to support her children. Desperate to earn extra money for her family, she asked me to attend this meeting with her in order to help her understand this business opportunity. I agreed. As we sat down in a quiet corner of a local coffee shop, an Amway consultant introduced herself. I immediately recognized Amway as one of the leading MLM Companies in the country. Since I was only a spectator of the situation, I sat back and quietly observed.
The Amway consultant was really excited to present the single mother with this business opportunity. I soon discovered the consultant was a co-worker of the single mom, at the factory. This woman boasted that she makes so much extra money a month with Amway, and told the single mother that she could make money also. She was extremely positive, and bragged about all the opportunities Amway offers.
Promises of great wealth, support, and hope were being thrown around casually. According to her, if you became a consultant you would be part of the “Amway Family”. Leadership skills would be taught, and support would always be given. In addition to having local support, you would be able to receive guidance from business leaders across the globe.
In addition to boasting about getting support from well known leaders, she told stories about how poor, single mothers were able to become wealthy and live in mansions. This consultant also talked about how she always feels so much acceptance. This greatly appealed to the lonely, single mother that sat in front of me. Heck, it even appealed to me!
As the speech continued, the single mother became really excited. She felt this was the answer to her prayers, until she heard the catch. At the end of the pitch, the consultant tried to pressure this woman to sign up, and purchase the start up package. In addition to purchasing this package, she would have to pay $150 a month to maintain a website. This single mother was heartbroken because she did not even have an extra $20 a month to invest in anything.
When the consultant finally left, I explained to the single mother about MLM companies and how they operate. She had told the consultant that she would consider working for Amway once her finances were a little better. After I educated her about how Amway operates (I did research), she was happy she didn’t immediately sign up. I am not sure if she ever reconsidered since that was one of the last times I saw her.
After this meeting, I sat and thought about what the consultant said, and how she presented her “business opportunity”. I didn’t know much about the consultant, but I did know she worked at a small factory and did hard manual labor. I also knew she was living in a small apartment with her boyfriend, and that she drove a modest economy car. I am not criticizing any of these facts, but if she made so much money from Amway, wouldn’t it show? I remember hearing her complain, while making small talk, about that factory. Why would she stay at a job she hates if she is making so much extra money? The facts did not match her claims, that is when I truly became curious about MLM companies.
Later on that night, I began researching Multi-Level Marketing because I had previously thought this business model was obsolete. To my surprise I discovered MLM companies are thriving more than ever, partially due to their presence on social media. I continually see more and more of my friends and acquaintances falling for this flawed business model, which is upsetting. The more I learn about the MLM system, the more I realized that the system itself is set up for failure. Which is why I am writing this article, to stop those from wasting their money on MLM companies.
If you are involved in, or working for a MLM company please understand that I am not completely against all MLM companies or products. I am not trying to target or criticize any of the MLM companies individually. I just want to expose the truth about how these MLM companies operate so people are completely aware about what they are actually getting involved with.
Multi-Level Marketing (MLM)
Unless you live under a rock, I am sure you have come across several MLM companies throughout the years. These companies are also referred to as referral marketing, network marketing, and direct selling or direct sales.
Some of the most popular MLM companies are LuLaRoe, Scentsy, Avon, Mary Kay, The Pampered Chef, Tastefully Simple, Herbalife, Beachbody, Shakeology, Amway, Melaleuca, Tupperware, Young Living, Beautycounter, and many more! Here is a more expansive list.
MLM Companies are extremely common, and have blown up to an even more massive appeal with the use of social media. Facebook, Instagram, Snapchat, and so many other social media platforms are being used to advertise these products. More and more individuals are becoming consultants for MLM companies without really understanding what they are getting into. While I fully believe many of these individuals have genuine passion about the products they are endorsing, it’s painful to watch them do all the legwork, and get little in return.
Distinguishing Features of MLM Companies
The easiest way to determine if a company operates using the multi-level marketing systems by recognizing two common characteristics all MLM companies have.
- Characteristic One-Not Sold in Stores
- Most MLM products are not sold in retail stores. In order to obtain the product you must order through a consultant, or on a consultant’s website.
- Characteristic Two-Recruit Others
- If you show any interest in the product, consultants will try to recruit you to become a seller as well. They will encourage friends, family, acquaintances, neighbors, people walking their dogs, pretty much anyone that will listen, to become consultants. The system is setup so the consultants do not depend on selling the product to make money. They depend on recruiting others, who will then recruit others, to sell the product in order to make money.
The Truth About Your Profit as an MLM Consultant
You can make money working for MLM companies, but it’s not likely. Considering all costs involved, whether it is membership package fees, mandatory inventory you must purchase, or website maintenance fees, you probably don’t make much. If you give yourself an hourly wage, on top of the fees, chances are you are losing money every month (if you’re not already losing purchasing products). While you may be earning free products, what’s worth more, extra products of things you may not really need, or extra income to support your family?
According to Dr. Jon M. Taylor, an MLM expert that has researched hundreds of MLM companies in depth, almost no one makes profits in MLM companies. In Jon Taylor’s free e-book “Multi-Level Marketing Unmasked” Jon Taylor found that 99.7% of people will lose money in MLM companies. So for every 1,000 people who join a network marketing team, 3 will earn more money than they spend. That doesn’t sound like good odds to me!
In fact, according to the FTC less than 1% of MLM participant’s profit. They even go onto state:
“MLM makes even gambling look like a safe bet in comparison” .
So basically, I’m better off investing in lottery tickets than investing in MLM companies!
It’s Not the Products That Fail, It’s the System!
Have you ever been to a fair or carnival and played those games? Most of us don’t bother because we know those games are set up for failure. They are designed for most individuals to fail, but presented so these individuals believe they can succeed. When the young man, that is trying to impress his date, fails to win her a stuffed purple elephant, he blames himself. The fact is, these games are not a reflection of the individual’s intelligence or ability. They are created purposely to deceive so they can make a greater profit. MLM companies operate the same way. They are designed for most to fail so that few can make a greater profit.
It is not the products that are deceptive, it is the system itself. Many products sold from MLM companies are great. I love Tastefully Simple’s food products. In fact, I love their Garlic Garlic seasoning mix so much I recreated it. You can find my recipe here!
But let’s face it, although many of the products are great, they are way overpriced! I was looking through a Tupperware online catalog the other day, and it was $45 for a plastic dip and veggie serving dish. I know that the products are of good quality, but it’s still just plastic! Same with so many other products sold by MLM companies. While they may be great products (sometimes), they have to inflate the prices to make the system work.
The truth is, the system is set up for only a few to benefit. When consultants try to recruit other consultants (usually friends, family, and acquaintances) they tell you that if you recruit just five people, and they recruit just five people each etc., eventually you will be so rich. The problem with that logic is that the recruitment process does actually have a limit. If you sit and do the math after about fourteen levels of recruitment every single human being would be a consultant (including babies and possibly puppies). It is simply not possible for most consultants to make money.
Why MLM Companies Continue to Succeed Even with a Flawed Design
While I was doing research on MLM companies, I continued to question how anyone would fall for it. Why would anyone invest so much time and money into a company when they most likely will fail? I discovered it is because MLM companies convinces you that you are the exception, and that if you fail it is your fault!
Why You Aren’t the Exception!
When you get interested in a product, your consultant wants to convince you that you can be successful. They are most likely someone you know and trust, so you believe them. Since they know they have the potential to make money if you sign up, they will say anything to convince you. If you even start questioning MLM companies, they will say things like “the people don’t fail don’t work hard enough.” You suddenly are convinced that you can really make extra money!
Once you sign up, you will be exposed to a ton of “inspirational” speeches and gatherings. There are usually conferences with the leaders of these companies giving testimony about how the product changed their lives. They will promise things like flashy cars and luxury vacations. They might even give away glamorous prizes at these conferences. Once you are exposed to this information, and have support from hundreds or thousands of others within the company, you are convinced everything is legit.
Unfortunately, the system is flawed and you most likely will not make much money. Since a small percentage do actually make money, they convince people the system actually works. Of course they will say anything since they are capitalizing on hope and ignorance.
Like playing the lottery, they make you believe you are the exception and will win millions. You here stories from past winners and think “why not me”. The truth is that statistically you most likely will not win. You are going to lose money on the lottery, but you will most likely lose more investing in MLM companies.
Your Failure is NOT Your Fault
I questioned why more people do not blame the system. People are forced to sell products and stand behind a company, because they already invested so much. They believe if they just keep going, they will catch a break. Finally, most give up. I’ve seen people that have so much extra inventory that they don’t know what to do with it. Where do these products go when a consultant finally gives up? eBay! You can find a ton of MLM products on eBay from people trying to salvage the little money they have left.
Try it, look for some products from MLM companies on eBay. Guarantee you will find a few!
I tried to figure out why people don’t speak up against these companies. I thought about it, and realized that it is because the consultants blame themselves. They think that it is their fault they failed. They didn’t try hard enough, or “believe” in themselves enough. They are ashamed and feel terrible because they believe their failure is their fault. In reality it is not their fault, since the system itself is designed to fail for the majority. Again, some people do succeed and are excellent at convincing others, but most don’t.
So if you have failed being a consultant for MLM companies, don’t blame yourself. You are capable of much greater things than working for companies that rip the majority off!
Not All MLM Companies are the Same, Know What you are Getting into
The design of all MLM companies are similar, but they all work a little differently. There are some companies that do not require membership fees, sign up package fees, or mandatory monthly inventory fees. These companies are far and few between. If you are interested in trying to be a consultant do research first. Ask your representative to prove to you how much they make monthly. See what their honest responses are. Really understand what you are getting into before you fork over your life savings.
The One Exception to the Rule
I am against MLM companies completely. I don’t think their practices are ethical, and they prey on the dreamers that want to make something of themselves. The only way I would ever approve of people becoming MLM consultants is that if they love the product so much that they want the discount. My Mom is a consultant for DoTerra because she really loves the product. She isn’t required to purchase a specific amount or to make any sales. Actually, the only person she has sold the product to was herself! When I was growing up she also would have Tupperware parties, and Stampin Up parties. She told me the only reason she did that was so that she could get free products. She was fully aware that she would not make money with the company, but loved the products so much she became a consultant. If you truly love the product, understand that the products are marked up, and that the system is flawed, go ahead. Just don’t expect to become a millionaire selling beauty products!
Make Yourself Rich, Not Others
If you are discouraged by reading this article because you were hoping to become financially free by working for MLM companies don’t be! You can get out of debt, become financially independent, drive luxury cars, and take dream vacations. You just have to be frugal, patient, and relentless. If you are passionate about something, create your own product or idea. Use your talents and interests to get ahead. Instead of investing in MLM companies invest in yourself! Save to go back to school, turn your hobby/passion into a product, start a blog, do something! You are unique and have the ability to accomplish whatever you want in life.
There are so many ways to make extra money, especially with technology. It may not be as quick as you want, but it will happen! I thought I would never be able to pay off debt and would be broke forever! I got so sick of being broke I took time and learned how to save money. I am still working on paying debt, but things are looking much better. I know that my money saving methods work, because I am starting to see the fruit of my labor! If you want to read about my journey find it here!
The truth is, we need to stop MLM companies from ruining people’s lives. So many wonderful people have been deceived by MLM companies. Please share this article with people you know!
If you need support or encouragement contact me at any time! I would love to talk with you about your questions and concerns. I am fully confident that you have the ability to achieve anything you want to! I would love to hear from you, and get to know your story, dreams, goals, and problems. You can email me anytime here.
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