Have you ever been approached by a friend or family member telling you, if you give them 5 minutes of your time,they have an exciting business opportunity that they believe will change your life? If you have and their excitement kind of intrigued and creeped you out at the same time,read on because you have most probably been targeted by a recent MLM recruit who thinks they have found the best thing since sliced bread!!
If your reading this, then it’s most likely you want information as to why the MLM business model is bad and why the majority of its participants will fail and most likely lose money.
Most definitely it will not provide the lifestyle change that most MLM opportunities seem to advertise with.
This article will quote extensively from Dr JM.Taylors book ‘Multi-Level Marketing Unmasked’ a thorough expose of the MLM industry and its deceptive practices.
The MLM Deception
[su_quote cite=”Dr JonM.Taylor ‘Multi-Level Marketing Unmasked'”]Most of the money paid by the MLM company goes to TOPPs (top-of-the-pyramid promoters) at the expense of a revolving door of unwitting new downline recruits, who try an MLM program and quit, only to enrich the founders and TOPPs with commissions from the purchases these recruits made in a vain effort to “succeed.” [/su_quote]
If you are thinking of getting involved in an MLM company, or you are involved in one, read on and I will tell you why you should get out and why it is your duty to warn others of this unethical business model.
MLM companies run some of the most deceptive advertising in the business world (I should know I got involved with two digital MLM that left me with a bad experience) however, by doing a bit of research you will find countless examples of why this model is built to fail, well at least fail for most people who participate in this scheme.
You will notice only those at the top make some serious money whilst the rest either make little or nothing. This can be concluded from MLM companies own stats regarding their top distributors/sales reps.
For example, if you go here, it shows you the top earners for some of the biggest MLM companies, remember these companies have tens of thousands of so-called distributors and a small fraction is making any serious money (less than 1%).
Companies that run MLM schemes have been around a long time and despite many lawsuits and financial penalties that have been slapped on some of the biggest names in the MLM business, the industry still thrives.
If you would like a more thorough expose of the MLM industry, I have listed a few websites at the end of this article. Please read them and be aware of the pitfuls the MLM industry can bring to those who get involved.
Why does MLM thrive
Why do they still thrive? A variety of reason, the main one being the law allows it. When you have big celebrities and politicians endorse your products it definitely gives you a lot of legitimacy. This still doesn’t mean that we shouldn’t warn people of the high-risk factor of the MLM system.
They Succeed because of legal loopholes and because their advertisement to recruit distributors are so deceptive.
So, if you are ever approached or see yourself watching one of their cunning advertisements please read on and understand why this business model is not one you would want to get involved in
An Unethical Business Model
MLM business model could be described best as a pyramid scheme (although many deny this and many have the audacity to say all jobs are pyramid schemes, I will debunk this assertion later), some of the biggest names in MLM are companies such as Tupperware, Amway, Herbalife, Mary Kay, Avon, and The Pampered Chef. People buying into the MLM scheme are required to buy their products in order to sell them.
However, selling the actual product isn’t what provides the most compensation. In fact, studies have shown distributors make very little from actual retail sales.
In order to really make life-changing money in MLM, you have to be a master recruiter.
MLM companies may sell products such as dietary supplements, cosmetic items, kitchenware and in the digital space the biggest names (such as Digital altitude and Empower Network) sell online marketing education at ridiculous prices (Some of their affiliates call it a University level degree!!!). However, their main source of income comes from mass recruitment.
Watch the video below to get a better idea of what a pyramid scheme looks like.
You Don’t Own The Business
Most people are persuaded by the idea of being your own boss and earning a passive income and doing as little work as possible.
Many MLM participants regard themselves as running their own business. However, this isn’t really true because to run your business you need some degree of control over the following:
- Have control over what you sell
- Have the ability to negotiate with your suppliers
- Have total control over what you charge
- Make decisions over how you advertise and market your products.
- The ability to get a small business loan
MLM participants,who like to class themselves as small business owners,have no control over the points I have listed.
So, they do not run a small business, the only business owners are the people who run it from the top,MLM participants are merely sales representatives who are given over the top titles as they move up the MLM hierarchy.
They also may have to travel frequently, attend regular meetings and always looking to recruit. A piece of advice, if in a company, you make more by recruiting people than actually selling the product it may be a pyramid scheme.
MLM companies have also been accused of having a cult-like following and if you have ever gotten in a conversation with an MLM believer, that term would be very apt in describing some of them.
It is true that it could be quite difficult to tell the difference between a scam or a legitimate MLM business model. A year ago I would refer to these companies as scams but I have changed my mind, I seriously believe those behind many MLM start-ups do want to help people.
However, given the flawed business model and the focus on recruitment rather than sales, this is bound to fail for the majority of those who get involved.
One of the primary reasons MLM companies have survived and thrive is because of a ruling years ago, regarding the Godfather of MLM companies, Amway.
In 1979 Amway’s attorneys managed to argue that it was not a pyramid scheme and the Federal Trade Commission ruled accordingly. And it is through this one ruling that some experts say the MLM industry was allowed to flourish.
More Reasons to avoid MLM
I have already listed a few reasons to avoid MLM, bad business practices, pushy sales people, overblown income claims, market saturation, and many other objections. Below I have listed some of the biggest flaws of this model and why it should be avoided at all costs.
You Would Not Earn.
The data above is taken from Dr Jon Taylors Book ‘Multi-Level Marketing Unmasked’, its a comprehensive dismantling of the MLM business model and why it’s doomed to fail for the majority of its members.
He analysed over 600 MLM companies and found that over 99% of MLM distributors make a loss and less than 1% make the lifestyle changing money they all advertise with.
Do you know that most people who have invested in MLM turned out to be at loss financially? This is true and totally in contrary to what most MLM recruiters tell you – that MLM provides an opportunity for making large amounts of money compared to other businesses.
Do you know that Amway and Herbalife, (Herbalife is another massive MLM company), 89% of their distributors make no profit and 99% of them make less than the minimum wage!
Sometimes it’s hard to ascertain what percentage of their members are making any profit because their compensation plans are so complex and they generally are not so open about this matter.
It’s only when some of the big players come under investigation, that the true extent of the pitiful situation some of these distributors find themselves in are exposed.
As I mentioned earlier in this article, MLM enthusiasts have recently moved into the digital space i.e. the internet. This makes them even more dangerous as the internet is still highly unregulated. One of the biggest players in the digital MLM scene was Empower Network.
This company exploded during the years between 2012-2014, since then its members have declined and as you can see from the google trends graph interest in it has waned ever since.
To their credit, they did reveal how much their affiliate members made and guess what? Less than 1% made any sort of serious income and the majority were making less than the national minimum wage (I don’t think the US has a minimum wage but most European countries do)
The given facts only proved that MLM is not a legitimate way to do business, not only do people lose money but relationships may be ruined and it can be detrimental to your health.
According to studies, most MLM members lose money due to failing to recruit enough members and eventual market saturation. Look at the Google trends graph for empower network, see the line turn into a steep slope? That’s when the market is saturated and people start to lose interest.
Overpriced and low-quality products
Wondered why some of the biggest retailers do not sell these so called great products? Because they are not so great, despite the exaggerated claims by its most adherent follower’s, the majority of MLM products are simply not great.
They are also vastly overpriced even at supposed discounted rates, you could be spending anywhere between $100-$1000 per month on products you may never sell just to be someone else’s downline.
Digital MLM companies have similar methods, although they don’t retail anything tangible, they market themselves as providing world class education.
They have several levels of so-called educational material the cheapest can be anywhere between $30-$100 dollars (you’ll find nothing worthwhile in those levels) and the most expensive I’ve seen is a level priced at a ridiculous $27000.
Focus On Recruitment
[su_quote cite=”Dr JonM.Taylor ‘Multi-Level Marketing Unmasked'”]Most of the money paid by the MLM company goes to TOPPs (top-of-the-pyramid promoters) at the expense of a revolving door of unwitting new downline recruits, who try an MLM program and quit, only to enrich the founders and TOPPs with commissions from the purchases these recruits made in a vain effort to “succeed.”[/su_quote]
Whenever you get pitched by MLM representatives you will notice they always focus on recruiting. They’ll say stuff like “if you recruit X amount of people and then help them recruit x amount, you’ll be earning passive income in no time” it sounds so easy and simple but if everyone is to be successful then it means the entire of earth’s population will have to be recruited, right? Yes, it sounds absurd but that is the logical conclusion you come to.
If you tell hardcore MLMers this, they will agree that not everyone will be successful at recruitment just like not everyone will succeed in running their own business. However, normal business owners aren’t looking to recruit the whole world to make their business profitable.
Digital MLM’s New Deception
Unfortunately for aspiring entrepreneurs, the MLM model has moved into the digital space where a new type MLM company seems to pop up every week. Just check out the excellent website behindmlm.com, they do a good job of keeping up the latest MLM companies and exposing their overpriced products and deceptive adverting tactics.
Digital MLM companies have found a cunning way of recruitment, they don’t need to hold parties or try and persuade people face to face to buy their overpriced garbage.
They recruit by creating highly deceptive sales pages. No need to meet up or talk on the phone just create an optimised sales page, send some traffic to it and hope that it has a high conversion rate.
Different style of recruitment but similar end results, the market will eventually saturate. Some digital MLM companies you need to watch out for;
- Six Figure Mentors – Not the worst and my first experience with an MLM company
- Super Affiliate Network
- Empower Network
- Digital Altitude
- iCoinPro (Bitcoin MLM)
- BitConnect (Bitcoin MLM)
- iPro Network (Bitcoin MLM)
- iMarkets Live (Forex MLM)
Update June 18th 2018
This year has not been kind to some of the biggest digital MLM companies,Digital Altitude and MOBE was shut down by the FTC,if you follow the MLM industry like I do,this was big news. Empower Network also went out of business,this will give out a warning sign to other MLM schemes that the authorities will be coming down hard on these types of business models.
Pressure to go “all in”
If you are not making any headway your sponsors (pressured by their sponsors and on and on) will coerce you into buying more product, spending more on training and generally tell you to be patient.
Being patient is a virtue but when you are literally spending hundreds and maybe even thousand dollars a month just for a measly small commission being patient is not something that comes easy.
I have some experience in this, I was involved in a digital network marketing company for a little while (Luckily I got out because I couldn’t afford the ridiculous so-called “license” fee) When I told my coach (really a salesman) that I couldn’t currently come up with that money, he gave me list of places I could apply to get that money!!!
Yes, he was asking me to go into more debt just for this opportunity!! So because I couldn’t pay up, I didn’t get to see any more of their average training.
Objections by MLMers
I mentioned earlier how many MLM enthusiasts defend their business practices by giving the example of a large corporation and its pyramid structure. Whilst the structure of a corporation does resemble that of a pyramid, that is where its similarity with MLM ends.
Corporations don’t ask you to pay them a monthly fee just so you can work for them, they pay you when you are contracted to get paid.
MLM is pay to play (some of them say this with pride “you gotta give money to make money) and the majority lose money. When employers advertise jobs they don’t deceive you into believing you’ll be driving around a Rolls Royce and flying private jets. MLM do, that is the difference, totally unethical.
So, what should you do?
Starting a business is something many people aspire to,however,getting involved in an MLM is not the way you would want to go. First, as I have already explained,you would not be starting your own business but growing someone else’s and you would be paying them to do that!!! How ridiculous is that?
Second, if you are already involved in an MLM scheme and not seeing any returns,I would highly recommend you cut your losses and get out before falling further into debt and falling into financial misery.
Third,I honestly believe it is your duty to warn about others about the dangers of getting involved in an MLM scheme,if you have friends,family members,work colleagues who may be thinking of or already are involved with an MLM company, do your best to warn them about it.
If you’re serious about running a business, then the internet provides a great opportunity and the good thing is, it won’t require you to break the bank.
Here is an article I wrote about legitimate ways to make money online,you have a lot of options,choose one method,learn as much as you can and take action. Remember,success will not come overnight,but with time,hard work consistency your actions will pay off.
If you enjoyed this article, I would appreciate if you would share it and if you have any questions please ask in the comments section.
Further Resources exposing the MLM industry
Pyramid Scheme Alert – one of the best resources on the internet, run by noted MLM critic Dr Robert FitzPatrick.
Whats wrong with MLM – By Laura and Dean Vandruff
MLM- The Truth – Website of Dr Jon M.Taylor, another MLM critic, pulled data from over 600 MLM companies and wrote a devasting book, Multi-Level Marketing Unmasked. Can be downloaded from his website.
Behind MLM – Website exposing the various MLM schemes that pop up every week.