In this article, I will explain why MLM is bad and the reasons you should avoid this deceptive business model.
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.
I wrote this article a few years ago and it still remains relevant today in 2021, MLM companies are always popping up and you should be on your guard against their predatory marketing tactics. MLM is still bad and the business model will always remain bad for the majority of people who get sucked in.
Why MLM Is Bad
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
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)
The 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 I highly recommend starting an eCommerce business via dropshipping.
This is basically where you will sell products as your own via a third party supplier, unlike MLM, with dropshipping, you control all aspects of your business. The main advantage of starting a dropshipping business is that you do not need a huge investment to get going.
This is an eCommerce fulfilment method that is very popular now because it is easy to start and run, there is no need to purchase any inventory, make delivery arrangments and you will not even store any of the products you sell.
To find out more about dropshipping and how it works, I recommend you download my free report by clicking on the button below.
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.
23 thoughts on “Why MLM Is Bad And Why You Should Avoid It”
This is a good article on MLMs. I’ve looked into this myself and I know most pyramid schemes out there disguise themselves as an MLM. Honestly I don’t think these fake MLMs are legal as well, they just haven’t been caught yet.
Either way I would suggest a newbie in marketing to stay away from both MLMs or pyramid schemes, they simply do not have the know how to make money with it. The other programs that you suggested are much more beginner friendly.
Hi Lucas, thanks for taking your time and reading the article. I agree with you, those looking to start an online business should stay well clear of anything related to the MLM industry. I wish the FTC did a bit more to reign in their deceptive methods.
The real danger for people are the MLM companies popping up all over the internet, I joined two digital MLM companies, their sales pitch is slick and they really make you believe you can be rich in the next 30 days. Learnt my lesson the hard way, got taken for a few hundred dollars ( I know people have lost a lot more than that) and hardly learned anything from their training materials.
I hope my article helps persuade others to avoid the MLM trap.
i wont lie i was going to join and build a site promoting a mlm company but i have a change of heart after reading this. Thanks for the information.
Hi, Jimmy, I am pleased my article helped you, there are legitimate ways to make a decent income online, MLM is not one of these ways. Hope you have all the success in your future plans.
I know what you are talking, I have been of this type of business and it was not a good experience at all. It seems as if only a selective few and that’s those at the top that carries home the cheese. with this kind of business in most cases, you spend a lot and have little to show or even nothing at all.
Yes, if you get in early with these MLM opportunities, you can make some serious cash. Its the other 99% that get ripped off and lose money. Best to stay away from these companies.
I learned a lot reading this page. I tried to sell Avon once and wasn’t very successful. You are right, I had to buy products to sell them. I was stuck with a lot of products I couldn’t sell. Lost money! I don’t understand how those types of companies are still in business.
My husband and I even tried Zeek Rewards and got burned like a lot of people. It’s so hard to know what is legit and what’s not.
Thank you for the great information!
Odd. I was wondering why Avon was on the list. I was a rep in the 80s, it was not mlm at all, there was no downline, I ordered my client’s products direct from the company and I do not recall any pressure to recruit? it was a basic commission sales job. Distribute catalogues, knock on doors, take orders and payment, order product wholesale, deliver when it arrived. I did not need to have any stock except a few samples. Maybe it was different in Canada?
This article may shed some more light on Avon and their MLM structure
hello admin! I’ve been in an MLM way back 2008..it’s true that they are more focused on recruiting people than promoting their product which is so expensive when you buy a single piece so they will encourage you to “pay -in” and explain how you will earn through this system they called pairing. And now I’m here in Brunei, there’s another MLM trying to make us fall again. So it’s really a know. I don’t want to sell very expensive products and encourage people to be like what they are doing.
Awesome post about MLM.
And i totally agree with you! MLM is not for everyone and i would not recommend this business model to anyone!
One girl i know works for Avon, and she is losing money constantly. I think that regular 8-4 job is much better option than MLM.
I don’t agree with you that all MLM products are low quality, but they are overpriced. I totally agree with you about that.
Thanks for the great info about MLM. I am looking forward to read more interesting posts from you.
Thank you for your article! I appreciate the way you explained your reasoning for turning people away from MLMs. I agree with you about MLMs not being the best way to make money.
I joined Amway a couple years ago and had a positive experience for the most part, but I did not like the pressure to go all in. I felt like all I could think about was building my business by recruiting and selling. I was told to talk to everyone wherever I went. This was more stressful than my 9 to 5 job. I was constantly thinking about pleasing my upline by trying to build my team. I read all the books, listened to all the CDs, and went to all the meetings (which were 4 hours away from where I lived and in a different country). It got to be unhealthy and I didn’t feel like I had time for anything else, so I made the decision to quit building the business.
But I do still buy the products because they are high quality and have really helped my health. That is where I disagree. I know some MLM companies, like you said, don’t have high quality products like they claim and are very overpriced, but the top MLM companies do have a lot of research go into their products for health/quality of life. They truly are trying to help people eat and live better. I’ve done a lot of research on the products myself, comparing them to what you see in a grocery store, and they are worth the high price in most cases.
Thanks for the informative comment, I will admit I made a generalisation when I said that all their products are average. I will amend that because I have found out that some people do enjoy the products offered by a few MLM companies.
It’s only from my personal experience that I made this observation but I am happy that they have helped you.
All the best
This article has come around in good time – I recently wrote an article on a MLM named Isagenix and posted it to my blog. Imagine my surprise when a couple of weeks ago I received a cease and desist notice from some New York Lawyers firm! Anyway – I took it down because I can do without the hassle. Moral of the story – MLM companies will try anything to keep the truth from you!
Thanks for letting me know, I will have to be extra careful when I review MLM companies.
Good, well written article Minhaj. I’ve been sucked into MLM in the past and can say that I had absolutely no success. I think you’re a little hard on companies such as Avon and the like where there is a possibility of earning at least some money from selling rather than just pure MLM, although I do accept that the money earned is never going to be huge. Del 🙂
Great review of the dark side of MLM – well there really is no bright side.
A very, very long time ago when I wanted to have my own business I got sucked into MLM. The person that got me in told me everything I wanted to hear. But it didn’t take long for me to discover MLM is the worst business opportunity on the planet.
95% of the people that get involved with MLM will quit in their first year. Plus they will be deeper in debt then when they started.
With affiliate marketing you’re in total control of every aspect of your business. Your income does not depend on how many people you recruit or being forced to buy the mlm company’s products each month to qualify for your commissions.
Unlike MLM with affiliate marketing you get to decide what you want to market.
With an MLM company you have no choice but to sell whatever products the company you’re involved with has. And more often than not these are inferior products, they just wrap them up in a good story making you think they are better. Go to Costco and save yourself the money on these garbage products from MLM’s.
If you truly want to build a business that you’re in total control of Affiliate Marketing is by far the best online business model. And the best training with everything all under one roof is Wealthy Affiliate.
I’ve been making a full time income as an affiliate marketer since 2015 so I speak from experience, affiliate marketing works. So if you’re tired of all the lies and BS – take a small leap of faith and let Minhaj help you build a real online business as an affiliate marketer. You won’t regreat it.
Thank you for such an in-depth article! MLMs do an amazing job at falsely depicting a life of your dreams, if you just “do this…”
I, too, have been involved in a couple of MLMs and even though it felt a little suspicious to me, I did my best to make something of it. However, here I am, reading more about the truth behind these unfortunate scams.
You make a great point, MLMs promote financial freedom and what you’re life will be like if you spend more money on their hefty, pricey suggestions. This is something that I have become more aware of: if they are advertising about their lifestyles and cars, and not so much about the process, then you know its a big possibility it isn’t a legitimate program.
Great suggestions to alternatives, as well.
Hello, great site, so glad I came upon it.
I have been involved with several MLM’s, didn’t make too much money as they all promised. Worked hard, no success. One MLM, I even went back to a second time a few years later and again, went nowhere.
Can these MLM be set up so that all people can make money? Seems like some sure are going strong.
Thanks again for the site.
thank you for this article, exposing some nasty facts 😉
By the way, the image you used (with two pyramids) is from this blog post about MLM vs JOB:
would you be so kind and update it’s source link?
Also, by doing it you will gain one more thematically related link on your site 🙂
It is not true. If you want to succeed in Network Marketing first you should choose great company which according to me is Forever Living Products and then you should develop that skill which is required at that field and do MLM with focus and consistency.
NOTE: Consistency is the key.
I don’t agree with this article! I have done a lot of research and I just don’t get why it’s so awful. Recruitment is not required by most companies, but its an opportunity to make residual income and earn valuable supervisory experience. You do not have to purchase the product ahead of time. You can sell online through websites and purchase only after a sell is made and companies are required by law to buy back 90% of unsold products. So I don’t understand why people keep saying that they lose money. If you’re careful you can keep your expenses very minimal and they’re tax-deductible. It is also unfair to point out that people only make $1000 yr average without mentioning that most work roughly 10/hr a week at most. Very few people take this seriously has a full-time job or put much effort into it, some sign up only for product discounts. Despite this, I have come across many examples of people who make a living doing this. Though some MLMs do sell reasonably priced products, ie paparazzi sells jewelry for $5 apiece, many are overpriced but there is a market for overpriced products (for reasons ill never understand). I can think of many successful companies that sell ridiculously overpriced products. Also, how does the author know the quality is crap since they clearly hate MLMs and would likely never buy from an MLM? The products that are sold are not different than products sold by many other successful companies at the same or higher prices. The internet is bombarded with articles attacking MLM companies but I just don’t get it. None of their arguments seem valid to me. Yes, its a risk with no guarantee of success but the same can be said for any other investment.
As per experience,it’s true as I had involved with Amway no success but lost my best relationship n regretting why I did so…..
Sooooo sad part in my life I am unaware in anyone’s part…..