Multi-level marketing opportunities have business models that reward members for recruiting in other members. Can this actually be a legitimate? Is multilevel marketing a scam or are there opportunities like this out there that are not scams? And if they are legitimate are they worth getting into or is it just going to be an uphill battle to make money that will never pay off?
In the multilevel marketing industry there are plenty of scams. However, not all mlm’s are scams. In this short post I’ll be going over the difference between the two, the most common type of mlm scam that exists, why legitimate mlm’s still might not be a good choice to get involved with and more.
What Is Multilevel Marketing (MLM)?
MLM is a business model where there are different levels within the compensation structure. The salesforce of MLM opportunities are independent contractors (which can be anyone) that go out on their own and are responsible for when they work, how they work, etc. Members are able to recruit in other members beneath them and earn commissions multiple levels down based on what their recruits do, and what the recruits beneath them do and so on.
MLM opportunities often refer to the people below you as your “team”. They will often push you to push your team to go out and do the same thing,… recruit, which in turn will make you money too. Then those new recruits are encouraged to do the same and the cycle continues.
The size of the MLM and the amount of focus placed on recruitment can vary a lot, and this is what separates a legitimate MLM from a scam pyramid scheme MLM.
Scam vs Legit
The most common type of MLM scam is a pyramid scheme. Why? Well because it is the easiest to pull off since the structure of an MLM already resembles one.
In pyramid schemes the majority of the focus is placed on recruitment instead of product sales to the general public. This is something you want to look at when researching a MLM opportunity. If they don’t talk much at all about you actually selling products to the general public and only talk about you recruiting others in, getting them to buy “starter packs” or something like that, and earning commissions from what they do… this is a red-flag.
Where the legitimate mlm ends and where the pyramid scheme begins is somewhat of a blurry line. The most basic way of putting it is that a legitimate mlm will bring in revenue from actual sales to real customers whereas a pyramid scheme will rely on recruitment. However, there is much more to it than this. The lines are blurry because it can be hard to determine how much they are allowed to focus on recruitment, what revenue is coming from where, etc.
You can read some good information the FTC provides on this topic here if you’d like.
MLM’s can still exist legitimately if their compensation plan relies on sales to the general public. You can still earn commissions by recruiting in people beneath you and earning a piece of what they make, as long as they are making money from selling to real customers. If the money comes from the sales to real customers in the first place then its legit.
But as I said, this is somewhat blurry. I have seen plenty of legit MLM’s that have been operating for years that do require members to purchase “starter kits” of some kind. This is allowed as long as they are necessary for business and are used to make real product sales.
I have reviewed plenty of legit mlm’s in the past that do require starter kit purchases, some of which include Beauty Counter, Life Matters, and PUREhaven Essentials. In all of these cases the starter kits are a big help to getting your independent sales business up and running. They are required for good reason.
Even If a MLM Is Legit… It Might Not Be a Good Idea
Even if a mlm opportunity is legitimate it doesn’t mean you should join. These are not great opportunities for everyone and I’ll go over why.
Mlm’s give members lots of potential to make money but also make it harder to make money when starting out. The reason for this is because of their pyramid-like structure where the money flows up from those at the bottom into the pockets of those above them. What this means is that money that those at the bottom could be making from product sales is getting taken away and given to those above them. So you will earn less commissions than you possibly could if there wasn’t a mlm system in place. This makes it harder for beginners to get started. And of course because of the way pyramids are structured, there are always more people at the bottom than at the top, which means most people will be struggling.
This pretty much means that you have to recruit others in to make good money. Now of course, like I said, mlm’s will vary in how much they actually take away and distribute to those above so the amount of recruitment needed to somewhat “break even” can vary. But either way… if an opportunity is a mlm and rewards based on recruitment, this basically means if you aren’t recruiting you are just making it harder for yourself and not taking advantage of the compensation plan.
The Reality of MLM’s
Because of the way that MLM’s make it harder for beginners to get rolling, there is almost always an extremely high turnover rate when it comes to these opportunities. People get started thinking they are going to be able to make a ton of money, they find out how difficult it is and they quit.
MLM companies will often times provide income disclosures where they will show a table of all the members and how many percent of members made how much money. You will usually see the overwhelming majority of members making very little money while the top few percent are the ones really reaping the rewards of the mlm system. And this is the way MLM’s will always work because, like I said, there will always be more people at the bottom than at the top.
Should You Try Out an MLM Opportunity?
If you are looking into joining a mlm then you have to know that recruitment is a must. I’ve said it multiple times and I’ll say it again…. how much a specific opportunity will rely on recruitment will vary, but in the end there is always some focus put on recruitment which you should take advantage of if you want to make the most of it.
Because most mlm’s that I’ve seen focus on recruitment to a pretty high degree, you are going to have to be good at it. The personality needed to really excel in this field is that salesperson type personality. Personally I don’t have it which is why I avoid these but I know some people that do and do great. It all depends on you.
If you are hesitant and not sure if you have what it takes to recruit then chances are you probably don’t.
As always, leave any questions or comments below and I’ll get back to you soon 🙂 Also, since you are looking into mlm opportunities you might be interested in taking a look at how I make a living online. I work for myself online which is probably something you’d be interested in. You can read a post that goes over what I do, how it all works, and how others can get started that I wrote Here.