Table of Contents
- Do People Actually Make Money in MLM?
- Are All MLM Companies “Pyramid Schemes” or Scams?
- What Does it Take to Succeed in MLM?
- Why Do So Many Fail in MLM?
- Are There Any Free MLM Companies?
- Bottom Line
Listen, this is the thing:
If you can’t spot the sucker in your first half hour at the table, then you ARE the sucker.
Those are Matt Damon’s first two lines from the great poker movie “Rounders”.
And when it comes to MLMs, the same principle applies.
Like it or not, you’re in an industry full of hungry sharks.
All trying to recruit you.
And if you don’t know how to tell the good from the bad, you’re gonna get eaten alive.
So this article is my tell-all review of the MLM business model.
At least for some folks.
More importantly, I know what really happens to the people who join ’em.
Been there. Done that. Got the t-shirt.
So I’m gonna do my best to explain the legit from the sh*t.
But first, in the spirit of transparency, I just wanna say that I’m not an MLM recruiter.
I have zero affiliation or involvement with any network marketing company and have no plans to join one.
So don’t ask me to join your “ground-floor” opportunity cuz I ain’t interested.
But I have been in my share of MLMs in the past.
And thanks to this blog, I’ve had the unique experience of hearing from literally thousands of current or ex-MLMers.
Bottom line: MLM has its good points and bad points.
I’ll expose as many as I can in this article.
After reading this, I hope you’ll be able to see through the smoke and mirrors of this industry and recognize fact from fiction.
By the way, in case you’re a complete newbie, MLM stands for “multi-level marketing” also known as “network marketing”.
Same thing, different name.
Now, let’s start with the million-dollar question…
Do People Actually Make Money in MLM?
Yeah, but it’s rare.
A fortunate few even get rich.
But that’s damn rare.
This is directly from the Federal Trade Commission’s (FTC) website:
Failure and loss rates for MLMs are not comparable with legitimate small businesses, which have been found to be profitable for 39% over the lifetime of the business; whereas less than 1% of MLM participants profit. MLM makes even gambling look like a safe bet in comparison.
I gotta say though:
If you’re someone who’s just looking for “a safe bet” and high percentage wins — being an entrepreneur prob’ly ain’t for you, Brotato chip.
Fact is, being a risk taker is an absolute requirement to be successful in network marketing, or ANY home-based business for that matter.
First of all, the company founders.
For example, Mary K. Ash founded the cosmetics MLM giant Mary Kay.
She was worth $1.5 billion when she passed away in 2001.
Amway’s founder, the late Richard DeVos, was worth $5.4 billion before he passed away in 2018.
But what about these MLM gasbags who post Instagram pics of themselves enjoying luxury yachts, Ferrari’s, and houses the size of castles?
You look at these photos and can’t help but wonder:
“Is this all staged?”
And if it’s not, are these folks getting rich only because everyone else in the company went broke?
What about all those poor saps who don’t make a dime in MLM?
To be fair, that could be said about almost all home-based businesses.
And let’s be real: Success is a two-way street.
You can’t just blame your company, your busy upline, or a lazy downline for your lack of results.
Just like you can’t really blame your parents, boss, or the government for your crappy life.
My personal motto is:
“Everything is my fault.”
Own your sh*t.
Just because you have a business structure that has many levels of support, ultimately it’s still up to you.
Unfortunately though, these “levels” are one of the main reasons why MLMers have been plagued with the following question for decades…
Are All MLM Companies “Pyramid Schemes” or Scams?
Simple answer: NO.
It’s typical for those who don’t know jack about MLMs to paint them all with the same negative brush.
Especially when it comes to accusations of being a pyramid scheme.
This is mostly due to polite ignorance or in some cases: sheer stupidity.
If you’re taking a serious look at any MLM company, you need to understand why people think this way.
(If done the right way.)
It’s definitely NOT for me, but MLMs clearly work for some people, are obviously legal, and have been around for over a century.
Pyramid schemes, on the other hand, are 100% illegal.
Other than that, the main difference between MLMs and pyramid schemes have to do with product sales and recruiting.
In a legit MLM, there’s always an actual product or service being sold, along with the option of building your own team of distributors to build passive income.
But since both involve recruiting, MLM critics have often referred to network marketing as “legal pyramid schemes”, which explains why this myth continues to perpetuate.
Now in case you didn’t know, to be super-successful in network marketing, you gotta recruit new members.
Doesn’t matter how good your product or service is — the real dough is in the flow of new recruits.
I’m not a big fan of Dave Ramsey, but he does a pretty good job explaining this concept below:
So generally speaking, there’s nothing wrong with MLMs or building a team of like-minded entrepreneurs.
But if too much emphasis is placed on recruiting and not enough on product sales, an MLM can land in seriously hot water with the FTC.
For example, Amway is the number-one MLM company on the planet doing around $9 billion (!) a year in revenue.
Back in 1979, the FTC made a landmark decision and ruled that Amway was NOT a pyramid scheme since its distributors were not just being paid for recruiting new salespeople.
Amway did have to make some other changes, but that ruling set a precedent for the MLM industry that remains to this day.
Don’t take my word for it, this is straight from the FTC’s website:
Some people confuse pyramid and Ponzi schemes with legitimate multilevel marketing. Multilevel marketing programs are known as MLM’s, and unlike pyramid or Ponzi schemes, MLM’s have a real product to sell.
More importantly, MLM’s actually sell their product to members of the general public, without requiring these consumers to pay anything extra or to join the MLM system. MLM’s may pay commissions to a long string of distributors, but these commission are paid for real retail sales, not for new recruits.
It can get even more confusing when you see how many MLMs give special “bonuses” for building (aka recruiting) a high-performing downline.
When that line gets crossed too far, the FTC will often step in and either shut down the MLM company or hit them with heavy fines.
Several of the biggest MLMs on the planet have been accused of pyramid scheme practices at one time or another.
It seems to be almost a rite of passage in this industry.
If you have a sense of humor (and 30 minutes to burn), you should also check out John Oliver’s take on multi-level marketing below.
Keep in mind that it’s a comedy show and he’s not interested in giving both sides of the business.
In other words, it’s heavily biased and completely anti-MLM:
To keep things fair, here’s an excellent response to John Oliver’s review and a more thorough (60 minute) examination of MLM:
If you skipped both vids, just know that there are 2 sides to the network marketing coin.
Some peeps absolutely love the business, some throw up in their mouth when they hear the term “MLM”.
But from now on, if you hear someone say that all MLMs are a pyramid scheme, don’t waste your time arguing with them.
If you’re seriously interested in an MLM business, do your own research and check out the company yourself.
Might be a good fit for you. Might not.
But at least you know better now.
What Does it Take to Succeed in MLM?
So you wanna be a rock superstar and live large?
A big house, 5 cars, you’re in charge?
Comin’ up in the world, don’t trust nobody
Gotta look over your shoulder constantly
— Cypress Hill
If you wanna be an MLM superstar, it ain’t all rainbows and lollipops.
There are many traits and skills that are must-haves if you’re gonna succeed in this game.
You need a ton of patience, determination, work ethic, and excellent communication skills to name just a few.
But here’s the thing:
If that idea makes your butt pucker and toes curl, network marketing is definitely not for you, Cupcake.
Because like it or not, it’s ALL about selling.
You’re either selling a product, service, or “the dream” of being your own boss if you’re recruiting someone into your MLM company.
So don’t be fooled by those who may try to ease your discomfort by telling you there’s “no selling involved”.
If you’ve ever been to a network marketing conference or event, you’ll quickly notice that all of the top-level distributors have epic sales abilities.
Some of them are born with it, others have developed it over many years of experience.
And there’s nothing wrong with that.
Truth is, the success of every home-based business ultimately depends on how well you sell your products or services.
But in MLM, recruiting other people into your organization is the name of the game.
Mary Kay, for example, became a billionaire because she knew how to sell her products and, more importantly, her dream of being a successful entrepreneur to other women.
The same could be same for Rich DeVos of Amway, Art Williams of Primerica, and every other successful MLM founder in history.
So this is where self-awareness comes into play:
If you’d rather fight a Grizzly bear than try to recruit and sell the dream to your friends and family, you better stay the hell away from MLMs.
From my own experience, there’s just something f*cked up about turning every form of social interaction into an opportunity to build your team.
Now don’t get me wrong.
Being passionate and having a true desire to help others achieve their goals is awesome.
I’m all for being obsessed about your business and entrepreneurial life.
And there’s nothing wrong with using your warm market and social media to build your business — to a degree.
But there’s a good reason why the following joke exists about long-time MLMers:
In other words, when practically everyone you meet and interact with becomes a target with a “Recruit Me” sign on their back…
And every other post you make on Instagram and Facebook is another ultra-spammy testimonial or marketing pitch…
Don’t be surprised when your friends and family start avoiding you or even blocking you on social media.
Get it? Got it? Good.
Why Do So Many Fail in MLM?
Here’s a fun fact:
When it comes to network marketing, almost everyone quits.
Technically speaking, attrition rates are about 99%.
In case you’re unaware, “attrition” is just a fancy word for the statistical difference between people who start something vs. those who actually finish.
Winners vs. quitters.
But let’s be honest, almost everything worth doing has a high attrition rate.
Behold the most common New Year’s resolutions:
- Exercise more
- Lose weight
- Eat more healthily
- Take a more active approach to health
- Learn a new skill or hobby
- Spend more time on personal well-being
- Spend more time with family and friends
- Drink less alcohol
- Stop smoking
(Okay, that last one was mine.)
Bottom line is, LIFE has a high attrition rate.
The phrase “if it was easy, everybody would be doing it,” applies to anything that’s worth the time and effort.
That’s especially true when it comes to starting your own business and actually becoming profitable.
So while a 1% success rate in MLM might be depressing, you have to remember that attrition is everywhere, not just in network marketing.
By contrast, the Small Business Administration (SBA) tells us that 51% of (non-MLM) small businesses will survive their first five years.
But don’t delude yourself into thinking the odds are stacked in your favor with ANY home business.
Notice I said “survive,” which is different than being profitable.
Of those U.S. small businesses that do fail, 50% go belly up during their first year.
And of those that actually make it, most of them are completely out of business within a decade.
That still doesn’t explain why so many folks quit MLM, though.
Here’s a couple reasons off the top of my head:
1. The company might actually suck.
Lousy MLM companies somehow manage to stay in business for years.
Even if their product straight up sucks donkey balls.
But if the company has solid leadership along with a top-notch recruiting operation, sometimes that’s all it takes.
And it’s not illegal to sell an overhyped, overpriced product.
Just ask Kanye about his Nike Yeezys.
(Yes, that’s a real eBay listing.)
2. The person who quit the company might suck.
There’s no nice way to say this.
Most people love the idea of entrepreneurship, but they suck at being one.
By that I mean they’re either too lazy, impatient, or unwilling to do whatever it takes to be successful.
But you’ll never hear anyone say:
Instead, they’ll bust out a dump truck full of excuses:
“Total scam. Pyramid scheme. No one wants to buy this crap. My upline wouldn’t help me. Nobody will join my team. I don’t have time for this.”
Because those are actually MY words.
See, the problem really wasn’t with the MLM companies I joined.
As cliche as that sounds, it’s the truth.
It doesn’t matter if it’s MLM, affiliate marketing, franchising, or any other business model.
Until you start taking full and complete responsibility for your success, you will not have it.
Take it to the bank.
Are There Any Free MLM Companies?
No offense but if you’re seriously asking this question, please go find another 9-to-5 job.
I don’t care what kind of home business you’re starting, there’s always gonna be an upfront investment whether it’s time, money, or education.
It always amazes me how some folks won’t think twice about buying the latest big-screen TV, or leasing a brand-new vehicle they can’t afford.
Yet they are unwilling to invest a dime in themselves.
The great motivational speaker Jim Rohn said it best:
But there are basically two types of business bargain hunters.
First, there are the “cheaple” — people who are looking for the cheapest and most inexpensive business opportunity no matter what.
They’re so interested in saving money that they forget the goal is to actually MAKE money.
It’s not surprising that these folks often get suckered into scams, since you get what you pay for in life.
The second type of business bargain hunter is what I call the “freeple”:
People who are looking for as much as they can get for FREE, so they can attempt to do it themselves without spending a dime.
These folks are usually very distrustful and cynical, which explains their unwillingness to invest in anything.
And yes, I’ve heard this excuse before:
“I want to see if it works before I invest any money into it.”
Or, “If it works so well, let me do it for free and I’ll pay you back when I make money.”
Go ask Harvard or Yale the same question.
Why don’t they allow that?
Obviously they’re trying to make money, but they also know that if you don’t have any investment or “skin in the game”, you’re not gonna really care.
Especially when you’re broke.
Sure, you can go get a student loan but you still gotta pay to play.
The cheaple or freeple mindset is literally the kiss of death to any hopes of owning your own successful business.
Grand Cardone sums it up like only he can:
It’s also a self-fulfilling prophecy because how you do one thing, is how you do many things.
And if you won’t invest money into a business, what else won’t you invest in?
How ’bout time and effort?
Let’s be honest, it’s easier to spend money than to get off your ass and work.
So if you’re not “bought in” enough to invest money into a business, you ain’t gonna put the sweat equity in either.
Bottom line: “Free” comes at a high price if you’re aspiring entrepreneur because time is money.
In my experience, it’s less costly to invest a few thousand dollars into something that’s been proven to work, than wasting time by trying to nickel and dime your way to success.
That’s why franchises cost so much — they’re proven business models.
Long story short, if you wanna make it in this game, you gotta spend money to make money.
If you can’t live with that, get used to working for someone else until you’re ready to change your attitude from:
“What’s the least I can spend to get good?”
“What’s the most I can invest to become great?”
That’s it, I’m done.
Fact is, many smart and successful entrepreneurs are MLMers.
And as much as I don’t particularly like network marketing, MLM companies are not all pyramid schemes.
They definitely have their share of bad apples who cross the line and get slapped by the FTC.
But the business model has been around for over a century and ain’t going anywhere.
Neither are the MLM haters out there.
When it comes to owning your own business and creating residual income, finding the “right fit” for yourself is essential.
So is developing the correct mindset and skill sets you’re gonna need to work from home.
Yes, some business models have higher success rates than others.
Some are full of competition and hard as hell to break into.
But where there’s a will, there’s always a way.
Excuses vs. results.
Some people find it in MLM.
I found it elsewhere.
Now it’s up to you.