Is Multi Level Marketing a Scam?

 is mlm a scam

It was a rainy Wisconsin day and my best friend was in my truck with me. We were on a short road trip to a hotel about 75 miles away at my friend’s behest because he really wanted to go to a seminar.

It was all about being able to sell products to customers, recruiting other friends and relatives into selling the same product, and then making money off of each sale in our network. One thought kept going through my head. “Is multi level marketing a scam?

I was about to find out. I was also hoping for a big tray of snacks because I’d missed lunch.

I remember that the meeting was in some dark conference center that was well away from the really nice parts of the hotel.

It took the two of us about 15 minutes to just find the place and two of the hotel’s employees couldn’t even point us in the right direction. The guy who was doing the Multi Level Marketing presentation talked repeatedly about buying water toys for his kids. He wanted us to be in his network so he could benefit from our sales.

Unfortunately there are a lot of Multi Level Marketing companies that are about as close to a scam as you can get while still being legitimate. Even the ones that are kind of decent tend to conveniently forget about the pyramid-level payouts you achieve unless you call and remind them three times about your signed agreement!

Is there a way you can find the good companies that provide good home business opportunities instead of working you to death so that only a few can benefit from your hard work?

 

Rule #1: You Won’t Get Rich Quick

Any multi level marketing opportunity that offers you the chance to get rich very quickly by selling products is an opportunity that you’ll want to avoid. Unfortunately this “get rich quick” mentality is the reason why many people get involved with this type of home business.

They’re often desperate because they’ve lost a job and need income. Or maybe they need some supplemental income because the bills are mounting up on the existing salary.

Either way, the problem that many face with MLM is this: they don’t put in the sweat equity that is needed to make it pay off.

What you’re doing with multi level marketing is selling products to customers. It’s up to you to find a customer base and that means you’re going to need to put yourself out there as a salesperson.

You’ve got to get creative and go beyond the parties and demonstrations at work or daycare to really build up your income to make MLM opportunities pay off big!

  • Walk door-to-door and talk to people about the products that you represent.
  • Create fliers, brochures, and other marketing materials that will draw people to your home business.
  • Make samples of products readily available.
  • Have an online presence that has an ecommerce platform outside of the national MLM platform so that your customers can deal with you directly instead of the national organization.

It takes a lot of hard work to build up a sales presence. You won’t be able to do that overnight, even if you live in a city with millions in the population base and you’re the only one selling the line of products you represent!

Many believe mlm is a scam because they don’t find success, but that’s often not the issue. It’s a lack of actual working hours put into the job that’s the problem.

 

Rule #2: Your Downstream Is Not Reliable Income

Is multi level marketing a scam? The foundation for this thought often comes from the idea of the downstream income that people can earn. The downstream basically has three steps in most MLM organizations to achieve success:

  1. You have a friend sign you up as a sales representative or you join through an online program and become part of that person’s downstream.
  2. You then recruit other people in a similar way so that you can have your own downstream.
  3. You then encourage everyone else to sell products so you get a percentage of their work revenues while you sit at home and watch Jerry Springer all afternoon.

The problem with Multi Level Marketing and why it seems like a scam occurs when the downstream revenues take on a greater emphasis than the actual sale of products to customers does in the home business model. If you’re focusing on the downstream instead of sales, it’s a reasonable expectation that others you would recruit would be doing the same thing, right?

Pretty soon you have a massive network of people in your downstream who are all doing one thing: focusing on the downstream.

In order to make money from multi level marketing, it is necessary to actually sell products so that you earn commissions. If the commissions for sales are lousy and the downstream commissions are pretty awesome, then you’re in a bad organization because there’s no reward for doing the real work that’s necessary!

Look for opportunities that will pay out a large percentage in a commission and a small, very small percentage in a downstream if there’s even one that exists. When you do this, you’ll get rewarded in both ways and still keep the focus on the two areas that you should always have in spotlights: your customers and your budget.

 

Rule #3: It Takes Money To Make Money

multi level marketing

If there were a way to really make money without making some sort of an investment, then everyone would be doing it or it is a closely guarded secret that only a select few know of in the world today.

A writer must purchase a typewriter, a computer, or even paper and pen in order to produce. A painter must purchase artistic supplies. The retailer must purchase inventory so that customers can browse through products to see what it is that they really want.

That last category is where almost every MLM representative falls into when they begin their business. You’re selling items to customers, which means you need to have inventory on hand in order to properly demonstrate why your products hold more value than the cheap junk someone can run down to Walmart and buy 5 minutes after you’ve finished your sales pitch.

When you’re desperate and in need of money, it’s difficult to spend money on inventory that might not ever sell. You could pay the mortgage or the rent… or you could take a big gamble and buy products to try to sell to other people.

The company that you represent? They don’t care if you buy their products or your customer does. They’re acting as the distributor or the wholesaler in this relationship. When you place your inventory order, they make their money. Now it’s up to you to make that money… and that’s not something everyone has the skills to do.

Sometimes this is compared to a Ponzi scheme, and in some MLM opportunities that is true. You’re promised a high return for a small investment and the organization takes someone else’s money to pay you.

In a legitimate opportunity, however, you’re only investing in yourself. You pay the merchandise at a discounted price and then sell it to people at a retail price, with the margin in-between being your revenue base.

As for the downstream in this model, your inventory purchase would provide the person who recruited you with a small percentage, often less than 5%, as a “thank you” for recruiting you. In return, if you recruit others, you would achieve the same reward.

 

How Legitimate Is Multi Level Marketing?

It can be very legitimate. It can also walk the fine line between legality and illegal business practices to the point where you’re not really sure which way is up!

Multi Level Marketing in itself may not be a scam, but that doesn’t mean people have figured out ways to try to scam you through this legitimate business practice. That’s why it is so important to perform your due diligence on any organization you’re thinking about representing, even if it is your best friend or even your mother who is recruiting you!

Sometimes that means traveling a couple hours with your best friend to a dark and dingy conference room to hear a sales pitch that has no snacks whatsoever. Sometimes it means you get onto the internet, talk with people on the forums, and look at the true reputation that someone has.

It means looking at the history of the company and what their payment rules are. Don’t just focus on the disgruntled people who couldn’t make a go of it! Look at what makes people successful and what they had to do to gain that success.

When that is your focus, you’ll be able to find the potential for success that makes MLM a good home business opportunity.

Is multi level marketing a scam? Only if you allow it to be.

 

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