I've been sitting on this one for awhile.
I have some dear friends that participate in MLMs (Multi-Level Marketing Companies), and I didn't want to make them feel bad or make them feel like I was coming down on them. So, let me preface this WHOLE thing with if you have put time and effort into researching an MLM and still feel it's a good financial move for your family, that is your right to do so. I trust you wouldn't do anything that was an obvious bad move and these are just my personal feelings on the subject.
I've made it pretty clear that I'm not a fan....and I've been saying for some time I was going to cover the WHYs of that....
So, with that said, here we go....
I've worked in "sales" in some way, shape, or form for quite some time. I've worked in retail, my husband and I owned our own retail record store, and I've had a service-based wedding business since 2008. So, I've had experience running my own business for some time, both retail and service-based. My father was an entrepreneur and ran his own business my whole childhood. So, I've been able to immerse myself in the "owning your own business" world. It's rough: The up's and down's in income, taxes, marketing, sales, and personal connections to customers. There really is a risk and reward part to the whole "owning your own business" thing that is unlike anything else.
Multi-Level Marketing Companies are companies that people buy into, becoming a sales-person for their product. The way you make money is by recruiting other people to sell "under you" (becoming your downline). This is what makes it multi-level. Many MLMers will tell you that any business with a CEO is an MLM because anyone below the CEO is in their "downline" but this is not accurate (and that is all kind of a line that they'll feed you at those big rah-rah MLM conferences people attend).
There's quite a few differences between owning your own business and selling for an MLM company, and we'll delve into some of that here.
MLM Products Can be Unproven, Shoddy, or Non-Existent
The first hint that an MLM company you're dealing with is bogus is their product really isn't all that much to crow about. Because it's NOT ABOUT THE PRODUCT. It's about recruiting salespeople. That's how MLM companies make their money: the more people who buy into selling for them, the better they are doing.
Do you ever notice that when the next "big thing" in MLMs hits the market, it seems like everyone you know is selling for them? There's no consideration for market saturation at all. Because the MLM company doesn't care. They get your on-board money and they have you shilling their wares and recruiting more people. Once everyone gets sick of the product, they can move on to something else, leaving salespeople out there without a healthy income stream because they completely flooded the market.
A lot of the products that come through MLM's make promises that can't be delivered (like wraps for your tummy that are supposed to help you lose inches or Herbalife that has promised everything from weight loss to curing cancer). A lot of them have products that are not worth what they cost. Some of them don't have a product at all.
MLM Salespeople are Pushed to Perform High-Pressure Sales Tactics
I've read the manuals/magazines that are sent to MLM salespeople, and in those magazines they give "sales tips" for their sales people to try and win over folks who say "no". These tips include badgering, online PM'ing, and consistent positive reinforcement on social media. You know how some folks who get on-board with an MLM company never shut up about it? They TELL you to do that. That you live the life of the MLM company and become a cheerleader. And people are all too happy to do it. This is pretty much free marketing for the company. They send their sales folks out to do their bidding, and the salespeople are paying to do it.
So, the next time someone private messages you to say "Hey, I saw on Facebook that you have a cold! You should try this essential oil!"....that's the MLM company directing them to use that tactic to try and gain new customers.
It's annoying. To say the least. You can pretty much be sure that if you PM me with information on your "surefire way to lose inches/kick the flu/whatever" I'm going to ignore you.
Here's the thing. Any of us who own our own businesses more-than-likely use social media to market our wares/services. When my husband and I owned the record store I put out information about new records, sales, etc. Of COURSE. It's the new world of marketing and advertising: social media, influencers, tag me, etc.
The way MLMs pound the idea of their item or service home is certainly a horse of a different color. It's like marketing diarrhea, as pleasant as that idea is (hey, there's probably an essential oil for that!) They ADVISE their salespeople to hound customers (Did that customer say no? Maybe it was just no THAT DAY...come back another day with an offer! You are bringing something wonderful into their life! They just don't know it!).
There Is Pressure to Stock Unnecessary Inventory
When you win prizes for being a top "seller" with an MLM, it's not because you sold a lot of product. It's because you BOUGHT a lot of product. The MLM does not care if you sell it or not. They care that you continue to stock inventory.
Here's another difference between an MLM and a real retail store. When I owned my retail store, no one was giving us gold stars for buying a lot of records from the wholesaler. They didn't care if we made a purchase or not. We were able to survey what our customer really wanted and make smart inventory purchases based on those needs and wants. We didn't stock what would obviously not sell just to be able to purchase more from the wholesaler.
Take the story of MLM Lularoe, for example. When you sign up to sell with them, you can buy certain items....but you have no control over prints. When I discovered this tidbit I was flabbergasted. You get these boxes of rando prints and some could be complete, unsellable garbage. But, as some LLR sellers have relayed, the company tells you that "someone" will want them, eventually. That the sellers are just not trying hard enough to sell them. They don't BELIEVE in the company enough. They are not working their business like a business. This puts the fault on the shoulders of the retailer, not on the company for making items that are completely unwanted in an over-saturated market.
Which leads me to....
Lying Liars and the Lies They Tell
If some 30-something mom is inviting you to a "party" these days, you can be sure it's probably to sell you something. You can't even trust a party invite anymore. You're not a potential friend. You're a customer.
There's conventions...with cheers, and pep-talks (sermons?), and labeled swag and is this unlike other conventions? No....but conventions espousing the miracle of whatever-product are pretty weird regardless. MLM or not.
People will tell you again and again that such-and-such MLM has changed their life completely. That it made them believe in themselves. It saved their family. Made them a better mother. Whatever platitude they need to put on a brightly colored meme and stick on the internet.
Let me be real with you here. They are going to sell you on the idea that you can stay home with your kids and make a full-time income with part-time work. This is false. The true statistics are bleak.
While entering into an MLM is typically less expensive than taking on a true business venture, statistics show that after 5 years, 90% of those who sign on to an MLM have left the company, per a research study on over 400 MLM companies by Jon M. Taylor, Phd. for the Federal Trade Commission. In comparison, The Small Business Association (SBA) found that 44 percent of small businesses survive at least four years, and 31 percent at least seven years.
Per Inc.com, the MEDIAN income for an MLM Rep per year is $2400.
That's $200 a month.
Could you be the exception? Maybe. But, the statistics say you won't.
In a direct quote from his study of over 400 MLM Companies, Dr. Taylor concluded: “In every case, using the analytical framework described, the loss rate for all these MLMs ranged from 99.05% to 99.99%, with an average of 99.71% of participants losing money in an MLM. On average, one in 545 is likely to have profited after subtracting expenses and 997 out of 1,000 individuals involved with an MLM lose money (not including time invested)."
99.7% of people LOSE.MONEY.
Write that down. Put it on a sticky. Stick it on your computer. Look at it. Read it.
My intention is not to step on dreams, make people feel stupid for joining MLM companies, or to tell folks they cannot truly love a product an MLM may sell (though you will find many of these products are overpriced for what they offer and not good for a frugal budget).
My intention is to help people find legit ways to support their families, pay off debt, and become financially fit and every run-in I've ever had with various MLM companies have run, pretty much, the opposite of that goal.
So, I guess what I'm trying to say is, if you love Lipsense....save your cash spending money in your cash spending envelope and buy some Lipsense. If you love Scentsy (is it still called that?)....save your cash and get yourself some candles, girl.
But, if you're looking for a way to make money to help your financial fitness goals, there are far better roads to travel down than the MLM road to riches. If you want to invest in a business idea, do your due diligence and research the numbers.
Any business venture is a gamble. A big one. But there are definitely ways of gambling smart and with long-term success goals in mind.
And please... Don't hate me :) <3