All opinions held in this post are my own. The information within is for education & entertainment purposes only. I strongly advise you do your own research on this topic. Any images or videos are covered under the fair-use act.
It keeps happening to you! Some chick you haven’t spoken to since high school messages you about this amazing product or company she just started selling. She says she can give you a huge discount if you want to try it. Then she tries to sell you the idea of working with her because she knows you’d love to have more time with your kids. And “don’t you want to become a boss-babe and be the CEO of your own business hon”?!? No, there are soooo many reasons why you shouldn’t join an MLM (multi-level marketing company)! I could write a book about it. But, I’ll just start with the basics.
You should never consider joining a multi-level marketing company if you actually want to earn money from home. Trust me, been there, tried that. There are plenty of legitimate ways to earn money from home where you don’t have to sell your soul.
I know there are going to be people out there who are going to comment with stuff like, “You just didn’t do it right”. Or, ” You have to really work the business if you expect to make money”. Or, “That’s just your experience. There are plenty of people who’ve made money with (insert company name here)”. And you know what? All of that may be true. But it doesn’t take away from the fact that ALL of these direct sales companies use shady business tactics in one way or another. And 99% of the people who join don’t make any money!
Listen, Linda, I get it. The idea of working from home, on your own schedule, and earn some extra cash is very compelling. You might also love the idea of helping other people. Hello, that’s why I have a blog. But I can tell you point-blank, you will not make money with an MLM. You might even end up in debt. And girl, I’m speaking from experience.
What is an MLM?
MLMs or Multi-Level Marketing are companies that sell products at a wholesale cost to distributors who then sell them to the public. Representatives earn a commission from those sales and also receive a commission when they recruit other representatives under them (usually from the purchase of a sales kit). It is sometimes referred to as Direct Sales or Network Sales. The only true difference between these companies and a Pyramid scheme is that they must earn more money from selling a physical product than recruiting. And most MLMs don’t do this. (more on that below) Examples include Amway, Arbonne, Young Living, Mary Kay, Lularoe, etc…
It seems harmless enough, right? The problem is these companies tend to focus more on recruitment rather than on the product they want you to sell. That is where they are in a legal grey area. And you will see many people argue that this isn’t true for the company they work for. It might not. But the data shows that for nearly all of these companies if you want to earn any kind of income, you have to recruit. Name me one, of any of the popular MLM’s top performers, that got there by selling products alone. Just one. Recruiting people for profit is a pyramid scheme.
A lack of retail sales is also a red flag that a pyramid exists. Many pyramid schemes will claim that their product is selling like hot cakes. However, on closer examination, the sales occur only between people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public.FTC Website
How MLMs Skate the Law
Most MLMs skate the law by claiming that a distributor will earn the bulk of their income from selling a product, not recruitment. The problem is if you look at the income reports for the majority of these companies they heavily suggest that you will not earn the big bucks unless you recruit. And most of their compensation plans focus heavily on the benefits of recruiting.
The reason that this is a huge problem is that a pyramid scheme is based on the idea that you earn money by recruiting people, the people they recruit, and so on. This is highly illegal. The reason it is an extremely predatory practice is that the only people making money are at the top of the company or are people who joined when the company was still new.
There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company’s incentive program forces recruits to buy more products than they could ever sell, often at inflated prices.FTC Website
Health-Focused MLMs the Most Dangerous?
Some of the most dangerous types of MLMs are the ones that sell health-related products. Whether it be work-out programs, diet pills or shakes, vitamins, energy drinks, or even essential oils. They all have one thing in common, at least here in the US. They are skating the law because none of these industries are regulated very well if at all.
Many of these companies will state on their website or in training materials that they don’t make specific medical claims. But their distributors are out there every day on Instagram, Facebook, or Pinterest making wild claims or recommending unsafe use of the products. And more than likely none of their representatives have any sort of medical background to make these claims.
Some will say well, that’s not the companies fault. I call bullshit! If a sales-person for Nike repeatedly made claims that their shoes will prevent you from gaining weight, they would immediately be fired! Companies, as good business practice, will protect their brand no matter what. MLMs don’t care because they know these false claims sell products.
The Truth About MLMs VS the Traditional Business Model
There are so many ways a traditional business model is different from an MLM. And these facts give even more evidence as to why you shouldn’t join an MLM.
- First, let’s compare business failure rates. According to the US Small Business Administration, “4 out of 5 small businesses started in 2016, survived to 2017 (79.8%)” That is a 21% failure rate in the first year, and the data shows that it only goes up to 30% in the second year. Now look at the comparative failure rate for any MLM: 99% of people who joined a direct sales company do not make any money and fail within the first year.
- Some MLM members like to claim a traditional business model is a pyramid scheme because there is a CEO at the top and all the workers are at the bottom. And as an employee, it is very unlikely you will ever become the CEO. But the biggest difference is that in an MLM all of the money earned by distributors always flows up to the upline; whereas in a traditional business model, the money flows down to the employees. The owner is the one taking all the risk by investing their money in the company, the employees carry no risk. Common sense economics there. And when was the last time you heard of an MLM distributor becoming the actual CEO of the company they sell for?!?
- There is a startup fee to join the company. If you work as a salesperson for a traditional company they pay you, you never have to pay your employer. If you have to buy something to start with an MLM you are not a small business owner, you are just another customer. Or an affiliate at best.
- You are not actually the CEO of your own business when you join an MLM. There is a CEO and you are not it. But if you create your own business the traditional way, you can be the CEO.
- As an MLM distributor, you are a small business owner. False you are one person in a huge sales force for a large company.
- As an employee or business owner, you have some say in how your company runs. True. Employees can have input into many aspects of the companies they work for. As a distributor for an MLM, you have little to no say on what or how the company you work for sells.
Can You Earn Money From Direct Sales (MLMs)?
This video is a great breakdown of why it is virtually impossible to earn a living from an MLM. She uses Arbonne as a model for her numbers. But you could compare this to any MLM company as the business models are more or less identical. She really breaks down the data and numerical proof of why it is nearly impossible to earn even an average living by being an MLM recruit. It really is a great video that gives facts and should help you better understand how these companies prey on women and their dreams. It hopefully will give you the proof of why you should never join and MLM.
Why MLM Products Are More Expensive
The products being sold by MLMs are really no better in quality than a traditional company that sells the same type of product. Although many of these companies will claim otherwise.
The reason you can only get MLM products at a reasonable price is by being a distributor/representative is because of the very business model they utilize.
- They have to be able to mark the product up enough in order to give a cut to the distributor and the upline.
- Buy law an MLM has to receive 80% of its income from the sales of their products. It’s easier to do that when a product is sold at a higher price and customers are convinced it’s because it is of better quality.
- It is also easier to sell the idea of becoming a representative if the signup kit is heavily discounted in comparison to buying product as a regular customer. Better inflate those retail prices!
Common Arguments for Joining An MLM
- “I’m just joining so I can get the products for cheaper”: I hear this one a lot. But are you really? Why would you want overpriced inferior quality products? You shouldn’t join an MLM at all if this is your reasoning. Especially if you know they use shady business practices. Would you still buy from a company if you knew they used sweatshops to produce their goods?
- My Friend (upline) has made great money with (insert MLM here): But have they really? How much have they spent on the product? How much of their income is because of recruiting people under them? Are they making more than if they were working in a traditional occupation?
- Just because you didn’t make money doesn’t mean I won’t. Maybe you just didn’t believe in yourself. Or you just needed to “fake it till you make it”. 99% of people who join an MLM fail. That is 60% more than people who have started their own brick and mortar business (after their 2nd year)! You really think so?!? And the only people who earn any kind of livable wage make up less than 1% of the company as well. You have more chance of winning the lotto!
- I really love helping people. No! Just no! There are so many better ways to help people that don’t involve losing family and friends and going into debt.
I Was Addicted to MLMs
I am I reformed hunbot.
You might be asking, “Barb, are you an idiot? How did you fall for it so many times”? Well, honestly it was because I believed the crap they fed me about how I wasn’t working hard enough, that if I wanted it bad enough I would be successful. I kept thinking maybe this time it would be different. I was an MLM recruiter’s ideal target. And I wanted so desperately to be able to work from home and have time for my family. So, you should never feel ashamed if you fell for an MLM too. It happens to the best of us.
Truthfully, I really don’t have an excuse. I was just lured in by getting (what I thought were great) products for cheap. And what can I say I like getting boxes of goodies shipped to my house. I know, bad excuse. Well, I have since educated myself and learned my lesson. This is why I will never again support an MLM!
My MLM Horror Stories
These are incidences I experienced with the different MLMs I belonged to over the years. I honestly saw a couple of them as red flags and would leave the MLM thinking it was just “that” company. Oh, how naive I was.
- While at an event with many other businesses we (my upline & me) collected information on people as entries to win a free makeover. When we were done I asked my upline when we were going to choose the winner. She said, “Technically they are all winners”. You see there was no free makeover. We would contact every person who entered and tell them they won and would basically sell to them and a friend.
- I was supposed to approach people in public and give them a compliment and ask them if they would like to model my beauty products. (Done mostly on Instagram now). Talk about awkward!
- Once had a Director burn an egg on the brand’s frying pan in my mom’s house when she was trying to recruit me. It stunk up the whole house. She didn’t even ask, she just did it!
- The glass bowls I got with one of my kits actually started chipping glass. I almost ate some before I realized pumpkin scones shouldn’t be that crunchy. I’ve never had that happen with any other name brand bowls.
- Found out the CEO’s son of a well-known MLM berated a bunch of directors at a Seattle conference I attended for the company. He was screaming at them that they were acting like privileged brats and that they were lucky they were getting any support from the company. This was because many of the area’s directors felt that because the company was in the mid-west it didn’t care about their west coast market. They weren’t receiving the same training or support as other parts of the US sales force. Women were literally walking out of the meeting crying.
How to Avoid the MLM Trap
There are so many signs that I think many of us who have joined an MLM willfully ignore. Because we are so desperate to work from home. We want to earn an income on our terms. We may be lonely, especially if we are homemakers. Or we love the idea of belonging to something. And we truly want to help others. MLMs prey on this.
But sadly if you join an MLM you’re more likely to end up in a worse situation then before you joined. Many people go into serious debt. They end up damaging relationships because they were pushed by their upline to sell to family and friends. And when their business inevitably fails the friends they did make in their MLM most likely will magically disappear. If you have joined an MLM it’s best to get out while you still have your dignity and relationships intact.
Signs you joined a pyramid scheme
These are just a few of the tell-tale signs of pyramid schemes. And some of the many reasons why you shouldn’t join an MLM.
- You have a purchase requirement to maintain “active” status.
- You have to purchase a start-up kit to become “the CEO of your own business”.
- Your upline says, “Sure you can make money selling just the product. But if you want to be REALLY successful you need to recruit”. There is a strong focus on recruiting.
- You are being urged to really sell the product to your friends and family. Even if they’re not interested.
- At business get-togethers, your upline has made statements that people who don’t like their products or company or people who have said no are just haters and will never be successful. (I have actually heard this at one of my MLM conferences).
- You are told if you have any doubts about selling methods that you need to fake it till you make it. Or you must not really want to be successful.
- Many of the products you are selling are constantly out of stock and the re-stock is constantly getting pushed back.
- There is a huge amount of group-think involved within the company.
- At any point, you start to feel like a pushy car salesperson with your friends or family.
- Cult-like behavior. Your upline wants you to live, eat, and breathe the company.
Great Example of Why You Shouldn’t Join an MLM
This video is an example of why you should follow your instincts if you feel uncomfortable about the company you work for. She really goes over the red flags she saw in the MLM she worked for. She also talks about the confusing nature of the compensation plan.
The Growing Anti-MLM Movement
There is a growing movement of people who see the predatory nature of MLMs. There are speaking up. I believe it is because of growing consumer awareness. And younger generations tend to be a little more savvy about the companies they are buying from. Either way, people are speaking out. And many are sharing very compelling evidence as to how these companies prey on the hopes and dreams of young women. As well as giving even more compelling evidence as to why you should never join an MLM.
There are YouTubers, bloggers, even former MLM representatives sharing horror stories. I think it also has to do with the growing amount of information we have available to us. It’s so easy to look up information on companies, their owners, and any actions that are being taken against them by government agencies. It’s not like back when grandma was hosting Tupperware and Mary Kay parties.
You Can Have the Dream of Working From Home
After many tries with MLMs and falling for the crap they fed me. I finally realized there are more legitimate ways to earn money from home. You just have to be willing to put in the research and effort. I know what it feels like to so desperately want to put your family first and not have to work outside of the home. Joining an MLM is not the answer. You will honestly find that you earn less money than from a traditional job only you will be working twice as hard.
THERE ARE NO GET RICH QUICK businesses that actually work long-term and will not compromise your integrity. And this is one of the biggest reasons you shouldn’t join an MLM. Legitimate work from home opportunities will never give you that icky feeling in the pit of your stomach.
*I know for a fact this article will be updated regularly as I found too much information to be contained in one blog post. There is so much compelling evidence out there about why you shouldn’t join an MLM. I could honestly write a book. And I am sure there will be updates to the growing list of MLMs being shut down by the FTC.
Update: Mary Kay just closed it’s Australian & New Zealand branches. (as of Mar 5, 2020) https://i.imgur.com/RBXGa8f.jpg There are also rumors they have shut down 5 of their 6 distribution centers in the US. (will verify when information is available.