Multi-Level Marketing (MLM) is a creative marketing strategy designed by Wachter in 1932 according to an article by Frank Ross at AllBusiness. Multi-Level Marketing (MLM) opportunities are usually pitched by a friend, friend of a friend, or family member. MLM’s cover a wide range of products from food to clothing to skin care to jewelry to household goods. Some MLM’s recruit sales consultants to offer services such as booking travel and financial services.
Many, if not most, consultants pitch MLM opportunities as a person being able to own their own business, have more free time, and earn easy money with little work. Most MLM’s require an investment for as little as $35 to as much as $5,000 or more. A lot of people get caught up in the emotional excitement and hype of belonging to an exclusive group selling products made by a favorite brand. After the money switches hands, papers are signed, reality sets in, and most wonder, “What did I just get myself into?”
Now, you may be thinking I am against MLM’s at this point. I am not; however, I am for educating and sharing the truth about MLM’s since I have been involved in a few of them.
When a person signs up as a consultant, they are exactly that…a consultant. They do not own the business. They are, essentially, a 100% commission based sales consultant for products of a company owned by someone else. It is true a person can set up a company to run their commissions through and write off business expenses. However, at the end of the day, the sales consultant does not get to make business decisions about the company. They are not directly affected by increasing or decreasing company revenues among other things.
Deciding to sign up for an MLM opportunity has some of the same considerations as deciding to accept a 100% commission sales position for a car dealer, insurance company, or mortgage company. Do enough connections exist to create sufficient sales opportunities? Is there enough money put aside to meet financial needs to avoid taking on debt until a steady stream of income is being made to meet the demand? Is there capital in place to cover expenses?
Initially, a new sales consultant seeks out friends and family members to pitch the products of the company. Those friends and family members need to refer their friends and family members to keep the sales opportunities alive. Referrals are the best compliment and are necessary to keep moving forward toward success and making money.
Money. It is the least considered aspect of making a decision to become a sales consultant of an MLM. Sure, a person considers how much they have to pay or invest to start as a consultant, but they do not always consider how long and how much they have to sell to recoup their investment (return on investment – ROI).
What about the expenses incurred to start and maintain the new sales consultant opportunity? Additional costs include business cards; gas; marketing; maintaining a website; fees for a trade show booth; inventory; meals; office supplies; childcare; etc. Many MLM’s require a minimum purchase each month. The larger the initial investment, the longer it will take to see a return on the investment and the more that needs to be sold. And, if a person uses a credit card to pay for the initial investment, the interest on the debt needs to be part of the investment costs.
Recouping costs means a lot of work. In my experience, many sales consultants state signing up means quick, easy money. In fact, some stated I could make as much or more money than my day job without working as many hours. That may be possible when joining an MLM in the beginning, but it’s often not the reality. I have quite a few friends who are consultants with an MLM company. Some of them are top consultants and earn a lot of money and win trips, but they work hard. Do they have fun? Yes! Do they love what they do? Yes! Do they get to control their schedule? Sort of.
Controlling one’s schedule in direct sales is a misnomer. Clients control the schedule. If you cannot meet when it works for them, they lose interest or go with someone else selling the same product. If you want the sale, you strive to accommodate their schedule sometimes at the expense of your own schedule. And social media creates more of demand on a person’s time.
What happens when a person asks a question about a product on social media and it doesn’t get answered promptly? They lose interest, ask someone else, or look it up online which draws them away from a possible sale. Sometimes those questions come at inconvenient times, invading your schedule.
Selling products for an MLM is a job. For many it’s an exciting and fun job, and for others it’s a career.
Does joining an MLM ever make sense? It can when considering a few caveats.
· Joining an MLM company is a job/career in sales. A sales consultant needs to be comfortable with selling. Products do not sell enough of themselves for a person to sit back and collect large sums of money.
· Earnings come from 100% commissions and/or sales from downline sales.
· Recruiting sales consultants is necessary to increase earnings and lessen hard sales.
· An opportunity should not be considered if a person will increase their debt obligations to join.
· If a person wants to join an MLM to eventually quit their day job, they need to be willing to work as hard as they do in their day job.
· How will joining an MLM impact personal finances and tax liability? Checking with a CPA is advisable.
· Enough money should be set aside to pay for expenses until sales can pay for them.
· Can all personal and business expenses be paid from personal funds and without incurring debt if no sales are made?
· Does your spouse support your decision?
· How much time will be spent outside of the home to make sales?
· Is childcare a factor?
· If sales consultants are required or need to stock inventory, products should be consumable and not expire quickly. Consumable products invite repeat sales. Products that expire mean wasted inventory. Once consultants purchase products, they typically cannot be returned because of expiration.
· Check company reviews and ratings on the Better Business Bureau and other sites.
· The MLM company should be legally established.
· Look for an MLM with consumable products at reasonable retail prices. High priced goods mean a small target audience for sales.
· The products should be loved! It’s difficult to perform direct sales if there are products a sales consultant does not or cannot endorse.
· Political views of the company should match the political views of the sales consultant; otherwise, some questions about the company may create an awkward or uncomfortable conversation.
· Compensation plans need to be clear and acceptable. How is money earned? How long will it take meet sales goals? How much commission is earned on each sale? How much and when is commission is earned on downline sales? How are downline sales tiered?
· Does the MLM require a minimum monthly purchase by the consultant?
· How can the popularity of online sales be done with the MLM company?
· Look for companies offering free training in sales and business management.
If, after answering these and other questions, an MLM opportunity is desired, then go for it and have fun!