Are MLMs Actually Promising Businesses or Greedy Schemes?

What is an MLM?

MLM stands for Multi-Level Marketing and it works as follows.

Someone starts a company and needs a way to promote that business. The owner can spend lots of money getting celebrity endorsements and prime time commercial spots or they can set up an MLM.

So they choose to market their business with an MLM strategy and they send out the idea to a bunch of people who would be interested in their business. Those people get invite codes to bring in more people.

You get invited to be apart of an MLM, you also get an invite code and are able to recruit more people. Every person you recruit helps your chances of making more money than before.

This is due to a ladder effect when it comes to sales; for every sale you generate you may get 40% of the profit. If one of your recruits makes a sale you may be 10% of that profit, and 5% of their recruits, and so one until the percentage is too small to calculate.

MLM sounds like a pyramid scheme

Yes, in most cases this type of endeavor is a pyramid scheme and very little money is made unless you are on the top of the ladder. Every so often there is a company that will be able to make you money from this method of marketing. But, the majority of companies using MLM to promote their business are shady and you should stay away.

MLM Diagram

Since they are not spending money on advertising they will be able to give you a larger chunk of the sale; but be careful with MLMs.

If you have to pay money just to join it’s most likely not worth your time and will be very hard to make your money back let alone a profit.

The better MLMs are free to join and work as a commission. They have products they want to sell and instead of hiring a sales team they allow anyone to join.

After joining, you promote their products and for every sale you make you get a commission. These commissions tend to be pretty high since the company does not have to pay for advertising.

MLM Experience

I have been a part of a few MLMs in the past. Only one did I ever receive a check. It’s just not my cup of tea since I don’t like to sell to people.

I’d rather provide valuable information to those who need what I know. This is why I blog and I encourage others to start a blog. You don’t have to sell, you simply have to provide.

By providing great content your readers will be more than happy to support you. This can be in the form of buying a product or service that you review on your site, paid content that you create for a fee, or donations to the site to keep the content flowing.

Within an MLM you are still working for someone even though you are independent from them come tax season. You have to play by their rules and follow their guidelines.

With your own blog, you create the rules and guidelines. The only person you have to answer to is yourself but it’s a good idea to listen to your readers as well.

Do This Before Joining an MLM

The best place to learn how to make money off of your website is Wealthy Affiliate. This site is a community based on teaching anyone how to make a profit online with a website and a passion. The best part is it’s free to join! You never have to pay a cent if you don’t feel this approach is for you.

Wealthy Affiliate is a community of Internet Marketers using blogs to help others gain the knowledge they are looking to learn. You will not only learn from the lessons but you will learn from the experiences of every one of their thousands of active members.

 

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9 Comments

    Andrew

    I wish I had seen your article a few years ago.
    I’ve been involved in a couple of unsuccessful MLM schemes in the past.
    You offer some great tips. Thanks

      Jaron

      Thanks Andrew. We all have to learn some things the hard way I guess.

    Roy

    Thank you, good information, i fully agree stay away, i lost a great chunk of money in WMI a decade ago, and never more any mlm for me..

      Jaron

      sorry you had to learn that way Roy. I hope this post steers people in the correct direction so they don’t have to deal with that unfortunate outcome.

    Matt

    I think this could potentially help a lot of people. I almost joined an MLM in high school. It seemed like a good deal but something was off about selling to other people and I was going off to college soon anyway so I just declined and left. I’m glad I made the right decision!

      Jaron

      Glad you did not have to learn the hard way to stay away from MLMs.

    Derek

    Great post!

    I have been a part of MLM’s myself and there were some where I made a lot of money from but ran out of leads. That is the hardest part, leads. If you are ever interested in MLM’s make sure you do your homework before deciding to join. It can make all the difference.

    Thanks for the read!

    Dan

    Personally I’m not a fan of MLM’s, for the simple reason that the training for most MLM’s encourages people to sell to and recruit friends and family, this can and does cause relationship problems. They are also designed to an impossible plan, the idea is the business owner recruits people who recruit people who recruit people and so on. If each recruit goes on to recruit 5 people then it it’s only a matter of time before you run out of people.
    That said every business has the bosses at the top and the soldiers on the front line it’s just MLM’s are a little miss leading giving the implication that everyone can make it to the top.
    Like I said I’m not a fan but I don’t think they’re as bad as a lot of people think and anyone can potentially make a lot of money from them.

    Marc Parsons

    Hey Jaron

    You nailed it when you said ‘It’s not my cup of tea’.

    Some people love selling and MLM would appeal to them. My personal problem with MLM is that it is not a sustainable business model.

    Most of the expert network marketers out there are only successful because they are bouncing from one prelaunch to the next… Each time they hype blows over, they jump ship along with there team.

    Affiliate marketing is just as lucrative, far more sustainable, way less hype and WA makes it super easy.

    Keep up the awesome work!

    -Marc

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