MLM (Multi-Level Marketing) - My personal view based on a real life story

carbayon · 06-09-2010 9:31am #1

Over the past years I know I person that is involved on a MLM company, so the following is based on my experience with the MLM business.

First and foremost I need to define what an MLM is, as there are many companies out there with a similar business model, so we need to differentiate between them.

What makes a company an MLM?

As the name says, it is a Multi-Level, so if there are levels on the company, this is a flag
Do you make money from selling products or for selling licenses to sell products? If you make more money from the license than the products, this is a flag
Do you have to pay a monthly subscription to retain your license or get paid commission? If you pay a monthly fee, this is a flag

Any company that raises all three flags, this is a MLM that you should be aware off, if the business model only raises one flag, then the business could be genuine.

Now I want to analyzed what most MLM companies say (or let you understand) about their business;

MLMs offer a great “business opportunity,” with huge incomes reported for many.
MLM’s nearly always lead to certain loss for new recruits. The founders and a few are at the top make most of the money.
“Everyone can do this” – and earn a good income.
Holding up top earners (usually the first ones in) as examples of what others can do is deceptive. It is unfair to sell tickets on a flight after the airplane has already left the ground. No matter how hard you work, you will never reach the top, your work pushed the top earners higher.
MLM offers true “time freedom.” For those who work at it, MLM can provide an income that is reliable, residual, long-term (even “permanent”) income.
These catchwords are used by MLM promoters to appeal to the desires for “easy money” that keeps on growing and providing for the comforts of life – and the resources to do what we want, when we want. [Remember that the money is in selling licenses] Those who do “succeed” must be constantly recruiting others to replace those that leave the program or fail to sell licenses.
Work for only an hour or two a day to supplement your income to help meet expenses or pay down debt.
To profit at a recruitment-driven MLM, one must work long hours and be willing to continue to recruit to build one’s downline and to replace dropouts.
Standard jobs are not rewarded fairly. In MLM, you can set your own standard for earnings.
Fair? Most MLM compensation plans are weighted heavily towards those who got in early or scrambled to get to the top of a pyramid of participants
“In any business, one must invest time and money to be successful.” Like anything else, you can expect to get out of it what you put into it.
Independent research, supported by worldwide feedback, suggests that the more a person invests in an MLM in time, effort, and money, the more he/she loses
MLM claim you are your own BOSS and that you work for yourself.
Those at the top earn commission from your work/sales. The definition of a BOOS is “person in charge of or employing others”, since you “bought” a license from someone, they “hired” you and they are your “boss”. When you recruit new people, then you are their “boss”. At the same time, any one that benefits from your work could be considers your boss, so anyone on the company that makes money from you selling, is your boss.

Finally I want to share my personal experience on regards of MLM’s in hope that this may help you.

When a MLM preaches and sells the business, they always say that you work from home few hours a day and you make money. What they failed to mention is that like any other business there are expenses attached to it, internet bill, phone calls, driving to meet people, lunches and so on.

The person I know works on average over 8 hours a day on the business; this is over 160 hours a month [more than a full time job]. Then she has a phone bill of about €75, a petrol bill of about €300 a month and miscellaneous cost of about €100 and then the minimum monthly purchase from the MLM of €80 in products. All those expenses and time yield an income of €600 a month.

Let’s do the maths on this scenario;
Income.......................... €600.00
Expenses ...................... €555.00 (300+100+75+80)
REAL INCOME................... €45.00

Now let’s calculate the hourly rate €45.00 / 160 = €0.28

In this particular month, this person worked for €0.28 an hour, the minimum wage is circa €8.50

This person is being at this business for few months, as you can see yourself, FREEDOM is not free, it comes at an EXPENSIVE cost. In any other “traditional” business, this could be consider illegal, as she is working for less than €1 an hour.

At this point is important to mention that her "boss" up the level in the company, is earning money on the sales she generates, so in reality, she is working for him. He is the one earning money with no work.