Someone is worried for you and wants you to understand why this is so. They are not negative haters. They want you to do well, they really do. They are afraid of offending you or upsetting you or are afraid you will distance yourself from them. Therefore, I am attempting to put forward some of their concerns. They may be worried about some, or all, of these factors. Please read them all and take your friend/ family member’s concerns seriously. They probably agonised for ages over whether to send you this link.
You have joined, or are thinking of joining a Multi Level Marketing (MLM) scheme. There are some concerns about this type of scheme that you may not be aware of. Here are some of them.
A very common theme in MLMs is to ignore any criticism of MLM/ the product/ the specific company. You will have been taught that these people are negative and don’t understand the business. They are jealous. You may have been taught about The Law of Attraction where negativity attracts further negativity so you need to cut negative people out of your life.
Please remember that people do have differences of opinion, even friends and family members. Please don’t let this come between you. True friends will tell you the truth, even if it means it is painful to you. These are good friends.
Closed/ Open minds
You may have been told that people who criticise your business have closed minds and that you have an open one. Please keep yours open. Don’t shut down people without listening to them because you think they have a closed mind. Do not be afraid of differing opinions.
Statistically speaking, you are very unlikely to make any money in an MLM scheme unless you set it up yourself. Some experts have calculated that 99.9% of people will not make any money in these schemes.
The World Federation of Direct Sellers Association (WFDSA) oversees MLMs over the world and produces reports on them. They are pro-MLM. They produced a report recently showing the sales made by MLMs. The report can be read here. Their facts show that in 2014 there were 99,724,641 sellers worldwide who made $182,823 million (6 zeros) in sales. This works out to be $1,833 on average per person. This isn’t profit, this is sales. The sellers will only have made a small percentage of that in commission.
Let’s say the average commission for sellers is 40% of the purchase price, each person in these schemes will have earned $733.20. A YEAR. And if some people earned more than that, it means others earned less because that is just the average figure. These numbers aren’t from an anti-MLM source, it is from your own industry.
Some companies produce reports of their own financial statistics. Find out if yours does, and have a look. If yours doesn’t, why doesn’t it?
Here is the one for It Works
Please note the above information shows that people in this scheme earn on average $189 a month GROSS. This is excluding expenses which “can be several hundred or thousands of dollars annually”.
Here is the statement and link for World Ventures.
YEARLY average commission was $190.15. The median earned was just $40 A YEAR.
Please search for your MLM for their statement. Google your MLM, followed by the words ‘Annual Income Disclosure Statement’. If your MLM does not make this public, the amount earned by sellers must be very little indeed.
Here is a video where people who were in an MLM (in this instance, Herbalife) tell of how they lost money in the scheme. It is very sad viewing but worth it if you can watch it.
Please keep a record of your expenses. Each spend may not seem much, but could all add up over time. This is how people end up making a loss in MLM. They spend much more on their scheme than they make in profits. Have you taken into consideration the costs of-
- Success days – travel, accommodation, childcare, food
- Holding information evenings/ product launches/ parties
- Postage and packaging
- Leaflets/ stickers/ bags/ business cards etc
- Website costs
- Facebook advertising
- Cost of prizes given out as incentives/ raffles
- Training events
- Mindset training events/ books/DVDs/CDs
- Products that you buy to try out yourself so you can recommend them.
There are probably more items that could go on this list, please work out how much this is costing you. We have a free spreadsheet you can download and use.
Fake it until you make it.
Have you heard of this phrase? Do you see people in your scheme who seem to be doing really well financially? Do you think it is because of their MLM earnings? Or could they be pretending? You may have been told to pretend you are doing better than you really are doing, so that people think you are doing well and want to join you. After all, if you seem to be doing well, people will join up under you. Be aware of these claims and observe others. Is that house bought or rented? Do they have another income that could be financing their lifestyle? It is common for people in these schemes to be told to sell their lifestyle, make their life seem amazing on Facebook, and completely positive. It is hard to keep this up, it is draining and false. Look out for it in your team. Are you happy with this?
Have you been given proper training so that you can operate within the law? Are you confident you are not opening yourself up for a whole load of trouble? Your MLM may be telling you about the product and telling you how to market it, but are you being told about-
- Tax liabilities
- Data Protection Act
- Advertising Standards Authority rules
- Laws relating to selling products with heath claims
- Insurance liabilities
- Consumer laws.
You need to know about all of these so that you do not break the law. Often, some of this is covered in your policy documents but not really backed up in any training. The law and your company will expect you to be following all of these rules so will not back you up if you break them.
All of the above are serious concerns, and we haven’t even touched on the obvious concern of MLMs being pyramid schemes.
You will have been told it is not a pyramid scheme. In fact, I bet someone has gone to great lengths to convince you it is not a pyramid scheme. This argument is too big for me to deal with in a few bullet points. Instead, I will leave you with this link to a short video that explains why some MLMs are considered to be pyramid schemes.
Do you feel that you need more information or support?
Please visit our Resources page for a great many more articles, books, podcasts and videos.
If you are reeling from all this information or you need more help or information, drop in on the Mumsnet forum that is very active and join in the chat. Go to Mumsnet Money Matters page here. Look for the most recent thread with MLM in the title. The threads are numbered and usually have the phrase Bot Watch in them.