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What You Need to Know About MLM

Jul 22, 2008
Multi-level marketing or MLM is a business scheme where individuals work as franchisees or independent contractors for a certain parent company. The parent company in return, pays these individuals according to their sales as well as the sales of those they have recruited for the same company. Legitimate MLM companies pay their agents on commission basis. Some non-legitimate companies lure prospective clients on the basis of how many people they have recruited to work for the company as well.

MLM, also known as network marketing arrangement, started around twenty years ago during the 1970s. Though legitimate MLM companies do exist, fraudulent ones also abound the industry. There are plenty of criticisms circulating against the flaws of the MLM system and its claims to fast and easy income. Even though the MLM business promises to be very lucrative and easy, one should be wary of the promises offered by any MLM company. Here are some promises MLM companies commonly offer that one should be careful not to believe so easily when thinking about venturing into the MLM business:

1.) There are better opportunities for earning huge profits in MLM as compared to conventional ways of doing business.

Honestly, only less than 1% of all MLM investors earn profit from the scheme and fewer people still miraculously manage to obtain sustainable living from an MLM business.

The problem can be traced to obstacles in marketing as well as to extraordinary sales. But still, even if the MLM business had more potential, the opportunity would be limited by simple math. Picture an MLM business wherein to earn a decent living, one needs a downline of 1,000 individuals. One million more individuals would be needed by that 1,000 to achieve the same success. Obviously, growth is simply determined by the exponential increase of new enrollees. The earnings of the real achievers in an MLM business would simply come from the constant supply of enrollees who would eventually turn out as losers in the business.

2.) Success in the MLM business is easy and guaranteed. One can have his loved ones as life-time customers.

Commercialization of personal relationships is quite a marketing trend nowadays but is destructive to one's social foundations. Would anyone love it anyway when relatives and friends start to bug him into buying products?

3.) MLM can be done during the spare time. Just a couple of hours a week devoted to MLM can generate income which will make other work unneeded.

Aside from some personal skill coupled with persistence, engaging in an MLM business demands extra time commitment. An MLM business actually requires more from a person than meets the eye. Everyone is a potential client. Every time is a perfect time for marketing.

4.) MLM is not a form of pyramid scheme.

The legality of MLM is set by the Federal Trade Commission and state attorneys general. Plenty of MLM companies actually violate the guidelines of the FTC and operate still only because they are not yet prosecuted. According to court rulings, at least 70% of the goods sold by an MLM company must be bought by non-distributors. According to the largest MLM, in reality, only 18% is purchased by non-distributor.

So there are the common lies told by MLM companies to gain more distributors. It is okay to venture in an MLM business, but it is important to make sure that one does not get fooled to do so. It is also good to keep in mind that what seems too good to be true is most likely not true.
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