MLM is a legitimate business but you should quit today and never look back. Multi-level marketing companies are deemed legal because of a 1979 case, FTC vs Amway, where the ruling stated that MLM, more commonly known as network marketing and direct sales was a legitimate business opportunity and not a pyramid scheme.
Warren Buffet (wealthiest man in the US), Howard Schultz (Founder of Starbucks), Rich Branson (Founder of Virgin Airways) all own at least 1 MLM company. Do you think this is an accident that some of the wealthiest people in American own MLM companies? No, because in an MLM company the people at the top get richer and the suckers who join lose their money.
The ruling of this case in the late 1970’s might have been well and dandy for that time period but in the year 2017 this case needs to be overturned.
If the government does not have the workforce’s best interest at heart, then I will give you 10 reasons why you need to walk away from MLM right now.
1.) Almost EVERYONE who invests in an MLM company is in a losing financial position.
This is not just an opinion. There are historical facts that will back this up. Facts that are presented directly from MLM companies.
The vast majority of people drop out of MLM companies within 1 year.
1999 court case against Melaleuca, one of the countries largest MLM, claimed to have the largest “retention” rate of distributors in the industry. Melaleuca proudly stated their drop-out rate was only 5.5% a month.
This is over a 60% drop-out rate for a 1 year period as long as those drop-outs are replaced with new recruits who are suckered into joining.
For the largest MLM company in the world, only half of the “distributors” make it to the simple level of “direct” distributor.
The average income for Amway distributors is ONLY about $40. That is the gross profit per month. When all the costs are factored in such as inventory, taxes, and other various expenses, it is clear to see each month the average distributor at Amway is suffering a loss.
Even making it to the basic level of “direct” distributor is not going to up your income. The Wisconson Attorney General filed charges against Amway and all the tax documentation on all their distributors in the state of Wisconson was turned over. This revealed the average loss of each “direct” distributor for Amway in the state of Wisconson was $918.
There is a very clear pattern of people quitting at a rate of 50-70% a year.
Pre-Paid Legal’s annual report to the SEC, revealed that over half of their distributors and customers quit every year. They are replaced by a flow of new recruits hoping to make it big with their “business opportunity”
Excel Communications in 1995 was a fast growing MLM company that was having a drop-out rate of 85% from distributors and customers were leaving at a rate of 45%
Nuskin is not different. They have a drop-out rate right there among the rest of the MLM companies. Nuskin is a perfect example of how the people at the top of MLM companies make all the money. In 1999 Nuskin paid out rebates to 2/3s of the top distributors. That is only 200 people from the active 63,000 disturbers working for Nuskin. 99% of those profits paid to those up-liners were paid directly from invests from their downlines.
Statistically speaking there has to be a lot of losers in MLM companies.
MLM compensation structures can only support a small group of people becoming financially successful. Let’s say it takes 1,000 people in your downline to make a profit and have financial success. For those 1,000 people, it will take 1,00,000 people joining to duplicate that success. How many people can an MLM company realistically rope into their scheme?
Do not listen to the lies of an MLM. They are not offering you a business opportunity that can make you large sums of cash in ways other businesses can’t.
2.) Network marketing is not a popular way to bring products to the marketplace.
You very well might have heard people claim that network marketing is the most popular way to bring a new product to market. That is complete and utter BULLSHIT.
Customers no longer are buying from a 1 on 1 basis. That is the whole structure on which MLM companies are based on, person to person selling and that method has died.
The marketplace has transitioned and the need for direct sales has disappeared. That is why joining an MLM company relies so heavy on selling to friends and family.
- Buying from an MLM company means changing a customers buying habits. (not going to happen)
- Choices on products are restricted.
- The customer is overcharged.
MLM is just a direct sales position that misses on selling a decent product and then has to restructure to recruit more people.
Distributor – “Do you want to buy this MLM PRODUCT”
Customer – “No”
Distributor – “How would you like to join us and sell this crap product?”
Customer – “Again NO”
3.) MLM companies represent less than 1% of retail sales in the marketplace
The total United States gross sales in 2013 were 4.5 trillion dollars. For that same year, MLM companies totaled 178 billion dollars. That is 1/3 of 1% of the total sales coming from MLM.
The majority of those sales are coming from “investors” looking for a business opportunity. Those same “investors” have a high probability of dropping out before the end of the year.
The real issues with MLM companies and their products are that there is no brand loyalty. Since the majority of the products sold are actually to distributors, the customers in the marketplace have no recognition of their products. The only representation the customers have of those products are that of a friend who was sucked into their scheme and soon left.
The word of mouth that spreads from people dropping out of these companies is what directly kills their products. The distributors will bash those products and people will understand that this is not a product worth paying for.
The sales model of MLM companies has no way of ever competing with companies in the same market sector, as an MLM company is selling an “investment” scheme and a business opportunity and not a quality product.
MLM companies will never have sole ownership of selling and distributing products. It is not a new form of marketing that is going to render advertising, shopping malls, retail stores, catalogs, and the INTERNET useless.
4.) MLM is not a fulfilling and happy lifestyle
The recruitment process of the majority of MLM companies is showing wealth and prosperity. When looking through the literature of any MLM company you will see people laughing and enjoying themselves. There will be motivational speakers claiming to be able to lead you to financial freedom.
The truth is that is not the case at all. In order to even break even with an MLM company, a person is going to have to put in extremely long days and nights for a small amount of profit. “Investors” are going to be chasing after money.
The real loss is of people’s time. Everyone has special talents and passions that should be followed and pursued. With any MLM company, a person is going to be chasing freedom and losing touch with themselves in the process.
There is no such thing as the “good life” with an MLM company. Unless you are like Warren Buffet and bought one.
5.) MLM companies are cult like
There are multi-level marketing companies that use spiritual concepts of prosperity and creative visualization to boost enrollment and try to keep enrollees.
When your company is talking about their organization as a “communion” and that MLM runs off of Christian beliefs and principles, you know something is wrong.
Your hopes, dreams, and prays should not be filled by chasing after wealth and financial gains. That is the exact opposite of what all major religions preach.
This should be a telltale sign that this is “investment” opportunity is deceptive and should be passed over by you. But, we all have a sense of community and want to be accepted so few of us join and realize how much of a mistake it was within a few months.
MLM companies are not a spiritual movement that will answer your hopes, dreams, and prays.
6.) You will ruin your personal relationships with friends and family
Being successful in MLM is not easy. You will be briefed in training that all your personal connects that you have are the perfect prospects to sell too.
Your friends and family are naturally going to love and support you. They will be easy to sell too. That might be the case for the first sale. But, what about next month when you haven’t made another sale? Do you think your family is going to buy more product to keep you afloat while you drown in your MLM investment opportunity?
This is going to put a lot of strain on your personal and social life. Your friends and family will begin to dread when you come around, knowing that you are there to try to pitch them on more crappy products.
MLM will destroy your personal life. Don’t ruin the personal connections you have in your life chasing after wealth.
7.) MLM is going to consume all of your time
A common tactic to lure people into joining MLM companies is that you will have time, freedom, and flexibility. A few hours a week will turn into financial freedom.
It takes years of hard work to build a network of business professionals to work with. It takes grueling hours, long days followed by long nights.
There is no freedom when you are building your network and trying to grow your “business”. It will take all of your time. Do you really want to work all day at MLM company and then part-time at night is the hopes of growing your downline?
There is zero freedom and flexibility if you want to be successful and earn money in MLM.
8.) There is no support in MLM
MLM claims to have positive, uplifting, and a ton of helpful support for their “investors”. Much of the marketing material that is distributed to the “investors” is fear based propaganda. A message that shows possible income potential if you just keep at it.
Much of the marketing tactics used by MLM is deceptive. Predictions that other channels of distribution are on the verge of collapse, insensitivity of corporate America, and lack of opportunity in other professions.
Many of the standard business and trades are looked at as pitiful for not offering “unlimited” income potential for their employees. A brainwashing tactic to convince people that those with employment and earning a steady paycheck are losers.
MLM can be presented as the last one true hope for people to gain financial success. This is ridiculous and keeps people from actually figuring out who they are, and what they truly want to do with their life.
MLM is not a unique business opportunity that will give you all the support you need to reach financial freedom.
9.) MLM is not true self-employment
Being an owner of an MLM distribution line is an illusion of owning your own business. This is not true entrepreneurship. Some MLM companies will even as far as not letting their distributors carry other lines of products.
The owner of the distribution line has no control over what really happens. At any point, the MLM company can terminate their contact with them. From termination, downlines can be stripped away from distributors. When you participate in an MLM, you are following guidelines and sticking to their code. There is no individuality or independence.
Joining an MLM company as a distributor is not owning your own business but participating in a complex hierarchy that you will have no control over.
MLM is not the best way to start your own business and will not improve your economic situation.
10.) MLM is a pyramid scheme
Multi-level marketing or network marketing is a pyramid scheme. Just because a product is being sold does not mean that the MLM company is not just a pyramid scheme. There have been plenty MLM companies with quality products that have been shut down because they were a pyramid scheme. The vast majority of MLM companies are illegal and just have not been prosecuted yet.
MLM is legal but only if they operate under the strict regulations set forth by the FTC and General Attorney. MLM companies have to operate under the 70% rule to determine if they are legitimate or a pyramid scheme.
The 70% rule states that an MLM company must sell 70% of their products to consumers who are NOT “distributors”. Under these guidelines close to every MLM company is illegal.
30% sold to distributors
70% sold directly to customers
The largest MLM company admits that only 18% of their products are purchased by non-distributors.
MLM companies sell products but operate outside the law and are pyramid schemes which just have not been prosecuted yet.
Your best option is to walk away from MLM. There is no longevity is taking a “business” opportunity with MLM companies. Even network marketing, which seems to be what they are calling it now.
We all know someone that has fallen into an MLM scheme. Help save more people from wasting their time and money by raising awareness about these fraudulent companies.
It is just a matter of time till a company because to “hot” from federal investigation and gets shut down. Plenty of MLM companies close their doors and then the owners reopen a new MLM company with a different name.
Stay away from MLM.
Follow your passion, build a website, and monetize it. That is what I did and you can do that too.