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Multi-Level Marketing – A 99% Chance of Failure?

Is multi-level marketing the answer to your dreams? Will you really end up making your fortune and driving a brand new car, just by working from home? The answer is no. Find out how much the average worker earns and why you should look elsewhere.

are mlms worth it?

Examples of UK MLM companies

  • Body Shop at Home
  • FM (Federico Mahora)
  • Younique
  • Scentsy
  • Herbalife
  • Juice Plus
  • Ann Summers
  • Avon
  • Forever Living
  • Utility Warehouse
  • InteleTravel
  • Usborne Books

A couple of months ago I joined a couple of Facebook groups about making money from home. I hoped to get some new ideas and also share how I was earning over £500 per month from surveys. I admit, that kind of money isn’t going to get people too excited but hoped it would help somebody.

Anyway, I found these groups were just full of people trying to recruit others for their multi-level marketing (MLM) company. If anybody asked for an idea on how to make money, within 30 minutes, there would be 100’s of answers, all from people working for MLM companies. But what is an MLM and why do I not look on them so kindly?

What is multi-level marketing?

MLM is a way for companies to encourage people to sell products on their behalf. A salesperson will receive a commission for each product they sell and not only that, but these sellers can recruit others to also sell (known as a downline). If somebody on their downline makes a sale, this person will also receive a small amount of commission. The downline can continue multiple times.

Ultimately, the higher up you are and the more people you recruit, the more you earn.

Is it the same as a pyramid scheme?

Technically, no. Pyramid schemes are illegal in most countries and will be shut down as soon as they are discovered (or at least they should be). Pyramid schemes generally don’t involve any kind of product either.

A pyramid scheme can be as simple as you sending £10 to somebody above you in the scheme. You then recruit a further 10 people who each send you £10. You will make £90 (minus the £10 you gave) and the people below you will each recruit a further 10 people, and so on.

Pyramid schemes would work brilliantly if the number of people in the world was unlimited. Of course, it isn’t, meaning that in the end you run out of people to recruit. That means you send your money and you never receive anything back. The vast majority of people in the pyramid will lose money, with the people at the top making a huge amount.

But, some MLMs come close to being a pyramid scheme. The products are of such poor quality that they are next to worthless and the only real way to make money is by recruiting others who will pay a joining fee.

Do all MLMs charge a joining fee?

Some require you to pay a joining fee or, you may need to buy £100+ worth of products to get started. However, there are some MLM’s that you can sell through that won’t need any cash upfront.

How they pull you in

The question is, if MLMs aren’t that great, how do they attract people in the first place? There are few clever(ish) ways that MLM representatives (reps) use to draw you in.

A promise of running your own business

I think lots of us like the idea of owning our own business and working when we want, and MLM recruiters claim that you will be your own boss. In fact, some of them refer to themselves as “boss babes”, which seems a little derogatory. You are not a boss though. The MLM decides what products to sell and the price points. You may be able to offer some small discounts, but that’s it. This is never your business.

Showing you what a great lifestyle they have

Another way to hook you in is by recruiters showing you how great their life is. Whether that’s showing they can work when they like, or how they have a brand new car or a holiday paid for the company. Incidentally, a lot of these holidays are actually MLM get-togethers and most have to pay for their own travel. As for the cars… the monthly payments are only covered if you reach your targets, otherwise, you have to pay yourself. Plus, you have to cover the rest of the costs yourself such as tax, insurance and servicing.

But what kind of person likes to show off to complete strangers about how successful they are? If you were in a petrol station filling up your car and somebody told you all this stuff, what would you really think?

Fake it till you make it

There are a few sellers that make money from MLM, but the majority don’t. And to try and recruit you, reps will pretend to be far more successful that they actually are. This often involves using social media and telling anyone that listens that they have so many orders that they will contact people when they get a moment.

And MLM reps usually hunt in packs. That means they always back each other up and comment on the other’s posts. For example, one rep may post on their timeline that they have some extra stock in. Within minutes, loads of people will comment, saying that they want to order this and that. This helps to create a bit of FOMO (fear of missing out) and may push people into buying products. But, these people who say they want to buy are actually reps themselves and there’s no need to buy through another rep.

Take a look at a post I saw on one of the make money from home sites I joined.

recruiting for fm

As you can see near the bottom, the poster claimed that FM had literally changed their life. So I decided to check their profile and found this post:

looking for a job

There could be a genuine reason to why this guy was looking for a part-time job, but it seems strange that he was telling others how FM had changed his life and 4 hours before, he was looking to increase his income.

Brilliant claims (or lies)

Around 75% of reps involved in MLMs are women and some of these companies like to play on female insecurities (although men suffer from them too). I have seen plenty of drinks that claim to help you lose one stone within a couple of weeks. But if these drinks existed (or were safe) do you think the only people selling it would be through social media? Or do you think major companies like Boots and Superdrug would already have cornered the market?

If something sounds too good to be true, it probably is. Even if somebody has put a couple of before and after photos of their weight loss, you have no idea when they were taken or what the weight loss was really down to. In fact, these products are often accompanied by wording that they should be used in connection with a healthy diet and regular exercise. No s**t!

Products sell themselves

You will find that some reps tell you how easy the work is as the products sell themselves. This is a complete load of rubbish, as why would you need to recruit people to sell? And if you were a rep that has a product that was so easy to sell, why would you create extra competition for yourself? Surely, you would take all the commission yourself, rather than let somebody else take the majority.

We don’t actually sell anything

This I hear from Utility Warehouse reps. They seem to think that because people already have broadband and electricity, you’re not actually selling anything. But, whether it’s a service or a product, it’s still selling.

Raffles

This is a bit of a separate issue, but there seems to be a lot of reps that run raffles on their Facebook pages. This drums up interest and also makes them money. However, rules are quite strict when it comes to raffles and they shouldn’t be doing it.

So, can you make a decent living from an MLM?

The chances are, no. Let’s be straight here, who are you going to sell to? Sure, your friends and family will buy a few items from you as they want to see you succeed. But how long will that last for and do you really want to keep hassling them? How many products can they really buy? For example, if you’re a perfume user, how often do you buy a new bottle?

Of course, you could set up your own Facebook page and sell to people you don’t know from there, but why would people buy from you, rather than any other of the 100’s of pages set-up?

How much can you actually make from an MLM?

So, there are promises of a full-time living, free cars and holidays, but what can you really expect to earn? Fortunately, some MLMs release an Income Disclosure Statement to show you what their salespeople earn.

Let’s take a look at some examples. Remember, these figures only involve income and don’t take into consideration any costs involved in promoting the products.

Scentsy Income Disclosure Statement

scentsy Income Disclosure Statement

This is from the American side of the business but is a good indicator for the rest of the world. If you take a look at Group 2 which consists of people who have been with Scentsy for under a year, the top earner made $36,046 in commission. Quite decent, but with the average income in the US being $33,706, it’s not exactly a fortune. And that top earner is from 115,417 people, so not exactly a small sample size.

On average, anybody working for Scentsy could expect to earn $190 in commission.

But if you’re new to a business, it can be quite hard to get going so Group 1, consisting of people in Scentsy for over a year is probably a better indicator for earnings. The top earner here made $1,014,942 which is a staggering amount. But the average earnings for this set of people was only $1,769 per year or around $34 per week. And when you think that this amount was boosted by somebody earning over $1m, it goes to show that even the more experienced members are earning poor amounts.

As you can see, there is somebody right at the top making a fortune, whilst the rest make next-to-nothing. If I was to put it in a diagram, it would be a triangle shape…

Herbalife Income Disclosure Statement

Herbalife Income Disclosure Statement

Herbalife hit the UK by storm a few years ago, and although it doesn’t seem so popular (partly due to reports with regards to causing liver failure), there are still quite a few representatives about.

Like Scentsy above, earning figures are split between those in the first year and those who are more established. As you can see, only 50% of representatives made an income of $175 or more. The top 10% earned more than $1,030 per month or just over $12,000 per year. Not bad, but certainly not a full-time income. The top 1% earned $4,740, which is a good income for most people.

For more established sellers, 50% make more than $265 every month – again, not much. The top 10% make $3,335 each month and the top 1% make an impressive $14,755. But Herbalife goes on to explain that most of the people took between 5-11 years to reach this amount with a lot of dedication.

It goes to show that to make a decent amount, you will need to work hard over a long period and recruit others. No easy money here.

In 2019, about 146,000 U.S. Distributors ordered products for resale from Herbalife Nutrition. Only around 4,000 to 5,000 of them actually made a full-time living from it.

InteleTravel Income Disclosure Statement

inteletravel income disclosure statement

Maybe you don’t fancy selling perfume or ‘wellness products’ and would like to go into the holiday business? After all, so many of us go away each year and love a bargain.

InteleTravel is run by PlanNet Marketing and again, the figures come from the US business and are from 2018. From the figures above, you can see that 97.52% of Independent Representatives (IR) earn on average $165.92 per year. Now, becoming an IR will cost you $19.95 and there is the same charge each month you are a member. That means that IR’s pay $239.40 every year, meaning that the majority of members lose money.

If you move up a level to Gold Builder (just over 2% do), you can start to make a small yearly profit. To do so, you will need to recruit InteleTravel ITAs – these are reps that pay $179.95 to join, plus $39.95 monthly. You will then start to earn commission through their sales.

But to approach anything that even resembles a decent wage, you need to become a Director. But even reaching One Star, you will need to recruit at least 100 InteleTravel ITAs.

For a full-time wage, you will need to become a Two Star and this means recruiting 300 ITAs. But as you can see, only 0.1% of IRs ever reach this.

As you can see, people at the very top are making a huge amount each year, whilst the many at the bottom are actually losing money. To get ahead in this company, you need to recruit, recruit, recruit.

FM Income Disclosure Statement

This is one of the statements I was most interested in, mainly because I know quite a few people pushing FM locally. However, even though it is one of the biggest MLM companies out there, it doesn’t publish a statement and seems to ignore emails when asking for one.

In fact, FM isn’t the only company not to submit a statement. I couldn’t find one for other major MLM companies such as Avon and The Body Shop at Home. Unfortunately, it’s only the US that insists on them. In the UK, the companies don’t have to share them and unsurprisingly, don’t.

Banning MLM from social media

If you’ve ever used social media, you’ve probably noticed that MLM companies are rampant there. But in December 2020, TikTok introduced a ban on MLM promotion, placing it next to pyramid and Ponzi schemes. Whether other social media sites will follow, we’ll have to see.

MLM banned from TikTok

Are MLM companies worth joining?

No. There is the slimmest possibility you can make a decent income from it, but the overwhelming evidence shows that even if you earn over £100 every month, you’re doing better than most.

Yes, you will find some positive reviews for MLM, but they come from people already in the business that want to recruit others, mainly so they can make even more money. Can you trust a review from somebody with a vested interest?

And dig a little deeper and you’ll find plenty of reports across the internet where MLMs have caused misery for former employees (sorry, business owners). There are also lots of stories printed in mainstream papers, not painting the business in the best light.

If you leave an MLM, you’ll be accused of not having what it takes or of being a quitter. The fact is, very few make a decent income from it.

There are other ways to make a side income which doesn’t mean spamming your friends or selling over-priced products.

The FTC offers some decent advice if you’re still unsure whether to sign up to an MLM:

  • Can you realistically see yourself selling to your network of friends and family? Selling is work, and not everyone is good at it.
  • What about the product? Would people you know buy it repeatedly and consistently? Or would they only buy it once as a favor? Can people buy comparable products for less?
  • What will it cost you to run this business? You might get pressure to buy a lot of product – in fact, people have lost a lot of money buying more product than they can sell. Also consider things like gas, shipping and packaging costs, sales aids, trainings, and your time. Does that math add up for you? Lots of people leave multilevel marketing programs without making any money, and many lose money.

Whatever you do, don’t get yourself into debt

If you’ve ignored everything I’ve written and still think that MLM is the future for you, then please be careful.

Some MLM companies offer ‘promotions’. As you sell more, you are promoted which gives you a chance to earn more or to be rewarded with gifts. But if you have a quiet month, it’s possible to be demoted straight back down again. Rather than move back down the rankings, some reps are then tempted to buy stock for themselves and hope to shift it at a later date. You could end up with £1,000’s worth of stock that will take you years to move.

And listen to the FTC one more time:

Failure and loss rates for MLMs are not comparable with legitimate small businesses, which have been found to be profitable for 39% over the lifetime of the business; whereas less than 1% of MLM participants profit. MLM makes even gambling look like a safe bet in comparison.

Please don’t be in that 99%.

FAQs

Why is MLM legal?

MLM companies are considered legal as they sell physical goods or services. A pyramid scheme offers neither and is therefore considered illegal.

Which are the worst MLM companies?

It’s very difficult to choose. To be on the safe side, I would avoid them all.

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