Multi Level Marketing: Can it Work?

by AJ Pettersen · 10 comments

Working a job that pays a low salary for only half the year is difficult, so searching for supplemental income is always in the back of my mind. I have found writing online to be an excellent way to add something to my bank account each month, but my friend (also a minor league baseball player) recently approached me about a possible way to make some extra money. It is a multi-level marketing program that uses green energy as its driving force. This sounded intriguing enough to me, so I looked into it further.

What is it?

Multi-level marketing is a business system where salespeople sell products and get other recruits to sell products. You earn for each product you sell and for each product your recruits sell. It can be thought of as a networking matrix, where the more recruits you get on board, the more income you make.

Pros of the System

It is possible to make money in a MLM system. The key is to get in at the right time and do well selling the product. Studies show that the majority do not make enough money to live off in such an environment, but the average does make between $2,000 and $3,000 a year. Getting in at the right time is important. In the early stages, the system has more possible people to recruit, while in the later stages it can be difficult recruit and sell products.

Cons of the System

The system is widely criticized for a number of reasons. It widely resembles a pyramid scheme where the bottom pays the top. It is only different in that there is a product involved. Once the system reaches a certain level, there will be a shortage of recruits in the market, which may lead to it failing. A 5×5 matrix (each recruit getting 5 more recruits) will fail around level 10. At this point the recruits towards the bottom will begin dropping out because they are losing money, which leads to a domino effect all the way up to the top.

Is it Profitable?

This is only a profitable venture if it is entered at the correct time. If you get in on a product early, you may have a chance to make some extra income. But if you are late, you will most certainly be losing what you put in. In most MLM systems, a large majority lose money.

The product is important. In my case, is helping to grow the green energy business important? This is a question I will think about when considering if I should join or not.

Are there products you would consider joining a MLM system for? What is your experience with MLM? Have you or anyone you know ever joined a system like this? Was supplemental income earned from it?

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{ read the comments below or add one }

  • Supermum says:

    In order to succeed in MLM, you need to find one whose products work for you and you’ll naturally be able to share about it and help others with similar problems.

  • Michael says:

    Ive been in Network marketin for 4 years now. Within that period I was apart of 2 different companies. I had miserable results my first 2 years. I lost more $ than I earned those first couple years but I believed in the industry, and It was my best bet to get to get out of DEBT and help myself financially. When i found a new company I believed in i was determined to make it work. I learned a lot during that time and I’m glad I went thru it because it made me a smarter business owner.

    Now, The only way a company can be called a Pyramid Scheme is if their selling information based products (I.e. trainings tools, Cd’s, books); and recruiting others to do the same. Their making $ off of things that have no real intrinsic value. Scams like these occur during down turns in the economy like we have now.

  • Rachel says:

    MLMs are dangerous, in part because they tend to emphasize and exaggerate the amount of money that can be made. The emphasis on selling first to friends and family can ruin those relationships. The same is true for recruiting or selling to contacts within the neighbourhood, work, or place of worship. “Friends” who are made in the business can disappear if a person quits, leaving the would-be business person feeling hurt. These businesses can be similar to cults–in that there great praise of the business and the leadership of the company–whereas honest criticism of the product or of the business culture are dismissed as “negative.” Some of these organizations even claim to be “Christian” and/or made up of “good people” and will use religious talk as part of their emotional manipulation. I wouldn’t recommend to anyone that s/he get involved with these companies. As the writer suggests, they benefit those at the very top, while those who sign up (at a price) in the down-line pour a lot of money into products and other expenses with little profit or, more likely, debt. That’s why there’s such a high turnover within these schemes. Plan to succeed in an MLM only if you have no regard for the financial and mental and social health of the people you recruit.

  • Becky says:

    This is a good writing. I had been approached by Amway in the past and I have always stayed away because I am not good at convincing people. I feel out of place to tell friends about this. Recently I was approached by ACN for energy and other services. Do any one have any idea and information on this and is this a good one by any means. Any response is highly appreciated.

    Thanks

  • Tub20 says:

    I now know why every now and then I suddenly have some long lost acquaintance suddenly asking about my welfare and seem concerned about my income. It’s very annoying when someone talks to you for half an hour as if they give a damn and the only reason they keep up the pretence is so at the end they can suggest a great way to earn money etc.

    It’s when they say the words join up is usually when I click the hide button and pretend I have had a disconnection. It’s totally annoying and it often results in me removing them from my friends list. Same with phone calls, out of the blue someone wants to meet up have a coffee, and you say fine, and you realize the whole process was to add you to their own money making venture.

    I always say to myself if I have to be that annoying to make a little money then I don’t think it’s for me. I tend to feel that if a product is that good, then why can’t it sell in the normal way instead of this recruitment drive method. Seems unwarranted and I have said goodbye to quite a few acquaintances over the years for wasting my time with fake friendliness.

  • MLM will always be around because there are some people who make money from it, but most don’t. However, most people are the rule and not the exception(I got that line from a movie, haha)

    If you have a great product you’ll start your own business and let it flourish. MLM is just that but usually the products aren’t that great. Advocare, Herbalife, all that is really big right now for MLM. I mean people could just eat healthier and run 3 times a week but instead they pay someone to do it.

  • Tim Ewing says:

    WOW! That was a blast from the past! Many years ago, I was involved with two different MLM’s. The A.L. Williams life insurance MLM and latter on, Amway. The insurance MLM was similiar to the above experiences. I did not make much income, but I did learn a lot about the insurance and financial services industries which has stayed with me and is the foundation of my current education as I study for my certified financial planner designation.
    The Amway MLM was a good system, but to convince others to change their shopping habits was extremely difficult. I did not make much and dropped out after only a short period of time.
    I have read many stories about fraud in MLM. Do yourself a favor and research any company you might want to work with.

    Good Luck in your future endeavors!

  • I think you do need to be careful in want business you get yourself into. Do you believe in the product? Is there room for you to be at equal level or advance higher than the person at the top? Are you capped? As long as there’s room to grow it may not be a bad business. With corporations, you can’t reach the top…there’s no room for you.

    Like any business, you need to know if this is the right thing for you. I consider real estate with a similar structur of an MLM–Broker recruiting agents and makeing an override off the sale of a home.

    This was a good post laying out the pros and cons.

  • Ken Kinstle says:

    AJ Great post! Yes it does work if people learn the skills and take daily action and dont quit! Your professionalism and experience shines through in your writing. Thanks for the help 🙂

  • ChrisCD says:

    I think one of the biggest problems with most MLMs is the minimum amount they generally require you to spend. It seems to be around the $150 to $200 month.

    Secondly, most of them encourage additional spends on conferences, DVDs, books, etc. Now, I realize a business requires capital, but they often seem to market to people that don’t have extra capital and it can have a devastating affect on one’s finances.

    Third, word-of-mouth advertising and recruiting is much more difficult then most people anticipate. It is one thing to recommend a good movie to a friend, it is another thing to convince them to enter into a business with you.

    Finally, many of the companies are short-lived and thus difficult to create a long-term income.

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