Everything You Need to Know About Multi-Level Marketing

multi-level marketing

So you’re retired or approaching retirement and thinking about the future. What will the next chapter of your life hold? Will you enjoy the permanent-vacation feel? Or will you spend time volunteering for a worthy cause? Maybe you’re worried you’ll get bored. Possibly you’re thinking about what working would look like for you.

You aren’t alone. According to the AARP, one in five Americans over age 65 are working or looking for work. Some work past retirement age for financial reasons, but others enjoy the extra social interaction. No matter the reason for an encore career, there are many to choose from. But today we’re going to talk about one that isn’t worth your time.

What is Multi-Level Marketing?

A Multi-level Marketing (MLM) business combines direct sales and recruiting. MLM companies start with a network of sales associates who are incentivized to both sell products and recruit new sales associates. Why? Because as the leader of a sales team, you’ll receive a percentage of your recruits’ sales. 

And when your recruits start recruiting, you’ll get a percentage of those sales as well. So in an MLM, you’ll earn not just by selling products, but also by increasing your “downline.” The concept feels simple: more downline equals more money.

Sounds great, right? That’s why there are 20 million Americans actively involved in this $36 billion industry.

Why should you avoid MLM?

When you look a little harder, the scheme starts to fall apart. So why are you better off avoiding this type of business?

They’re not very profitable…

Seventy-four percent of MLM participants either just break even or lose their money—especially the lowest tier of recruits. Often the market is saturated with too many people trying to sell the same product. But also, not everyone is suited to sales. MLM companies don’t usually provide enough sales or marketing training for you to succeed. That’s why 53% of MLM participants make less than $5,000 a year.

…it’s time-consuming…

And that’s $5,000 a year requires quite a bit of effort. Despite the low (or nonexistent) returns, you still have to put time in. Thirty-five percent of those in MLM structures say they don’t like feeling pressured to sell all the time. For such a small chance of a return on investment, MLMs simply aren’t worth your time.

…and tough to keep up!

Most give up on the MLM within the first year. There are many reasons people struggle to succeed in an MLM but feeling awkward asking friends and family to buy products is a big one. Of course, most report they didn’t make as much money as expected. Not surprising given what we know about MLMs!

How can you spot an MLM scheme?

MLM companies often come under scrutiny by the Federal Trade Commission for deceptive enrollment practices and other nefarious business dealings. If you experience any of these three signs, you’re likely dealing with an MLM:

Sign #1: Pushy sales tactics

If you’re asked to message all your friends on Facebook, email everyone you know and repurpose your social media for sales, you’re probably dealing with an MLM. They’re well-known for over-the-top tactics.

Sign #2: A hefty investment

Most MLMs require recruits to purchase a starter pack including product samples and sales tools. You’ll also probably be pushed to attend expensive conferences and training sessions that are big money makers for MLM companies’ top earners.

Sign #3: Focus on recruitment

As we mentioned above, you’ll be encouraged to recruit others. When you do, you’ll earn commission from their sales—just as the person who recruited you gets commission from yours. Unfortunately, this formula makes turning a profit quite challenging for those at the bottom.

What are some MLM alternatives?

If you’d still like to find a way to stay active while earning, here are a few ideas:

According to people who have participated in MLM schemes, 65% agreed they wouldn’t join an MLM business again. Don’t repeat their mistakes. Avoid getting trapped in an MLM scheme by learning from their experiences!


image credit: shutterstock/RoboLab