As a budding entrepreneur, you are bombarded daily with the “Latest and Greatest” business ideas and opportunities. So, how do you know which ones are the best or even a viable opportunity? That question is better asked as which ones I should avoid altogether, and that answer is any that do not give you the owner or creator 100% license and profits to run the business. You may be asking what kind of business this and my answer it would be a Multi-Level Marketing” (MLM) business. You have seen these all-over social media marketed by consultants or salespeople or “entrepreneurs” that try to recruit others into their “company or business”. So, how do these work and why are they such a bad investment or idea. Let’s find out.
MLM’s operate as a direct sales or marketing company with the product or service manufacturer and its executives at the top of the mountain. They then begin to recruit others to both sell the product and recruit others to sell under them. As the number of people grows, levels form, and it takes on the shape of an ancient Egyptian shape that was once the name of Ponzi or Money scams that bilked thousands of people out of millions of dollars. Those straight-out schemes are now illegal, but MLM’s take on the same type of structure except for offering a product or service.
Those at the top received profits off the sale of the product and get a piece of the sales of those they recruited sales as well. As the ancient shape grows, it gets bigger and the pieces of the income get divided among more and more people. So, if you just use a bit of elementary geometry, you’ll see those at the bottom of the structure make very little if not lose money. As the diagram below shows.
Why They Are Bad
The basic structure is a company who sells stuff to their employees. Yes, those “entrepreneurs” that try to recruit you are just unpaid employees who are required to buy a starter kit or certain amount of product from their boss and then sell to others while recruiting them to sell too. Sounds great doesn’t it, it is for the Company, its executives, and those on the first couple of levels. It is incredibly bad for the majority of those involved for several reasons.
You are told what to and how to do it
You have no control over the product
While it’s bad enough that you must sell the product, you also have no say on costs nor the ability to tweak the product, it’s labeling or anything that has to do with its branding. In short of the product was good, it’d be in stores or online retailers.
No support from the company
The contract clearly states that you are not an employee nor a contractor and that the company has no liability for your actions. What you fail to realize is that it means that even in the case of a lawsuit about the product itself (which you have no control on), you could be sued just for distributing it.
You are the best customer
99% of its sales are to those who sell for it and its attention is on recruiting a sales force rather than marketing the sales of its products. Even better, they can charge a fee to work there and a fee for their products meaning that you are not only their best customer but you are being overcharged to work there. The product is meaningless as your job is to get to the people in the system.
You are forced to dismiss criticism
You are told that just about any negative comment about the MLM itself is part of an elaborate plot of haters or lost souls who have tried and failed at the golden opportunity. Typically, every business is met with opposition, but you do have to question the motive when 100’s of people share a similar experience and are frustrated enough to write about it.
It’s in the fine print, yet you ignore it
Year after year, MLM companies showcase their earnings and yet show only less than .01% of their salespeople make any money over $32,000. Still, at every seminar, every recruiting boot camp sells a very different story: a promise of financial independence.
Everyone seems to make money, but no one can prove it
A lifestyle like cars, jewelry, or stacks of cash are all used to promote the idea of financial freedom in MLM companies, but no one can prove they have the cash, except those at the very top. Financial freedom is great, and, in most cases, it is the idea itself that is sold by the countless amount of people who are following in the hopes of making it but have yet to see it or taste it.
Your focus is to recruit, not sell
The goal of every MLM to reach an audience through its so-called “salesforce” who all are encouraged to bring their family and friends in the mix. The livelihood of any MLM is fueled by its ability to increase its workforce, which ends up being its greatest source of consumers. This can cause huge rifts in both families and friendships.
They target the hopeless
10 out of 10 MLMs I’ve encountered love to sell the idea of financial freedom and independence to those who work a low wage 9-5 or are unable to find employment. They seek out those that may feel they have no other choice.
Who is an MLM?
Though you should be very careful to note this thing, before entering any opportunity, so keep a watch what are the companies you should be able to spot at a distance. Well here is a list, but there are more springing up every day.
- ACN Inc.
- Ambit Energy
- Amway Global, previously known as Quixtar
- Arbonne International
- Avon Products
- Discovery Toys
- Forever Living Products
- Fuel Freedom International
- Isagenix International
- Juice Plus
- LegalShield, previously known as Pre-Paid Legal Services
- The Longaberger Company
- Market America
- Mary Kay
- Morinda, Inc.
- National Safety Associates
- Nature’s Sunshine Products
- Neal’s Yard Remedies Organic
- Nu Skin Enterprises
- The Pampered Chef
- Qnet, previously known as QuestNet, GoldQuest, and QI Limited
- Rodan + Fields
- Southwestern Advantage
- Stream Energy
- Success University
- Tastefully Simple
- Telecom Plus
- USANA Health Sciences
- Vector Marketing
- Wakaya Perfection
- Watkins Incorporated
- World Financial Group
- Young Living
- YTB International
Are these brands you are familiar with or have seen touted on social media? Do you anyone that is involved with any of these? Maybe spread the good word and help them out.
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