Why You Shouldn’t Join an MLM
One of the people I follow on Instagram loves to post about her blossoming business career. According to her feed, she’s a #bossbabe with her own business, works flexible hours on her schedule, and is pulling in a six-figure salary.
The first few times I saw her emoji-filled posts, I genuinely thought she was a successful freelancer or entrepreneur dominating the market. It wasn’t until she began to advertise essential oils from Young Living that I started to catch on to what was really happening.
She wasn’t the wealthy, glamorous entrepreneur she masqueraded as — she was just another person caught up in an MLM, trying to recruit others for her own profit.
Although I have no idea whether or not she’s actually making the six-figure salary she boasts about, I’d bet against it. Over 97% of MLM consultants misrepresent their earnings. It’s much more likely that she’s hustling to make a small profit, and even that might be a stretch.
Despite the prosperity gospel she’s trying to feed me about Young Living, MLMs aren’t the goldmine they pretend to be. These companies — and I use that term loosely — have been reeling in hardworking people just trying to make a buck for decades.
And, because we live in the digital age of social media and mommy blogs, MLMs are more inescapable than ever. There’s always a stay-at-home mom advertising on Instagram or a young freelancer on Facebook ready to tell you why you should join their cult — I mean multi-level marketing scheme.
But, before you drink anyone else’s kool-aid, I’m here to tell you why you steer clear of MLMs.
What are MLMs?
Even if you’ve never been a part of one, you’d probably recognize an MLM by its name. Some of them, like Amway and Mary Kay, have been around since the ’50s and ’60s, and are still thriving today.
More recently, Avon, Young Living, Younique, Herbalife and the possibly bankrupt LulaRoe have joined the MLM hall of fame.
Unlike regular businesses that sell their products online or through stores, MLMs use consultants or distributors. Consultants will buy a bunch of the product from the company at a reduced rate and then sell it for a profit. Like salesmen, they work on commission rather than an hourly rate or salary.
Anybody can become an MLM consultant and start selling regardless of whether or not they have sales experience. As long as you can afford the starter kit — which typically cost $50 to $200 — you’re hired.
Consultants will often encourage you to join their MLM, but it’s usually not because they believe in the company that much or think you’re a perfect salesman.
It’s because, in most MLMs, the consultant that recruits you will get a percentage of your commission. This is called a downline: your recruiter will get a commission from anybody you bring in, and anyone that person recruits — and so on. Building a successful “downline” is the main way consultants make their money. If they can recruit enough people (who will then recruit other people), they could be making hundreds or thousands of dollars in passive income each month.
On the surface, that seems like a profitable idea that could yield some serious cash. Unfortunately, MLMs are not designed for the success of their consultants, but only the top percentage of management.
You won’t make any money in an MLM
The people who join MLMs generally think that, once they establish themselves, they’re going to be able to make a full-time income. They might even be under the assumption that, like the girl on my Instagram, they’ll make six-figures a year.
Other MLM consultants, in an attempt to recruit anybody they can into their downline, tell them this. They advertise a glamorous life full of flexibility and passive income. What they don’t say is that the chances of making a six-figure salary — or even a full-time income at all — are slim.
Dr. Jon M. Taylor conducted extensive research into the time and money that goes into working for an MLM as well as the profit it yields. What he found was that, over time, consultants spent a minimum of $25,000 on expenses. Most of this money went towards buying new products to sell, traveling to conferences, incentives, and giveaways.
In comparison, the average annual income for an MLM rep was around $2,400 a year. Taylor found that only 0.14% of consultants were actually making a glamorous, six-figure salary.
“In every case, using the analytical framework described, the loss rate for all these MLMs ranged from 99.05% to 99.99%, with an average of 99.71% of participants losing money in an MLM,” Taylor said, “On average, one in 545 is likely to have profited after subtracting expenses and 997 out of 1,000 individuals involved with an MLM lose money (not including time invested).”
Your chances of actually making money in an MLM are almost nonexistent. Not only will you lose money, but the company will encourage you to keep spending until they’ve bled you dry.
This is the part that most consultants often miss: multi-level marketing schemes aren’t targeting the consumers — they’re after the consultants.
When consultants join the company, they have to buy the product in order to sell it. They think they’re making an investment, but the company is just making a sale. Any commission they get from their product being sold by reps is just icing on the cake.
Your friends and family will probably hate you
Beyond the fantasy of earning passive income from their downline, the real reason that so many consultants focus on recruiting rather than selling is simple: they can’t actually sell the product.
This isn’t necessarily because all these people are terrible salesmen (although many of them do enter into an MLM without sales experience). It’s because there’s almost no market to distribute the product.
Consider the girl on Instagram trying to peddle essential oils. She can’t sell the oils in stores, and because it’s not actually her product, she can’t open up an online store or website. The fact that there are hundreds of other consultants selling the same exact thing also puts her at a disadvantage.
Beyond setting up a stand at local markets or fairs, consultants are almost forced to advertise completely online — specifically on social media accounts, and to family and friends.
This is where most of us encounter MLMs for the first time: we see our Instagram followers trying to pitch us essential oils, or we get invited to a LulaRoe pop-up party. I once even had an old acquaintance from high school invite me for coffee under the guise of “telling me about a great business opportunity”.
Realistically, MLM consultants don’t have much choice other than to sell and recruit family, friends, and co-workers. Still, nobody likes showing up to the family reunion with the aunt who only wants to talk about Mary Kay makeup.
Perhaps I could swallow my frustration of being pitched to all the time if I knew I was supporting a friend’s actual business — not a shady multi-level marketing scheme.
Unless you’re an amazing salesman, joining an MLM will put you in an impossible position. You’ll spend the majority of time pitching the product to people you know — which, over time, will also only put you at odds with them. You’ll be driven closer into the cult-like atmosphere of your MLM “family”, and away from your true friends.
While they may masquerade as legitimate businesses that could make you rich, MLMs thrive on misinformation and the naivety of their consultants. Not only do you end up losing money in the long run, but you’ll probably end up annoying every family member you have too.
This is why I have a counter-proposal: instead of joining an MLM and spending $25k on products, conferences, and incentives, why not just burn the money in a bonfire? You’ll save yourself plenty of time, and you’ll get s’mores out of it.