Regular 9-5’s suck. I’ll be the first to admit it. In fact, I already did.
I know what it’s like to feel stuck on a hamster wheel that won’t stop spinning for at least 30 years. What it’s like to be chained to a desk watching life pass you by.
It gives you a deep sense of desperation, especially when you can pick up your phone and watch the lives of hundreds of financially successful people half your age.
So when multi-level marketing companies (MLM’s) swoop in and promise to cut the chains, a lot of people get sucked into the dream. I mean, they offer:
- Working from home with your family!
- Unlimited earning potential!
- Freedom to spend time how you want!
- Amazing products!
- Ownership of your own small business!
- The easiest way to start a business!
Except, if you read the fine print and do the math, they really don’t offer any of these things. They just sell the dream to people who are already in a desperate situation and deliver a nightmare.
Before you go signing your soul away to the MLM devil, there are a few things you’ll want to deeply consider. We’ll outline 5 of the big ones in this article.
1. A Scheme By Any Other Name…
People who represent MLM’s get offended by the suggestion that they’re just pyramid schemes with a fresh coat of lipstick. They’re not, technically. But pay attention to that word: TECHNICALLY.
There are only a couple hazy differences between illegal pyramid schemes and legal MLMs. First, the products of illegal pyramid schemes are either non-existent or have almost no value, while MLM’s offer real products that could be considered to have some value.
Second, pyramid schemes focus almost entirely on recruiting, while MLM’s focus on product sales (even though most people will realize that recruiting is their only chance of making money, so this is barely different).
In an MLM, the end user of the product is getting slightly less screwed, but what about the seller…sorry…distributor/independent business owner. *Sigh*.
Well, you get JUST as screwed as you would in a pyramid scheme, cause you’re still the real revenue source for the company. You get to pay for:
- Registration fees to sign up with the company.
- A required number of products to buy/sell per month to continue being a registered seller.
- Your own advertising.
- Anything for events to drum up excitement about the products (food, decor, sample products to give away, etc).
- The VAST majority of any profit made from selling the products (since you’re either paying an inflated wholesale price to get the product or getting a tiny percent of the sale price).
And in addition to paying the company you work for to do all of their advertising and reduce liability by buying a required number of their products each month, you also recruit more people to do the same…FOR FREE.
The scam also takes advantage of your personal relationships. MLMs bank on the fact that your friends and family find it more difficult to say no to you than some stranger off the street. This further increases their profit, while decreasing your reputation.
2. You Don’t Own $hit
MLMs promise that you’ll become a small business owner, but don’t kid yourself, you could fill a novel with all the stuff you don’t own. To start, if you run into trouble, there is nothing you can liquidate to help you get out of the mess.
You don’t own the concept/brand/recipes/etc that you could sell the rights to. You don’t own the website or official social media that you could re-tool to monetize the traffic. You don’t own the manufacturing process. You don’t even own all the profit…you get a teency weency percent of it, as determined by the actual owners.
All you own is a pile of crap that no one wants to buy anyway. And why? Even if it’s the most incredible product ever, the MLM model requires having as many sellers as possible (because, again, the company makes money from you, the seller). And the more places someone can get the product, the more competition, and the less it’s worth.
Supply and demand, baby!
You may be thinking, but what about Starbucks? McDonald’s? They’re everywhere!
Yeah, they can be on every corner of the globe because there is a huge market of people who drink coffee and eat ‘food’ every day. Multiple times of day even!
There are only so many pairs of leggings, tubes of mascara, or bottles of oils one person can use and a lot of other well-established competing brands that people are already loyal to.
At this point, maybe you’re willing to concede that your not a business owner, but a valuable employee. Valuable? Yes. Employee? No. Employees get paid for all of the hard work they do, they don’t pay to do it.
You’re more like the unsuspecting victim of a hungry boa constrictor in the process of squeezing the life out of you.
3. Nothing is Up to You
Just to drive the previous point home, not only do you not own anything, you don’t even get to decide how to run ‘your business’. So in reality, you’re not even at manager status, let alone an owner!
The company dictates:
- How you are allowed to advertise the products (words you can use, how often you have to post, etc.)
- How much inventory you must purchase or sell to stay a registered seller
- How much to sell the products for
Business owners make these decisions, because they are vital to success. You know who doesn’t make these decisions? Revenue streams.
You are their customer, a money maker. That’s it.
4. Making Money is a Mathematical Anomaly
You can make good money at an MLM. In fact, there are 3 ways:
- Own the entire company.
- Be an actual salaried employee (e.g. Director of Marketing, CEO, CFO).
- Be one of the first people to sign up as a seller, trick as many people as you can into working under you, and hope they also sign a bunch of people up.
Note how none of these involve actually selling products.
Well, I’ve already mentioned it a few times, but in case you weren’t paying attention, I’ll say it again. YOU GET THE MOST LAUGHABLY SMALL PERCENTAGE OF PROFIT YOU COULD EVER IMAGINE.
Let’s take Younique as an example. You can make 20-30% from your retail sales. Sounds pretty good, right?
But before you even make profit, there is a $99 fee to become a sales person, so you’re already down money.
It takes money to make money, of course.
And in 2018, Younique had their best year ever! 775 women sold $698, 082 in product. Still sounding pretty good at the moment. But that’s about $900 in sales per woman in a year (assuming each woman sold about the same).
Let’s be generous and say they all sold enough to make 30% from their sales…even though it’s impossible, because they would have had to sell at least $500 in product per month, and we know they only got $900 for the whole year.
So they get $270 for the year. Ok, I guess that could go toward some insurance or something. But don’t forget the $99 you have to pay just to sell. Now it’s only $171.
$171 in one year. Their BEST year EVER….
Now let’s take into account that you have to sell $125 per month to be an active seller…and everyone in your downline has to maintain their minimums to keep you active too.
Well, looks like each one of our sellers is now having to beg to be reactivated, and might be tempted to fudge sales in 2019 by buying their own products just to keep their ‘business’ afloat for a few months while they figure out how to increase sales.
All while making a cool $14 a month for their trouble. And I don’t even know if you have to repay the $99 dollars or some portion of it to re-register if you miss your targets. It wouldn’t surprise me.
Either way, it looks like none of these ladies will be quitting their day job any time soon.
You’re more likely to go in debt trying to make it happen than actually making it happen. Same goes for any other MLM out there.
5. You’re Driving Everyone Insane!
I mentioned earlier that the MLM model leverages your personal relationships to make money. Well, your friends and family are catching on. And spoiler alert, they don’t want to be in the awkward position of having to tell you they don’t want your crap.
But the company will tell you that you can make good money if you put in enough work. (Translation: “if you’re not making good money, you aren’t working hard enough — it’s your fault”.)
So you get desperate. You stop taking no for an answer. You bug everyone you know until they break down and throw a few dollars at you, just to stop the harassment. Pretty soon they start dodging your messages and you stop getting invites to hang out.
The company you work for gets plenty of money, while you earn debt and social isolation.
At this point, you might as well ask your friends for straight up cash. At least you’d keep 100% of that, and you’re loved ones don’t have to figure out where to stuff whatever crap you’re hawking.
And don’t forget about yourself. How crazy do you feel begging people to buy from you, just to earn pennies? Spending day and night worrying about finances? Watching your bank account drain trying to keep it going.? Having to ask for loans to sink into the Titanic?
This boat’s going down no matter what, my friend.
Pretty far from the dreams MLMs sell if you ask me!
If you’ve been caught up in one of these schemes, it’s not your fault. You’ve been straight up lied to!
But you have to remember that there’s this thing called loss aversion. It will keep you making the same bad decision, so you never have to say you lost something. Accept that you have lost. Quitting as early as possible is your only hope for coming out on the other side.
You will NEVER make up the money doing the same thing!
If you or a family member have experience with MLMs, I’d love to hear your stories below!
See you next week, but until then, good luck choosing to make life a little better!