10 Signs Your MLM Business Will Empty Your Pockets

10 Signs You Have Joined A  Multil Level Marketing Business That Will Empty Your Pockets


MLM scam 
Thousands every year turn to self-employment as a viable alternative to living in the rat race. Many people become enamored with the idea of becoming their own boss and they may even have romanticized notions about it, picturing themselves making a dramatic exit from the office, telling their manager that he’s a jerk, and heading off to the bank with all the money they made by working for themselves. Many people take on “work from home” projects part time in the hopes that they can quit their day job one day.

The reality of the situation is a little different, of course. Working for oneself is hard work, and there’s a huge, competitive world to navigate even if you are highly talented at the services you are providing. A job shields you from these harsh realities, even as it shields you from the potential rewards. For some people, a middle ground—being able to work for themselves while still being guided and supervised—is to join an MLM business.

If you think that you’re not familiar with Multi-Level Marketing (MLM), you’re actually probably more familiar with it than you realize. Have you ever had a friend suddenly become obsessed with peddling a new brand of makeup and every time you would spend time with them, they would try to sign you up as an “associate” or a “network marketer”?

Have you ever watched someone blow thousands of dollars to buy a “starter kit” that included all sorts of product
starter kitdemonstrations from some shady company only to later find out that they didn’t sell a thing? Maybe you’ve even tried to join a company like this, thinking that the company had a quality product to sell, only to hear your recruiter insist that you shouldn’t focus on the product at all, but instead that you should focus on recruiting others yourself so that you can sit on the beach all day and accrue residual income from them.

MLM is basically a kind of business model where the source of income is not only (or even sometimes just barely) selling a product to end consumers, but where one makes money by recruiting people who are lower on the “chain,” usually by charging them some initial fee or selling them their initial supply of over-priced products.

In this sense, the burden of producing the source of income is passed down the pyramid, and only the few people “on top” really make much money, and often the whole system will disintegrate over time, since there is not much value really being exchanged. You may have heard of such systems being referred to as “pyramid schemes” or even in their extreme forms (when there is no product at all), “Ponzi schemes.”

Lots of MLM systems out there are basically glorified Ponzi schemes, with the product serving as a decoy, so it’s not always obvious what is going on. MLM businesses prey on both those who are naive about economics and those who have experience already. Fortunately, there are a few standard signs that something is a shady MLM scheme, and those are also the same reasons why they will not make you rich:

 

1) The focus is not on the customer (or else the customer is not who you think).

Any business worth its salt has one main focus, one all-consuming obsession, and that is to make the customer happy. Everything else is second, because the only thing that really makes money is to serve customers. Even if a CEO seems like he is his “own boss,” the truth of the matter is that he’s not—the customer is his boss. If you find that a company you are getting involved with is not putting its energy into serving the customers and constantly refining the product, then something is amiss. Every business needs customers, though, even pyramid schemes: Lots of people join MLM companies only to come to the horrific realization that they were the customer all along—and that they were sold lies and exaggeration. After all, if you’re the customer, you’re going to be spending money, not making it.

 

2) The product is irrelevant or never changes.same old

The world of business is constantly changing, and it’s hard to make tons of cash selling the same old products that people can often buy at the store (except for often inflated prices). The fact of the matter is that selling is hard work, and to be even slightly successful you have to have a superior product that is positioned uniquely in the market. Some MLM companies do sell decent products, but few of them have the incentive to keep themselves competitive, so you often find them selling the same old stuff for years, mostly relying on revenue from the constant stream of naive recruits to sustain them.

 

3) The business strategy is to hit up your friends.

A lot of MLM companies encourage you to bother your friends and family in order to make sales and get more recruits. The problem with this is that you only know so many people, and eventually you’re bound to run out of prospects. If you try to go outside your social circle—online, for example—there’s nothing that makes you any different from all the thousands of other recruits who are probably doing the same thing. Which brings us to our next point:

 

4) There is nothing to distinguish you from other sellers.

To be successful when it comes to selling, it helps to have an edge. If you’re one of the hundreds or maybe even thousands that are flooding the market with the same exact low-demand product at the same exact prices with the same exact sales pitch, you are in for tons of unnecessary competition. It is hard to find a niche for yourself with a cookie-cutter system, even if in theory it seems effortless to have everything planned out for you.

 

5) It is inherently limited.residual income

Recruiters will love to talk about how your opportunities for residual income are “unlimited,” since you will receive a percentage of whatever anyone down the line from you makes; a piece of whatever your recruits sell will go to you, the same as their own recruits, and their recruits, and so on. The person who is trying to get you to join may even show you a cute little chart, describing how many people you will have working for you and bringing in free money 10 or 12 “levels” down the line. Seems effortless, huh?

Too bad that with a little bit of math, we can see how deceptive these ideas really are. Let’s say you recruit 10 people, and they each recruit 10, and they each recruit 10, and then they recruit 10 each, and—just for fun—let’s say that this last group also each recruits 10 people. Just five levels down the line, and that’s 100,000 people. Does it sound likely that 100,000 people are going to work under you? Even most heads of successful corporations do not command armies this large.

Remember that your recruits are really your customers, and every market is limited, especially one as competitive as MLM.

 

6) MLM companies sell mostly dreams and hot air.

If there’s one kind of business that is guilty of being “all sizzle and no steak,” it is your typical MLM company. They often spend a lot of time and effort on getting their recruits to “believe” that they can make money, borrowing the words and concepts of legitimate personal development experts to build faith in their brand. After you’ve been working for awhile, they may even send you certificates or accolades, or move you up to a higher “rank” to keep your interested. These rewards are unlikely to make you a dime, however, even if they may temporarily ease the pain of the monthly fees the company might be charging you.

At the end of the day, if you have to believe in something blindly, chances are that it has little or not objective merit to it. Examine the product, and if you seriously can’t imagine why someone would buy it, don’t get involved.

 

7) They give you unrealistic expectations.

Nothing can make someone quit faster than having unrealistic expectations for making money. The way many pyramid schemes pitch it, you’ll be rolling in Benjamins after six months, or sipping wine on the balcony of your private yacht. The reality of building your own legitimate business is that it is slow, you have to figure things out on your own, and there are no guarantees. This is an unpleasant reality, but it is the truth, and MLM companies like to pretend otherwise. It’s probably the case that more people quit working for themselves due to unrealistic expectations than any other reason.

 

8) You never actually own anything.

When you’re dealing with a pyramid scheme, you are a strange hybrid of employee, contractor, and customer to your parent company. They may give you all sorts of product samples and a nice website, but you never really own anything of true value. You don’t have your own brand, you don’t control the business, and you can’t change and refine the product because you have nothing to do with how it’s made. You’re hardly in control of anything, and if you don’t have control and responsibility over your products and customers, you do not own a business.

 

9) People recognize MLM schemes.pyramid scheme

Most people nowadays are wary of pyramid schemes and have come to some kind of understanding of what they are. You will find it hard to recruit people (which will be your main source of income) if they already know the game and are hesitant to fall for a possible scam. It will be an uphill fight to get past people’s defenses, and the people that you do manage to recruit will be some of the most naive and vulnerable, often those who are unemployed and desperate.

 

10) Your job will be to convince people to believe you, not to add value to their lives.

The most important litmus test when it comes to figuring out if an endeavor will be a true long-term, sustainable source of income is to ask yourself this: Does this genuinely bring value to people’s lives? Are you selling a product or service that people truly would have a hard time finding somewhere else for the price, and that will honestly help them? Or, rather, is your product something that you only hope people will buy, and you find that you make more money convincing other people to sell instead? If you are facing the latter case, then you are probably looking at an MLM scam.

 

There is nothing wrong with the idea of working for yourself, and in fact, there are many legitimate ways to make money on your own, even from home, without having to have what most people think of as a job. If you feel the call of self-employment, there are tons of great resources out there that can help you start your own business, but an MLM scheme will not be one of them. Steer clear of the shady marketing and the hot air, and focus on developing a product or service that genuinely creates value in the world. If your service really helps people, you will be rewarded for that value with profit—and it will be money that you’ll never have to feel guilty about making.

4 comments on “10 Signs Your MLM Business Will Empty Your Pockets”

  1. Chris Reply

    I always look for signs that you are being recruited in order to recruit more people of your own, rather than actually focus on selling the product. This is an obvious tactic of pyramid schemes and indicates that only the top players are going to see sucess in the long run – what do you think?

  2. ChazzBrown Reply

    I like the way you imply that there are MLM companies that don’t meet every one of these conditions. Gives you a chance to get their guard down before you club them. (figuratively)

    You don’t have to go down more than three levels before the system begins to fall apart. This how I explain it when people promote their hot new MLM project to me.

    “How many friends are my friends likely to have that aren’t MY friends too? Aren’t we all hitting up the same people after a while?”

    I don’t want to imply that I was always too bright to fall for this. I’ve tested those waters with Amway, Melaleuca, and MyLife. So I don’t have to bang MY head against a wall…

    For a fourth time!

    • SJB Reply

      Hello and thanks for stopping by!

      I too have tried many MLMs and to tell you the truth, I have quit all of them for the simple reason that their compensation plan was badly set up. I mean, I just COULD NOT make money. I am not a quitter but when I realize that getting to the top is next to impossible, I quickly wake up and move on. I am sure that you did the same thing. 🙂

  3. Simon Crowe in Asia Reply

    You’ve really hit the nail on the head. A couple of years ago someone in the office got em to sign up to Amway and I did give it a real shot for 6 months or so.

    For me the worst and most shameful thing about that period was I met up with an old friend from school I hadn’t seen for years and he was opening up to me after a devastating heartbreak. What was on my mind? Signing him up into my downline of course!

    Ashamed to say but it’s true – I turned into ‘that guy’. Now I run an online business where people come to me, instead of spending all my time harassing my family and friends.

    MLMs are borderline illegal and should be, as you say, they exploit people’s hopes and dreams.

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