Can You Make Money in an MLM Business?

by GuestPoster

Most of us have probably had an encounter with a multilevel marketing or MLM business.  Even if no one has actively tried to recruit you, you have probably been invited to an in-home sales presentation and heard the offer at the end to become a salesperson for that company.  The brochures and presentations look great.  They all but promise you, because legally they aren’t allowed to promise, that a little work and investment now will set you up to make big money for the rest of your life with very little effort.  You see video testimonials from people who make massive amounts of money and live in luxury.  Despite the nice presentations there are fatal flaws in the MLM business model which make it impossible for more than a handful of participants to earn a significant income.

A Flawed Business Concept

The two major flaws in the MLM business model are a backward compensation scheme, and an unlimited recruitment policy.  A close look at an MLM compensation scheme will reveal that the highest percentage commissions are paid to the people at the top on the pyramid or network.  This is what enables the top people to earn such high incomes, they’re being paid 5 or 10 percent on the sales of hundreds maybe even thousands of people they have never met.  At the same time all of those people may only be making 1 or 2 percent off of the same sales.  My actual analysis of one compensation scheme (as detailed in the company’s literature) revealed that the $11,000 per month income for the top person boiled down to a $7 per month income for the bottom level of his network (half the people) and an under $100 per month income for the next couple levels up.  The other big problem with the MLM model is that sales people are recruited without restraint and recruitment brings advancement.  Common sense would dictate that there are only so many customers in a given region, and therefore only so many salespeople are needed, but MLM’s recruit more and more salespeople in an unsustainable system.  Too many salespeople means none of them have enough customers to make their sales profitable.

Evaluation Questions

The following questions can help you separate legitimate work from home jobs from an MLM opportunity that is most likely going to cost you money.

  • Are commissions paid to more than 4 levels of participants?
  • Does the majority of the commission go to someone other than the person who made the sale?
  • Is there anything about this product that would make people buy it, if it weren’t you asking?
  • Can you make a reasonable income just from selling the products?
  • Are you rewarded based on how many people you recruit?
  • Do you have to pay the company for the right to work for them?
  • Are you being recruited by someone who has just started out themselves?

A “yes” answer to more than one of these questions is cause to dig deeper and ask some more pointed questions.  Also check out MLM- for more information on why MLM’s cannot work for a majority of the participants and statistics on the high losses drop out rates of MLM participants. Don’t get me wrong, an MLM business can be very profitable, but the products must be excellent and priced competitively.  This way, you can enjoy the commissions on the products that you use yourself anyway, and if you make money off downline affiliates, then that is icing on the cake.

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