MLMs have hurt millions of people, but it doesn’t matter how many negative reviews they have. Or how many warnings people give about MLMs. There is a group of people that can’t get away until it’s too late. And today I’m going to talk about one of those people. But before I do, Let’s give some background.
MLM stands for multi level marketing, and this is a scheme. The business model operates where people are earning profits from the products they sell. So the direct sales, but also importantly from the recruits. They bring in, you’ll notice with MLMs, a common theme is recruitment focus.
The participants are always encouraged to recruit new members. It’s not only about selling the product, but bringing new people in. This will create multiple levels of sellers to join in a hierarchical structure. There’s an initial investment to join the MLM.
You’re going to have to purchase what is called a starter kit or an initiation kit and this is all under the guise of starting your own business. So with MLMs, the earnings are not just from the product sales, but also from the bonuses and commissions based on the sales and recruitment.
The more you do, the more people you bring in, the more sales you make, the more commissions and bonuses you get. And there will be talk about levels to this. And once you hit a certain level, then you get. This additional commission or you get a prize. And so part of that is someone’s downline.
The downline is in reference to those individuals that you bring in that are under you. this is all to entice you. Sometimes you’ll be referred to as a distributor or an independent distributor or an associate or a consultant, a promoter, et cetera. But the whole idea here is that you are making sales.
So you are selling a product, but you’re also trying to recruit other people to sell said product. People are sold on the idea that this can become their own business, they can be an entrepreneur, they can work their way up and start making really, really big money, and this is all from their own business, and they can work from home, and so you’re sold on that, but what’s not highlighted are the hidden costs. So the monthly quotas, the training and marketing experiences, you’re not sold. You’re not told really about the initial investment. It’s glossed over. They don’t want you to pay attention to that. So they don’t dwell on it, but there is an initial investment.
It’s marketed as low risk. Because you’ll have the product and then you’ll always be able to sell it even if it’s at a discount and you’re already getting a cut of that. So you’re getting, you’re selling it for more than you’re buying it for. And you’re not giving a realistic picture of the viability of this business or the profitability.
Per the Federal Trade Commission, over 99 percent of participants in MLM schemes. end up in the red. So they end up taking a loss. So how it starts your it’s there’s this revolutionary business with an amazing set of products and You can have financial freedom if you’ll only help them sell these products It gives you flexibility in your hours and you’ll have a community to fall back on and you can even You might even have dinners with the people that are also involved.
You might have vacations with people. You really have this dream that’s painted. But what happens is it starts off as a dream and then it ends up. So we’re going to talk about Ashley and Ashley buys into this financial freedom and being her own boss and she also likes the community aspect and the ability to get recognition when she starts hitting these different goals.
So she starts with. She’s going to go ahead and go for this and she wants to really give this a try. And one upside here is that Ashley doesn’t have to start from scratch with her own website. This is a ready to go. Business. All she has to do is start selling. The products were already there for her. What she needs to do is just move product and then also invite other people in on this opportunity.
The word opportunity, of course, is used throughout the pitch from the MLM company to the participants because they want you to see this as a chance to really get ahead. So there’s no need to establish a brand. No product line, everything there, everything is there for you. And don’t worry. You’ll have the support of the community behind you.
So Ashley bought a starter kit for 1, 300. Well, she bought the, the, the entire starter kit for 1, 300. 300 was for specifically for the starter kit. Then there’s 500 for the initial product to have in stock. So she had to buy products so that she could sell it. And then there was 500 in marketing training so that she could learn how to sell and really take her sales to the next level.
So not only does she spend 1, 300 to get started, she also spends 45 hours over three weeks. And this is with webinars learning about the product, how to sell and she’ll be selling. beauty products. There are monthly quotas attached to this buy in. So not only does Ashley need to buy this initial product, but then she needs to meet monthly sale quotas.
So already there is something that Ashley has to do in order to remain active and in good graces with this program. And if she doesn’t hit her monthly quotas, then Ashley’s going to face pressure from the person above her, her upline. And so Ashley needs to meet Monthly Quotas, and this includes buying inventory, even if it’s not selling, but that’s not really talked about in the beginning Because in the beginning, it’s just like okay, you have monthly quotas, but don’t worry about this You’re going to be successful and we’re going to help you.
So don’t worry about those monthly quotas They just want to make sure That you’re moving and that you’re active in this program. So with the first month, we begin the daily grind. Ashley is completely hopeful. She’s posting on Facebook and Instagram daily. She’s showcasing products and sharing testimonials, and she’s spending three hours a day doing this.
And she does get a few initial sales from close friends and family. And she’s even convinced one friend to sign up and she, so she has her first downline recruit. So now she’ll get a percentage of all of her friends sales and she can support her friend the way her upline is supporting her. By month two routine starts to set in, but she’s not getting the same number of interactions on daily posts.
And so she starts. Direct messaging friends with exciting offers and following up on her previous message. And she’s noticing that her direct messages are getting ignored. By month two, she’s down to 75 in sales, and yet she’s spending three and a half hours a day on this. She goes ahead and checks in on the friend who is struggling, and she coaches her friend over lunch, even though she’s not really selling, but she’s trying to push her friend to sell.
And then with month three Ashley decides that she needs to get creative and she hosts a Facebook party and eight people say they’re interested on Facebook, but only three turn out and it’s, it’s, it’s her aunt and two cousins. She gets another 100 in sale and sales, but she’s starting to have inventory pile up around her house.
But because the inventory is not moving, she decides to spend another 250. On new, more popular items and her friend ends up dropping out without getting any sales. Ashley tries to talk her friend out of it but to no avail. So her down, her downline is out and she’s facing pressure because she’s buying inventory.
She’s taking a loss, nothing’s selling. So they tell her, okay, well, what about this new inventory? This is a way to start moving. These popular items are going to sell quickly. You won’t have to worry about it. By months four and six, Ashley is starting to regret this decision. Her posts become sporadic.
Her enthusiasm is gone. She’s down to two and a half hours a day of work. She gets one sale for 30. She texts her old friend about trying to come back in right now that they can buy, that they can now rebuy at a discount and the friend ignores her. At month seven to nine she’s now on an aggressive marketing campaign and she’s trying to reinvigorate her sales and buy more stock.
So she does buy more stock. She attends a 400 seminar and her direct messages become more frequent because they tell her, you’ve really got to start being aggressive. The only way you’re going to make sales is if you start talking people. You’ve got to pick up from there. You might want to offer discounts and this results in strained relationships.
Now people are just outright unfriending her. They’re telling her not to contact them anymore. And she’s spending four hours a day in these aggressive efforts. She even posts about a virtual party and it gets one like, but no one signs up and now things are getting really bad. So. In months, 10 through 12, the emotional toll mounts, and she’s being told one thing by the MLM company, but her results speak differently and she’s having serious doubts.
She’s now avoiding social media, feeling isolated. She doesn’t know what to do. Her net loss is in the thousands of dollars. She’s got unsolved unsold stock and it’s really making her look like a hoarder. And. Now she’s left with no choice but to leave and she’s having lost all of this money, lost all of this time, her energy, a year of her life has really been dedicated into promoting this MLM.
And it’s now a complete failure. She’s embarrassed her friends and family, no longer like her. And she finally decides to leave. She’s got to sell her unsold stock. And she can’t get even half of what she paid for it. So she ends up selling it at 15 percent of the buy in price. And now she’s got to work on rebuilding her life, her relationships.
Her emotional well being and she really doesn’t want to interact on social media anymore because all it has is bad Associations. So this this scenario that I’ve run through is not uncommon. This same chronology happens over and over again. So why does this happen? Well, There’s a there’s a flaw here, right?
You should never pay anybody to sell their products for them. You have to look at the situation for what it is. In reality and not what it is that you are led to believe. So what’s happening with MLM’s is the company that is originally the MLM. They’re not bearing the risk and cost of their product marketing sales.
This risk is all being shifted over. To that consultant or to that associate or that distributor that’s all shifted to the individual who now pays for, wait for it, the opportunity to sell. Everything is just an opportunity. So the MLM company is using you and your credibility with your networks and your friends and family to sell to them when they would have never had the credibility.
To reach them previously they wouldn’t have had the reach they wouldn’t have had the marketing or the credibility So they’re using you at the same time. They’re making you pay So the MLM company, as I said, they don’t take any risk because they’re pre selling the product to you, and they require a substantial upfront investment in a number of ways.
So they’re making money multiple ways. It’s not just through the product. You might have had to buy the starting kit, the starter kit. You have to buy their customized marketing. You have to sign up for consultations, et cetera. And then they require you to buy even more inventory to remain active or to qualify for bonuses.
So you have to keep rebuying. So they are guaranteed sales every time and you, they put the pressure on you to sell these. Or else you fall out and you may even have to pay if you fall out And the mlm is guaranteed money in several ways and they’re not paying you anything To promote them to your network.
You’re taking all of the risk and you’re taking all of the risk Reputationally, so you’re straining your relationships to make sales because all of a sudden you’ve become a salesperson Even though you’re paying to be the salesperson. So it’s really problematic. You never pay anybody to work with them.
One last thing I want to go over are some common cliches. You’ve heard me talk about opportunity. That word is weaponized against people so much. But there are also some cliches that you need to look out for. So when you hear, go big or go home, that’s really just justifying. a significant investment into this.
So a significant amount of inventory under the guise of your only option is success. Well, that has led many people down a path of losing a lot of money or success is just around the corner. So that is always giving you that false hope that you’re just, you just need to turn the corner and then you’re going to be successful.
Well, as the FTC has outlined in their statistics, it’s not just around the corner for 99 percent of people. You have to spend money to make money. A lot of money has been lost under that cliche. That, that’s just telling you, okay, you know, it’s okay to spend money. It’s, you’re justified in spending money on us because when you do so, you will make money.
Rome wasn’t built in a day, so it’s okay that this is taking a long time. You just have to build up. You know, that’s another, that’s another warning cliche. You’re building your own business. You’re not building your own business. You don’t own anything. You don’t make crucial business decisions. You might have some minor discretion over certain things, but otherwise you’re just selling people products that you’ve already bought from someone else.
You really have, you’ve created a job for yourself. Everyone can succeed if they believe. So the, the idea here being, you just have to think that you’re going to be successful. And meanwhile, this ignores the realities of the situation and how the market may be saturated for this product because they already have so many people selling it.
You’re just not working hard enough. So there’s a blame shifting, right? And it shifts onto the individual because the MLM companies constantly pressure. People to make sales. So it’s the blame game. It makes participants feel like it’s their fault Like if they don’t make sales, then it’s their fault.
They’re not working hard enough. They’re not trying hard enough They didn’t study hard enough. They haven’t used enough pressure. They haven’t direct messaged enough. They haven’t marketed on Facebook enough They didn’t use enough hashtags. They’re not on YouTube, right? There’s an endless list of reasons Why it’s the, the consultant’s fault or the distributors fault.
It’s never the MLM’s fault and they’re always pushing you to get more. And you’ll notice this constant pressure come up because they’re constantly pressuring you through any number of ways. And then there’s this idea anyone can succeed. So just trying to give you this idea that It’s possible for anyone, and they’ll show you the examples of the people that first joined the MLM.
Yeah, those people that first joined may have been successful, but it’s going to be less and less and less the case as more and more people join. So it’s only going to be those initial people that they show to you and they showcase to you where they have all of these people that are downline, right?
Those are going to be the people they want to, but those are the, those are the exceptions. They are not the rule. It’s not anyone can succeed. Anyone cannot succeed. You, you’re ignoring market realities. If you think that anyone can succeed in this. So MLMs are, are just, they wreak havoc on society. And.
They’re usually just they’re complete failures The only people that end up being successful out of all of these in a sense is the people that start them Because they’re the ones breaking in all of the profit and they’re not taking any of the risk Besides the legal risk. But of course, MLMs have become more fine tuned.
They’re more polished now. They can avoid those legal troubles while they take people’s money and then leave them holding an empty bag. Well, not necessarily empty. They’ll still have all of their worthless inventory, but these are. Commonalities among so many MLMs and they all follow this basic structure.
Sure. Some details will change. Like I said, MLMs have evolved. Some details do change. They change the way some things go work, but in the end. People fail. People lose money. They lose all their time, they lose relationships. They become really just a pariah and people don’t want to deal with them because all they’re doing is selling their family and friends.
And that’s what MLMs are using you for to reach your family and friends to further their ends.