What is MLM & How to Identify One

Surely sometime in your life you have heard of Herbalife, Usana, Mary Kay, or Monat or even Amway.

If not them, then you must have been approached by smart looking, smooth talking, very articulate people who would tell you that you can "become your own boss", "work from home", "At your own convenience" and they can even help you "create a secondary source of income".

These businesses that offer you attractive proposals that include "working from home, being your own boss, choosing your work hours, being an entrepreneur and ready to succeed." These are multilevel companies or known in English as MLM -Multi Level Marketing-.

What makes a business an MLM?

This business is made up of a network of independent salespeople who are usually called representatives or distributors. They make money from the sale of the products that the company offers: Mary Kay offers makeup, Usana and Herbalife offer vitamins and nutritional supplements, Monat offers vegan beauty products, etc.

But these salespeople also make a profit for every salesperson they successfully invite into business. If you, María, are a Monat distributor, you can earn money by selling products to clients, or you can also earn from each sale made by the salespeople you brought to the business on board.

Technically, there are two ways to make money in these MLM businesses:

·     Direct sales:

Classic sale of a product to the potential customer. Either in person or online.

It's what many of us have received or seen, the Avon books being passed around the office and the person selling the products.

·     Creation of dealer networks:

This method is about inviting a person to become part of the MLM business. And, if she joins, it means that she becomes part of your network of distributors and for each sale she makes or the person she brings on board, you will get a percentage.

Studies conducted by the Direct Selling Association (DSA, or Direct Selling Association) showed that people who were engaged in direct sales in an MLM earned an average of $ 5,702 in annual sales in 2018. There are cases where the seller earned $ 100,000 annually, but this is a minority of cases.

Those who do it is because they not only dedicate themselves to direct sales, but also dedicate time to create a network of distributors that generates commissions - do you understand why it is called a “multilevel” business? -.

Finally, a 2018 study from the AARP Foundation found that 47% of older adults who participated in MLM reported lost money, while another 27% reported zero earnings. The rest of the percentage said that they had already had experience in this type of business.

Too good to be true?

Could be. MLMs sound like a very attractive proposition. Whether you are looking for work, or when you want to have an extra income. But you must be careful and know the business very well before entering.

Signs of a bad deal

If an MLM company - or any other company - shows any of these points, it is best to politely decline and continue looking for a conventional job or a better offer :

·        Exaggerate your profit potential : keep your feet on the ground and don't be swayed by a "huge and promised" profit from the business. MLM is not easy and it takes time to see real gains - if they ever come.

·        Push for you to sign a contract quickly: never sign anything without researching the business and reading other people's experiences.

·        It requires purchases or training with high initial costs : some of these businesses ask you for an initial investment either to receive courses or buy products. Remember that studies prove that more than 50% of adults who venture into these businesses see no profit and even lose money. Don't invest money that you could use for basic necessities, in a business with impossible promises.

·        It does not allow the return of unused inventory: This refers to when you buy product to sell, but if you did not manage to place it, the company does not allow you to exchange it with other products that are more requested by your customers. This system is, in general, to force you to buy more product and go into debt with them.

·        Suggest that you go into debt to buy inventory: Companies like Mary Kay offer you a credit card to buy product and give you an amount of sales that you must make; If you do not reach that number you still have to buy a product and since you did not have real profits, it is necessary to use the credit card again. The debt with the business rises and the profits do not come.

·        It has a bad rating with the Better Business Bureau (in English)

Listen, we get it. A lot of us are looking for jobs. Especially since the pandemic, it has been difficult to find one even more.

Conclusion

"Not all that glitters is gold" is a phrase we hear from our grandparents, but in the case of multilevel businesses it takes another turn.

The proposals of distributors trying to form their network of salespeople sound attractive, yes, but do not get carried away by the excitement of "being your own boss" and "working from home to take care of your children". Don't forget to do your research before signing anything, to ask direct questions of the dealer you interviewed and to remember that if it sounds too good to be true, it might not be.

There are other businesses that involve being your own boss, choosing your hours, and working from home like Fiverr or opening an Etsy shop or even actually starting your own business.

Our suggestion, don't fall for such offers please. And if someone approaches you on homeis with such a proposition, report them to Varsha please.

Have a great day.

Good Luck.