Are MLMs Good? How To Spot An MLM

Lots of people love the idea of making money while having a flexible work schedule. Get up when you want. Work when you want. And that’s what makes MLMs and other work from home opportunities so seductive. What’s an MLM, you ask? MLMs are multi-level marketing companies that sell products through direct selling. And that’s what this article is all about. But are MLMs good? By the end of this article you’ll know what they are, how they work and how to spot an MLM. Then you should be able to decide for yourself if they are worth your time.

Are MLMs Good

What is an MLM and How Do They Work?

MLM stands for multi level marketing. Companies that have an MLM business model don’t hire a sales force. They rely on independent contractors called Distributor or Consultant–something like that. As a distributor or consultant you only get paid in commissions for products you sell. The other way you get paid is by recruiting people to join your team. Those are the two main ways that the company and the independent contractor make money.

MLM vs. Pyramid SchemeAre MLMs Good - Pyramids

You may have heard MLM and Pyramid Scheme used interchangeably. So you know how MLMs work. Now we’ll talk about how pyramid schemes work. MLMs and pyramid schemes have a few things in common such as:

Pyramid Schemes: rely on recruiting. Someone recruits you and asks you to put up a certain amount of money. Then they promise that you will make that money back and more when you recruit others in the same manner.

MLMs: To start with an MLM, you have to have a sponsor. So that sponsor will earn money off all your sales. The payment part comes in the form of buying a starter kit. In order for you to move up the ladder to earn more money, you also need to recruit. See how that works? You can see how this could be a bit confusing.

Both MLMs and pyramid schemes rely on recruiting others to join you. Pyramid schemes ask that you put up a certain amount of money with the promise that you will make that money back and more through your own recruitment efforts. MLMs also expect you to recruit. A percentage of your product sales will go to your sponsor. If you want a piece of that pie, you have to recruit as well. In the end, the organizational structure looks like a pyramid in both cases. MLMs have also been compared to affiliate marketing. If you want to read my article about that, click here.

Who is Best Suited for MLMs

It really does take a certain type of person to make money with MLMs. Just because you want to make some extra money, doesn’t mean that you can be successful working in an MLM business model.

This is all my personal opinion so take it with a grain of salt. If you’ve had any experience with MLMs, you’ll probably agree with the the list below:

  • Love the products: if you have been using the products of a particular MLM for a while and really enjoy them, your enthusiasm could help you make sales.
  • Outgoing people: Outgoing people tend to be very confident and can usually strike up a conversation with most anyone. Personally, I love people like this. Imagine you hanging out at the airport waiting impatiently for your flight. You’re tapping your toes and checking the time on your phone every few minutes trying to calculate how late you’re going to be on arrival. You’re waiting for the flight to be called and a passenger just starts talking to you about the inconvenience, whatever. You immediately feel good, right? Outgoing people have a way of immediately making you feel comfortable and at ease. They love to talk to people.
  • People with a wide network: these people basically have unlimited resources at their disposal. And anyone who has a wide network is probably outgoing and loves certain products. This makes them excellent for this business model. Not only can they tap into their own extensive network but the networks of the people in those extended networks!

I’m not saying that anyone who doesn’t fit the above categories can’t succeed here. I’m saying that the people with the above skillset will likely be the most successful.

Why Do People Join MLMs?

Of all the MLMs I’ve looked into, women seem to make up the biggest number of distributors or consultants working for MLMs. And that’s for a very good reason. Women join MLMs for different reasons, such as:

  1. Love the products: If they join the company, they can get a discount on those products. Depending on how much they sell, they can even qualify for free products.
  2. Free products: if a distributor is really motivated to sell, she can sell enough to qualify for free products
  3. Building a career: if you dedicate yourself to working full-time, you can rise up in the ranks to area manager, district manager, etc.
  4. Travel perks: Another benefit to rising up in the ranks is that you can earn an all expense paid trip.
  5. Cars: Some MLMs, like Mary Kay, will even give you a car if you rise high enough in the rankings. Mary Kay once gave out pink Cadillacs. Not sure if they still do this.

For women who are trying to raise a family, MLMs can be a great way to earn money in your spare time.The flexible work schedule means that you can work around your family respons