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10 Reasons Why MLMs are Bad News

pyramid-scheme

In many recent arguments and conversations, MLM followers always assume that being in an MLM is the same as being self-employed, or even more comically, an entrepreneur. The reality is that the MLM model is here to stay but its far from being in business for yourself, nor even close to being an entrepreneur. Here is 10 clear reasons why being an MLM is more like being a cheap salesman at a company that sells products that no one wants.

1. You are told what to and how to do it.

In business or in entrepreneurship, you are the creator and the one responsible for executing. You are the one required to create the product or oversee the idea itself but in this case, it is far from that. All MLM companies provide you with their products to sell and even show you ways to sell them. How are you not a salesman?

2. You have no control over the product.

While its bad enough that you have to sell the product, you also have no say on costs nor the ability to tweak the product, its labeling, or anything that has to do with its branding. Essentially, you are buying a product at retail costs and simply trying to sell it for profit. This is no different than if you walked into a Costco, bought a can of Redbull for $2, and attempted to sell it outside the store for $3. The only difference is that the can in the supermarket is actually good enough to be on the shelves.

3. No one has your back and its in writing.

If you read the contract you sign when you join an MLM, it clearly states that you are not an employee nor a contractor, and that the company has no liability for your actions. What you fail to realize is that it means that even in the case of a lawsuit about the product itself (which you have no control on), you could be sued just for distributing it. At least when you work at a coffee shop, the business assumes the responsibility for its employees or actions, especially for its product.

4. You are the MLM’s best customer.

This is my favorite of all time especially as we hear that Vemma was just ordered to close its doors by the FTC for being an ‘illegal pyramid scheme’. While it may seem strange that a business that pretends to sell products focused 99% of its budget on recruiting a sales force rather than marketing the sales of its products, its also logical as more sales people are forced to buy the product to resell which means that more consumers in the door for a product no one wants otherwise. Even better, they are able to charge a fee to work there and a fee for their products meaning that you are not only their best customer, but you are being overcharged to work there.

5. You are forced to dismiss criticism.

One of the worst parts of being part of an MLM is that you are told that just about any negative comment about the MLM itself is part of an elaborate plot of haters or lost souls who have tried and failed at the golden opportunity. Typically every business is met with opposition but you do have to question the motive when 100’s of people share a similar experience and are frustrated enough to write about it.

6. Its in the fine print, yet you ignore it.

MLMs are forced to describe their earning statements and how divided such earnings are. Year after year, MLM companies showcase their earnings and yet show only less than .01% of their sales people make any money over $32,000, with the majority of the people making less than $1,000 a year. Yet, every seminar, every recruiting boot camp sells a very different story: a promise of financial independence. When was the last time you were excited of getting a full time job that made less than $1,000 a year?

7. Everyone seems to make money, but no one can prove it.

Lifestyle like cars, jewelry, or stacks of cash are all used to promote the idea of financial freedom in MLM companies but yet no one can actually prove to have made their money within it, unless of course we are talking about those at the very top. The idea of financial freedom is great and in most cases it is the idea itself that is sold by countless amount of people who are following in the hopes of making it, but have yet to see it or taste it. I once asked the director of an MLM to show me his tax return and said IF he actually makes more money than me as he claimed, I would give him my $120K Porsche. He has yet to show me his return…

8. Your focus is to recruit, not sell.

When was the last time that the highest incentive you worked for was to hire more people? Which company did you ever work in that traded human capital for cash, rather than sold a product or service. There are only 2 answers: 1) human trafficking and 2) working for an MLM. The goal of every MLM to reach an audience through its so called “contractors” who all are encouraged to bring their family and friends in the mix. The livelihood of any MLM is fueled by its ability to increase its workforce, which ends up being its greatest source of consumers. Imagine if you worked for yourself and all you had to do was find more people to work with you when you haven’t even started to make a profit… Why would you ever do that?

9. They target the hopeless.

10 out of 10 MLMs I’ve encountered love to sell the idea of financial freedom and independence to those who work a low wage 9-5, or are unable to find employment. Those that lack awareness and the ability to grow themselves are ultimately the single best people for MLM to recruit. Partly because they lack awareness, but also partly because they are losing hope and need something to hang on to.

10. Its endorsed by celebrities but yet never practiced?

Many business celebrities endorse MLM companies and even write in their books about the power of the MLM model. Yet, none practice it? If you look at their social feeds, websites, and many other things, none are actually selling you the products they endorse. Why? Could it be their face was used in exchange for money? Most likely every single celebrity is simply using their image to endorse a brand and then the MLM company leverages that endorsement as a good business opportunity. For example, if Tony Robbins said that Vemma was a great brand, Vemma would say that Tony Robbins endorsed its brand and culture when Tony Robbins could have simply mentioned it enjoyed the product or brand. The model is real and profitable, but only for those less than .01% at the very top.