Update 8/12/20. Has someone asked you to take advantage of an “opportunity” and get involved with an organization that sells supplements or other products where you can earn money working from home in your spare time? If yes, what you have been asked to become involved with is called Multi-Level Marketing (MLM), also known as Network Marketing. Is MLM bad? Is it a scam? I’m not going to pass judgment. Instead, let me give you some questions to ask the person who approached you -and questions to ask yourself too. Hopefully, this will give you a better idea of MLM is right for you.
What Is MLM?
Multi-Level Marketing (MLM) also called Network Marketing, is a popular way to sell a variety of products ranging makeup, dietary supplements, cookware, etc. MLM allows some people to start a home-based business, often without much start-up costs.
That's one of the reasons it's so popular.
But supplements are the only things sold this way. For example, Tupperware, Amway, and Avon are all sold through network marketing.
The people who sell via multi-level marketing are often called “distributors” but companies may use other names, such as ambassadors, brand ambassadors, consultants, or representatives. Within the realm of network marketing, all these terms mean the same thing: an independent employee (subcontractor) of a company who sells a product for that company.
I know people can have strong feelings about MLM. Some hate and others love it. But, before you decide to try it, I want to give you some homework to do first. Here are 11 questions that can help you decide if multi level marketing is right for you.
Is MLM A Pyramid Scheme?
In some circles, MLM is called a “pyramid scheme.” I understand this analogy because the people at the top of the pyramid make a lot more money than those at the bottom. There are fewer people at the top than the bottom, and that's where the pyramid analogy to this type of selling comes from.
But, through hard work and time, anyone has the potential to rise to the top (in theory). While there are some programs that I feel have traits similar to a pyramid scheme, I don’t think they all are.
To help you weed through the different companies that try to get you to take advantage of the “opportunity,” what follows is a list of questions I believe are important to ask before you get involved.
Some of these questions are tough and you might not know the answers yourself. That’s okay. The person who is trying to recruit you (your “up line”) can help you find these answers. Another way to find out is to simply call the company yourself and ask.
MLM Questions To Ask
If I were going to get involved with a company that sold its products through network marketing, here are some of the questions I would ask first:
1. How much does it cost?
The way it usually works is that before someone can be a network marketing distributor, they have to pay the company a distributor fee first. Many companies I’ve seen charge a onetime fee (or yearly fee) of about $49 to get started.
Companies may also have additional fees if you want to have a business website, business cards or obtain a starter kit that has samples of the product to give out to people to help jump start your new business.
Be sure to ask if you have to pay a onetime fee or a yearly fee for the privilege of being a distributor. While I think most fees are not too steep, some might be. Ask yourself is the distributor fee more than you can afford right now? If yes, save up for the fee and pass on the opportunity for now.
Remember, we still have to pay our bills too. Don't be lured into plunking down a big chunk of change if it means you can't make your car payment this month.
2. Do you have to buy the product first?
Most of the network marketing companies I see do not require you to buy the product upfront before you sell it. That’s good. By not making you buy the product upfront means, you don’t have to stockpile the product in your house before it’s sold to your customers.
Even though most companies will give their distributors a discounted price, I don’t think you should have to buy the product before you sell it to someone else.
Think about it. What happens if you can’t sell the product? You are stuck with it.
Most network marketing companies allow distributors to take orders from people (your customers) first, after which you can then fax or email the order to the company. After receiving your customer order, the company then sends the product to the customer.
3. How long have they been around?
How long has the company been in business? Companies that have been in business for a long time might be more reputable, than companies that are newer. This is not a guarantee, mind you, but in theory, a company that has been around several years might have built up a level of respect among its employees and peers.
On the flip-side, newer companies might have fewer distributors. This could be an opportunity for eager beavers because it might mean you can get in at the start, potentially allowing you to make more money as you sell the product and recruit distributors under you (your “down line”).
Remember, with network marketing, you also make money when distributors –who are under you- make sales. This means it’s not just the sales you make the generate money for you – it’s the sales of all the other people (that you recruit) under you that do too! You also will get a bonus when you sign up for new distributors under you.
This is one of the benefits of network marketing; the ability to have your own business, with employees who make you income by the sales that they generate.
4. How many distributors?
Before getting involved with a company, ask how many other people are out there who also sell the product. All these other people are your competition.
If there are tens of thousands of people also selling the same product as you, it may mean the market is saturated and you have less of a chance of selling it or signing up new distributors under you. On the other hand, seeing lots of other distributors might also mean the product is popular. Regardless, this is good information to know.
5. How many actual customers?
This is a very important question to ask. A customer is someone -who is not a distributor -who buys the product.
If there are more customers than distributors, then that’s a good sign. It means the product is popular and lots of people are interested in. This means you might be able to make some money.
If, on the other hand, there are more distributors buying the product than actual customers, then this could be a red flag.
Think about it; if most of the sales are coming from those who are already distributors, it might mean the product isn’t as popular as people say. The stuff purchased by distributors is artificially inflating how popular the product is.
Distributors get discounts on the products they purchase. So, one possible tip-off to this might be If you hear lots of people saying “I only became a distributor so I could get the discount.”
If you know a distributor, then ask them this question about actual customers (who are not distributors). If they don’t know, ask them to contact the company for the information. The company knows this answer.
Compare the number of distributors to the number of actual, paying customers.
6. How much does the average distributor make?
How much does the average distributor makes each month? In my opinion, this is THE most important question to ask. By asking what the average distributor makes per month, this will give you an estimate of how much YOU might make. All companies know how much their average distributors make per month.
If the average amount per month is only a couple of hundred dollars, ask yourself if that is worth your time -or ask yourself what you’d be willing to do (or do differently) to make more than that.
7 What’s the BBB say?
The Better Business Bureau (BBB) can sometimes give insights into companies. Just search online for the “the name of the company and BBB” and this should bring up their Better Business Bureau file. For example, if you were interested in company X, then search for “Company X BBB.”
The BBB can sometimes tell you if there are any complaints or alerts about the company. If there are complaints read them. Are they frivolous or do they make sense? Also, read how the company responded to those complaints too. Many times companies reply to complaints lodged with the Better Business Bureau.
I know not everybody likes the BBB, but regardless of your feelings, weigh what they say against what you learn from the other tips outlined here.
8. Does it have proof?
Ask this question: “Does the product have peer-reviewed human studies that show it works ?” Say it just like that. A peer-reviewed study is one was first reviewed by other scientists before it was allowed to be published in a medical/nutrition journal. The peer-review process adds an extra layer of confidence that the study was done properly.
If they say “yes” ask if the study involved people, lab animals, or were test-tube studies? That's important because you're not a mouse or a test-tube.
Ask to see the studies.
When you look at studies, read the summary (called an abstract) and pay special attention to the last 2 or 3 sentences. This is where you will often see the results of the study. To give you a better idea of how to understand this, look at the reviews on these:
- Protandim (click to read review)
- Juice Plus (click to read review)
In each review, I showed you the studies and broke them down to help you understand them better.
Sometimes companies might have a “white paper” as proof. A white paper might not be a published, clinical study. When in doubt, do an online search for the study title and the words “Pubmed.” Pubmed refers to the National Library of Medicine.
Pubmed.gov, is where millions of clinical studies can be viewed. So if you wanted to know if a study titled “bla bla bla” was peer-reviewed or not, do an online search for “bla bla bla PubMed.” If it was published, it should show up. Then read the last 2-3 sentences in the summaries you see to get an idea of what happened.
Remember, research on ingredients might not always mean the same as research on the product -itself. Sometimes ads for supplements might contain vague language like “clinically researched ingredients.” In this case, you'd have to see the research on each of those ingredients and try to make sense out of it.
9. Is the company easy to contact?
Go to the company’s website and see if they have a contact phone number – and call it. How easy it is to reach the company if you have questions? This is important because, if people ever ask you questions – like those I’ve outlined here – it would be nice if you can get an answer quickly.
If you don’t see a contact phone number or way to submit an email, then to me, that is a red flag. In fact, If I were involved with MLM, I’d prefer to speak to humans whenever needed. I would not be a fan of having to use email to get help.
10. Who is recruiting you?
Many people become involved with multi-level marketing because someone – a friend or relative – approached them and asked if they might be interested in the opportunity to help others and make an income in their spare time. Do you know who the person is? If not, perform a quick online search of that person's name and see what comes up. For example, some people might jump from one multi-level marketing company to another. When in doubt, it's good to know who you are doing business with.
11. Do YOU like selling?
I know the title of this review is “top 10” but hang in there because this tip probably the most important to you personally. One of the big attractions to network marketing is the ability to make money in your spare time, often from home. While I've known some people who have made money this way, before getting involved in the business you should ask yourself “Do you like selling stuff to people?”
Do you like helping people find real, honest solutions to their problems? That is what selling is all about -helping people find solutions to their problems. It’s really more about that than making money. Are you comfortable talking to people – even strangers? In sales, you will have to do a lot of talking to prospective customers.
Really think about this.
If the answer is yes, you might do well – very well – in network marketing.
If you don’t see yourself as a “salesperson” or feel funny or uneasy speaking to people you don’t know, then network marketing might not be for you.
Another name for MLM is relationship marketing. This name puts the emphasis on forming a bond of friendship -a relationship- and trust with others. I believe those who are able to do this, will be the most successful.
I think this is one reason why new distributors are often encouraged to share the product first with friends and family – those with who they already have relationships. Friends and family are usually easier to sell to and this helps build confidence and ease people into talking to and selling to people they don’t know.
Don't believe anyone who says that posting stuff on Facebook etc. is all you need to do well in network marketing. There is no substitute for talking to people face-to-face.
While there are many fine books on sales out there to show you the ropes, those from Zig Ziggler are some of the best.
Is MLM Right For You?
Despite social media pictures of lavish vacations and expensive cars that grab people's attention, it's wise to remember that, as with any business, there is no way to predict how much YOU might make with network marketing. Do your homework first and see if this type of home-based business is right for you.