Questions, questions, questions.
Is Network Marketing a Scam? Can you realistically make money in network marketing? Do you know how to tell if MLM is a pyramid scheme? Is MLM shady, impossible, rigged, wrong, or bad math – or are there possibly other explanations why so few succeed?
I wanted to share my experience in MLM and in Network Marketing, Direct Sales, being an Independent Distributor, and an Independent Consultant – whatever you want to call it. I have been all things to all men when it comes to this. I want to get your opinion on a lucrative side project I am still doing and I am just looking for a few guys who want to make an extra $500-$500,000 / month. Is that you? Well, I’ve got something for you! The best Deal in town, the opportunity of a lifetime, the chance of the century! I have been in it, I have been coachable and teachable, I have bought the books, attended the seminars, loved the products, and ate, breathed, and immersed myself in it.
And I haven’t made all that much either.
Why would you want to join me? Just looking for some gluttons-for-punishment and those that just want a good challenge perhaps. Looking for those that embrace failure. If you are someone who loves MLM, is a flat earther, loves the bible, doesn’t side with Democrats or Republicans, is a conspiracy theorist, and just loves being the black sheep of the family and the neighborhood, you will fit right in.
The knee jerk reaction is to blame it on pyramid schemes. It’s not that simple. I still haven’t figured it out – this is a business where most reject you yet there are people who are building empires in this thing.
Key #1) Realize it’s not easy and the deck is stacked against you.
And your odds of success are about the same as being struck by lightening after winning the lottery. The good news is even if you are more likely to get burned in Network marketing, it’s not like getting-struck-by-lightening burned. It’s more like spending your life prospecting for Gold in a town that had it’s last nuggets mined 30 years ago.
A man named Jon Taylor crunched the numbers and found that 99.7% of people lose money in network marketing. This means for 1,000 people who join your team, 3 will earn more money than they spend. So if I want the magical 6 people to build my dream of working 3-5 years and taking the rest of my life off, I really need to recruit 3330 people into the business. And considering anywhere from 1 out of 100 to 10 out of 100 will eventually join your business I likely need to be showing 333,000 presentations to get to that number. So to take the rest of my life off by being successful in a Network Marketing business, I could need to be working until 4:30 the day of my funeral. And that doesn’t take into account of training the people you find, or the fact that those that you recruit that turn into superstars then are like NBA Free Agents. After 3 years of being your top income earner, suddenly a new company woos them over and they bring on all the people they had recruited for you. And you are back rebuilding your team of 3300.
In traditional MLM, you have to recruit 1,000 people in your team to find 3 who have success. If you are OK knowing you are essentially exploiting 997 people on the way to the top, then MLM might be for you.
You might be better off selling those 330,000 a $25 Yankee Fundraiser candle. If 33,000 or 1/10 buy one candle from you that would be $400,000. Invest that in an 8% mutual fund and in 40 years you have some serious cash. Or you can still be pyramid climbing your way to the top.
Honestly, I have a love-hate relationship with NetWork
So more likely, if it was smooth sailing and I did earn the incentive trip overnight and the dream car to drive there, I wouldn’t be so upset. If I was able to recruit the whole state of New York in one big on-line funnel swoop, I would have some wonderful things to say. You too can have an entire state in your downline! Come on, there’s 49 states left. Hurry before all you have left is Rhode Island or Puerto Rico.
It’s a bit like winning at Professional Poker – it’s learning how to have posture and bluff your way to success perhaps, but it’s also a bit of those that figured it out and hung in there long enough to no longer be bluffing made it to the top. Not in a pyramid-scheme sort-of-thing, but a climb over the casualties along the way to get there sort-of-thing. And when you look up and see how hard the climb was, you will see how nice the view is up there. Maybe there is jealously perhaps, and a fear of heights now. However, the dread in taking the early steps is gone, and toward the top of the pyramid you will no longer be able to see the so many below you that are battered and bruised just at the ground floor. Or from falling off half way up the climb.
My position is unique perhaps, but I don’t think my experience is that unusual. I am here to tell you in 5 years or more I haven’t made much money in it at all. I would consider myself a Poster Child for MLM failures. But I also think I am seeing why this is so difficult and at the same time why it’s not a scam at all in the sense that it can’t work, or that it’s doomed from the start. The lottery is not a scam. You really see real people waving $50 million dollar tickets. In the movie Charlie and the Chocolate Factory, you really saw people earn (fictitious) golden tickets. The California Gold Rush was a real event with real gold at the end of a real rainbow. None were scams – but none were get-rich-to-all fair level-playing-fields. And that is my problem with MLM. They make you feel anyone can do it and make you feel you are a second rate human being if you ever dare give up the dream. What is reality is usually, you have the small handful living the dream, a large following buying into the dream, and a huge pool at the bottom buying over priced crap because they think they just have to follow a provable system and they too can achieve the dream. It’s dream selling, and they don’t like you when you wake up. Don’t spoil my dream, they cry! I just want dreamer to have a full honest taste of reality and understand the frenzy of it all, see this is just another Gold Rush, and see that in 5 years 99.7% will be still chasing a dream and still no further up the pyramid as when they started.
This doesn’t change the fact for most of us, its NOT-Work Marketing and most the time it’s like being an elite
Key II. Understand the simple idea that a gold rush stampede up a pyramid means most fall off the edge.
I don’t think it’s a scam in the same way the NAVY Seals is not a scam. There are some real obstacles and it really is both like joining the NAVY Seals and the Mafia at the same time while being in the Top 20 on a cooking show like MasterChef. It’s the NAVY Seals in the sense it’s a battle of only the mentally strong surviving, just like a cooking reality show where the weak get voted off and cast off at the end of the show. You need your A -game and your best signature dish, and at the end of the day you still may find your pitch lacked just the right seasoning and was a bit underdone in the middle and there you are, one minute in the Top 5 and almost tasting that trophy and and the next minute they are spitting out your dish and you are hanging up your apron.
It’s like the Mafia that if you really leave one company you will end up getting pulled into another company. I had left my first MLM project after making $100 and spending thousands (good deal for them) but after a year of personal development and seeing I can’t blame the MLM model, I gave it another go and reactivated my account. I contacted my Upline and my sponsor was already out of the business that was going to fund his retirement. Then I contacted his sponsor and he stated how he had been trying to get a hold of me. I invited him to the house expecting him to share with me how to get back on track with the business we were in. He stated it was going well, but he found this new anti-aging product, and as a pharmacist, wanted to get my opinion on it. And I was in that one full throttle, ordering the $1800 starter kit, getting energy drinks and cellular activators on auto-ship, and booking my trip to the big conference in Salt Lake City in just a few months. I did a little better in that company, but mostly because my wife was able to get her boss to join and she was telling everyone about it. Mike-the-Pharmacist tells everyone about an anti-aging product and no one cares. My-wife-the-hairdresser and her boss are telling ladies about it and everyone wants to try it.
That did wonders for my ego. See maybe it’s all me. If you want to sell essential oils, maybe partner with my wife.
There are some fatal flaws in MLM such as over saturation is intentional as you need to build a huge distribution team, which waters down demand as you increase those who have the supply. It is basic economics that if you want to succeed at MLM you need to increase your distributors which means you increase SUPPLY which should naturally DECREASE DEMAND. But everyone is so happy and excited, you don’t care you just put a team on every corner. There is plenty for all! Even though everyone I asked has already said no. In that sense you tend to get a few big leaders and the rest are simply buying usually overpriced product to keep the dream alive.
Key III : Follow the SYSTEM at all costs, unless you want to be successful.
The other challenge is they tell you to always be coachable and to follow the system BUT all the really successful leaders invent their own system so really they just want you to follow them. And coachable really doesn’t work like when you were on the highschool
I don’t think it’s a scam sure, but I have yet to really crack the code. So really I am on the fence struggling to recommend it because I see how hard it’s been for me so I think, do I really want to subject Anyone else to it? If you care about what’s best for those you care about, you have to honestly answer that.
Key IV: Seriously, if you really insist on doing MLM no matter what, find one where you can have a one floor pyramid if you had to.
On the positive side, I do like a few of the modern developments on some of these. For example, I found two companies that reward straight customer gathering. In my previous MLM you earned 40% commission on your initial sale, but repeat sales only got you a 2-7% profit. This other company offers you a straight 20% commission – that means if you enroll one person, every time they order you get 20%. The challenge in a product based still is finding people who will continue to spend $60 on a bottle of natural pain reliever month after month that you can normally pick up at Wal Mart for $15. No matter how superior that product is, at some point they end up with a cupboard full of product and they put the Auto Ship on infinite hold OR a shinier $50 natural pain reliever comes to market. If you market a cream, people usually will buy the DREAM over the CREAM, and they usually buy products for awhile until they find out no one wants to buy from them. And so you are back having to rebuild your residual customers anyway. You might do better selling life insurance to earn residual commissions.
There are other product based that are popular items, things like CBD oil. You can teach on them and become an expert and people might buy from you. The one nice thing about some product based is you can get FREE product with referrals, and one CBD I know gives your customers free CBD with just 3 referrals so if you can focus on adding customers and helping them find 3 people to support them, that seems to be more authentic than recruiting people to build a downline. The main issue I have in simply focusing on the downline approach and recruiting others is this – you are basically recruiting them with the appeal of the dream. They exchange buying expensive products on a monthly subscription simply so they stay in the club and stay in the game. If someone is a fan of CBD oil and finds them expensive in the stores, and is attracted to the idea they can get free product instead, that is more legit. And if the referrals want some product, you can teach that person to help the person below get free product. It does become a bit of that MLM model, but you are helping people get product they naturally want instead of enticing them to join up because of the millions they can make. More and more there are opportunities that reward the middle class and have less lucrative payouts to the top but more realistic commissions. They still have their challenges, and it gets muddied over the tendency to want to push someone toward the business side of things because they all will allow you to sign up as a preferred customer or distributor. Still, they are a bit of an upgrade from what I have seen out there and it feels more like it’s your own business.
So in these instances where you honestly have no original side hustle ideas, then jump into one of these direct sales options where you at least get rewarded for enrolling customers or selling products. People will more likely buy from you than join you in business. Even if it’s overpriced. You might have a hard time retiring that way, but let’s look at now a service based instead. In deregulated energy states, you can join an MLM that let’s you offer friends and family savings on their energy bills. I had joined one years ago that was true MLM and you needed to have a huge downline as you got nickels and dimes for every customer you enrolled. The average Joe didn’t make anything, and it did not reward you for simply treating it like an actual business. I gave it up after a year and that was the one I made $100 in. Yet there were the top of the pyramid guys who really were apparently hired by the company or heavily recruited to come out of the gate guns blazing who were making $100,000 a month in it. It was $495 to join at first and years later they even had a time when it was free to enroll. I couldn’t even get people to enroll for FREE. These guys got how many thousands to join for $495. It is a bit easier to enroll people when you show them you are making $100,000 a month and you are showing them the plan from your yacht.
Key V: If I haven’t given you enough reason to run for the hills, jump into a SERVICE based MLM or direct sales company instead of a PRODUCT based.
Just recently I found another one of these that works very similar. It is like a Co-op for energy, cell phones, and in some places gas too. You still pay your electric bill the same, but it’s supposed to lower your bill and it offers you a lock-in rate instead that guarantees a rate for 2 years. You can enroll as a customer for free or for $99-199 you are able to join the co-op and if you get 15 customers you get free electricity and essentially the supply portion of your bill is free. Every 15 customers gets you $500 and about $200 a month residual. I like it because you don’t have to build this team below you and you actually can work as an Independent Consultant. If I was doing a side business, I would recommend something like that because it’s service based, there’s no cost to be a customer and if someone wants to make a few extra dollars they aren’t having to shell out $200 in product every single month. Service based that doesn’t operate like the traditional MLM model seems to be the best option I have found.
At the very least find good products or a service you can attract customers with because then you won’t have a mental battle trying to recruit people with the FREE BMW program when you still have a rusty clunker. It is a challenge if you sell something popular like CBD because everyone is selling it. It is a challenge if you are selling something new because something newer and shinier will likely come along sooner than you think.
Key VI: Recognize why it may be looked at as a scam because:
1) you are paid by commission only so you put hours up front that might not seem to pay off so most give up too soon. If you had a salary from an employer you would put up with some harassment, rejection, phone hang ups, and irate customers. Instead when it happens here, it’s back to Netflix.
2) people don’t want to touch it because it could be a pyramid but then if you do it, often you will get upset you can’t build a pyramid so you can sit back on a beach and have everyone do your bidding.
3) some of its jealousy and you told all their friends and BOTH said no and the people above you who have built a network for years prior can build a business overnight. It’s hard to take when everything you touch seems to fizzle out and every Zoom call or Facebook update, they are bragging how they just tripled their team and they are waving around their 6 figure bonus check.
4). It’s frustrating to have to depend on people – those that know leadership can build this and get it going. It’s very hard if you don’t have people willing or wanting to follow you. People will follow success but then they will leave you for someone more influential, so often you are holding their bluff and have to always pretend you have it all together so people will follow you. Yet inside you are terrified you will be revealed as a fraud and a phony before you actually are as successful as you portray.
5) it is hard to endure the loss of friends and feeling like you are selling snake oil the way they respond. We had our friends over for a bbq once and spent $100 on steaks. We grilled and prepared half the day. They knew we had just started a business – they gave polite acceptance of this fact. They ate and when the presenters arrived they immediately walked out and left. Our friendship was awkward since and that was 5 years ago. You feel like a Jehovah Witness. I can’t imagine someone being a Jehovah Witness in MLM.
6) There is this often ultra positive persona Ned Flanders type pie-in-the-sky transformation you will see in a lot of them that if you are a typical cynical person who has trust issues, it becomes obnoxious and nauseating to endure especially when they have rank advanced 6 times since you last saw them and you still are paying $500 a month in product and have 6 Months supply in your cupboard and have only been in it 3 months.
7) A lot of these companies are in Utah and there is something suspicious about that. Mormons believe some crazy things- if you aren’t sure about that ask them about their Mormon underwear. They believe they can have god-like attributes. I can’t tell where it’s just a coincidence and where it’s intended. Back in the day they had multiple wives — it’s like having this one big pyramid of polygamy.
Anyway, that is my opinion on MLM. I will always be it seems somewhere between having one foot on the fence,
and one foot on the pyramid.