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If you ask many desperate college students, housewives, and single moms, the bane of their existence is MLM companies. MLM companies, also known as multi-level marketing or network marketing companies, are companies that hire people to sell goods on behalf of them.
Those salespeople are then encouraged to hire others to sell goods, and are told that they get a slice of the commission that those salespeople get on top of their own commission. You're also promised that you can work the hours you want, get prizes, and even get your own MLM company community, too!
It seems like a dream job, except there are a couple of catches...
There's a lot of paperwork involved, you have to buy the supplies you're selling, and oh, yes, there are no leads available to you for free. But, it seems like it's pretty legit, right?
Well, it sounds legit until you find out all the things they don't tell you about MLM companies. Here's what everyone should know before they join a company known for MLM tactics.
MLM companies don't allow you to be your own business owner in reality.
One of the biggest lies that MLM company recruiters tell you is that you will get your own business when you join their MLM company. This is not true. MLM "entrepreneurs" are paid via a 1099 form, which means that they are actually independent contractors.
This doesn't sound too bad, and to a point, it's not. However, that form difference also means that you still have to answer to someone - and that you don't have the full legal protection of a sole proprietorship LLC in most cases.
Additionally, one of the things they don't tell you about MLM companies is that one of the forms that you sign when you join also basically signs away your rights to argue with the company. If the MLM company in question no longer wants to pay you, they can force you out and keep your customers.
So, all that work, and all that money you paid to join the company just went down the toilet if they choose to do this.
The vast majority of MLM profits are not made on selling clients the products - it's on recruitment.
This sounds fine until you realize what this means. It means that the products you're selling aren't in demand. What is in demand, is the potential of making money via selling products that no one actually seems to want to buy.
If this sounds like a pyramid scheme, it's because that's exactly what they are. One thing that recruiters won't tell you about MLM companies is that most of them are under investigation for pyramid scheme tactics and that many only survive due to very ethically dubious loopholes.
Oh, and recruiting is not in your best interest, at all.
When an MLM marketing company starts out in a brand town, there's usually only one person who sells within that territory. This person makes a killing - and why wouldn't they? They're making a new company famous in town.
But, then they begin recruiting, and problems arise. If the person you recruit is a better seller or networker, you could see most of your item sales plummet. Now, you're only making a fraction of what you did off sales - and you have to work twice as hard to get a single tchotchke.
It doesn't stop there. What they don't tell you about MLM companies is that your client base is constantly shrinking, even if you don't recruit a single person. After all, others are recruiting dozens, too.
This means that the biggest potential market you'll ever see as an MLM company employee was the market that happened when you were brand new. Direct sales aren't easy, and the chips are literally stacked against you more every single day.
Only people at the very top of the MLM food chain actually see the big bucks they advertise - unless they're working themselves to the bone.
The reason why these kinds of companies are constantly being sued and attacked as pyramid schemes is because they are pyramid schemes. The people who are making the most money are the ones at the top, because everyone is working underneath them to sell products that they have full control over.
The only time you hear of anyone actually striking it rich at the bottom is when they are literally pouring their entire lives into the company. Among people who do make a living at MLM companies, 10 to 12 hour days aren't uncommon.
Moreover, only a handful of people make a reasonable living at an MLM company - even if they are selling insurance. In most cases, the typical mid-ranking MLM person in direct sales schemes will make a total of $2400 or less per year.
But, it gets even worse than this. What they don't tell you about MLM companies in that one study is that the vast majority of people who join them actually just end up owing money rather than even making a single penny back. After all, that "business" has a lot of costs.
Fiscally speaking, you'd be better off flipping burgers at McDonald's. The money would be more stable, faster, and would also open you up to better career opportunities later on.
If you naturally are terrible at sales, your chances at success are virtually zero.
You know how MLM companies tell you that they'll teach you to be a great salesperson. Well, technically, they can. However, studies show that the people who regularly end up making a lot of wealth as a salesperson do have a natural knack for them.
Only 30 percent of people who were taught sales tactics actually make it as a salesperson, burnout excluded. When you combine that statistic with the already high chance of failure, you're looking at a pretty abysmal chance at success.
The worst thing about MLM companies might just be the fact that their products are bogus - or just really terrible quality.
If MLM products were really as good as salespeople say they are, why wouldn't they be sold on store shelves? Wouldn't it make more sense, from a financial standpoint, to just have an online store without salespeople or to have brick and mortar stores that have people paid minimum wage? Of course it would. But, why aren't they doing that instead?
Simple: their products are terrible.
In most cases, the claims that the companies make are often proven to be bogus or based on faulty science. Many of the ingredients that they claim are in there aren't, and in some cases, are even replaced with ingredients that make people sick.
Most stores are discerning about the quality of products that they carry, especially if they are priced as high as the ones being sold via MLM company models. What they don't tell you about MLM companies is that they legitimately can't compete with regular products - otherwise, they would do so.
Scarier still is what they don't tell you about MLM companies and their recruitment tactics.
Selling a terrible deal to people isn't easy, and it's not something you can do without fudging the truth, blurring the lines, and appealing to baser instincts. In fact, just keeping people in the doors can be a chore for many networker groups.
In order to keep up recruitment, employee retention, and sales, MLM companies have worked to hone their recruitment skills from a pretty ominous source: cults.
If you've ever done MLM business work before, they you may have noticed that company business tactics were a little bit strange compared to Mr. Good Lube, 7-11, or Buzzfeed.
You may have noticed a slight religious-style leaning to their recruitment tactics, or that you felt like you were going to be asked to "drink the Koolaid." The fact is that this wasn't your imagination. MLM companies really do work to make a cult-like environment.
Consider the following tactics MLM groups have borrowed from cult leaders, and you might get a bit (rightfully) freaked out:
- Using emotional pleas to get people to make decisions that logically don't make sense. Things like asking people what really matters to them, asking them how much time they'd spend with their kids if they could, and asking if "just delaying rent for the price of a good opportunity" are all things cult leaders would ask new recruits. Some, such as American Income Life, even go so far as to emphasize how positive and faith-focused many MLM leaders are.
- Forming a community that becomes your "new family." Many MLM companies make a point of establishing their business as a community, and even tell people not to talk to those who refuse to buy into the MLM company's bids. Some will even tell you that family members that discourage direct selling are jealous - much like how a cult will warn potential members about listening to family members. How they make up for the void is simple. They encourage people to find a "new family" inside the company...just like a cult.
- Using public shaming as a way to keep people in line. Shame is very good for keeping control of people. Asking the wrong questions during a group recruitment session at an MLM will often get the salesperson to insult and shame the questioner. Cults know shame keeps people in line - and that's why they use it on people who dare misbehave or question cult policies. Moreover, people also want to fit in by nature, so they often won't even muster up the courage to even speak up most of the time.
- Indoctrination. The way MLM companies keep networkers into it is via indoctrination. Constant lectures and learning sessions eventually do sink in as "fact" even if the facts are warped.
- Bait and switch tactics. Many cults have used drug programs to recruit new members, saying that it's "not a cult, just a wellness group with certain beliefs." They may also be vague about what it takes to join. If that sounds a lot like the vague ads promising tons of money that MLM companies are prone to make, that's because it's the same tactic.
Scary as there is, there's a lot more to be worried about when dealing with direct sales companies.
The last thing recruiters don't tell you is that you will often alienate good friends and family members from you by joining a network marketing company.
Most MLM sales people who have made millions will urge you to sell to friends and family, but what they don't tell you about MLM companies is that they often are the cause of major friendship breakups, family rifts, and more.
Those who are approached by MLM sellers often feel used, especially when it's done under the guise of "just catching up on things." Most people also feel that it's a very trashy, gauche move - and as a result, will avoid introducing you to others or even calling you up.
The more aggressive the tactics you use, the worse the outcome will be. People who drop out of MLM companies often end up doing so long after they've dealt permanent damage to their social networks.