When you first hear about multi-level marketing, it can sound like a dream come true. You get to work from home and make money by helping others do the same.
Unfortunately, this is not really how most people experience MLM. The statistics show that only 1 in every 300 participants will ever earn more than $10k per year with an MLM company. If you want to know if you can really make money in an MLM, please read on for some valuable information before making any decisions!
What is an MLM?
Multi-level marketing is a system of selling goods and services through distributors. This strategy relies on the sales force to recruit more people so that they can grow their downline or team
This is what distinguishes multi-level marketing from single level traditional advertising, where one person advertises for an organization in good faith with no expectation of reward.
An MLM company’s income can be divided into two categories: the sales of goods and services (for example, regular memberships) and residual or commission-based pay. Some companies use both methods to earn money from their distributors.
Is an MLM a good way to make money?
For most people, an MLM is not a good way to make money.
The reasons for this are as follows:
- The average MLM participant makes less than $700 in a year, while the amount of time people spend on it can be significant and many companies require more upfront investment. This means that most people won’t earn enough income from their downline or team or direct sales to make a living.
- The cost of buying the goods or services that are sold by MLM is usually higher than it would be if the products were bought from retail outlets, and more people won’t purchase these items at all because they don’t want to pay for other distributors’ prices plus their own.
- Unlike with other types of businesses, there is no barrier to entry in MLM. Anyone can be an independent distributor for a company and the only qualification that’s needed is usually just money or buying power. There are many people who have tried this type of business but found it too difficult because they had more customers than sales representatives so they weren’t able to generate enough revenue.
- The company that the distributor is working for often pays their commission a certain way, such as paying them when they reach 200 people without any regard to whether those people are ordering anything or not. One of the biggest risks associated with MLM business is that distributors will have products sitting on shelves and waiting for customers who never show up.
- MLM is often criticized for encouraging people to put their own life’s energy into a business that doesn’t give them very much in return. When the distributor reaches 200 people they have to start paying themselves, but it usually still falls short of what conventional jobs can offer.
- It’s not uncommon for distributors who are working with MLM to experience financial difficulty. And because of the nature of MLM, distributors who have fallen on hard times may find themselves with a huge amount of debt they will never be able to pay off.
In general, people are tempted by MLMs because people want so desperately for them to work that they don’t investigate whether or not participants in MLM companies are really making money.
What is the likelihood of MLM success?
MLM is a popular strategy for earning income. But it’s not the best road to take if you’re looking for success and stability. Most participants in MLM companies see little or no personal profit. It seems that most of the money earned by distributors goes right back into the company, leaving only small percentages available at wholesale prices as commissions.
Why don’t people see success with MLM?
Some of the reasons why people don’t see success with MLM are:
- They’re not prepared and they quit too easily.
- They focus on recruiting rather than building their own downline to earn commissions.
- They only have one product or service, so when that doesn’t work out for them, it’s basically over.
- They don’t have the time to spend on building a business with MLM.
How long has multi-level marketing been around?
Multi-level marketing has been around since the 1800s with Avon. Avon started out as a door-to-door sales operation. They found that they were more successful when the person selling to consumers actually used and displayed the product.
Since then, many companies have adopted a multi-level marketing strategy because of its potential for generating huge profits with relatively low startup costs. Some of these companies include Amway, Mary Kay Cosmetics and Herbalife.
Tips for MLM success
For the most part, multi-level marketing is a legitimate way to make money with an upfront investment of time and effort. The key is knowing how to go about it in such a way that you don’t end up losing more than you gain.
- Make sure you are interested in the product. If you have no interest in the product then it will show and people will be turned off to your pitch of the product.
- Create a strong social media following that is engaged with what you share on there so they follow up by wanting more information about your products.
- Promote your business on social media platforms, but be careful to not spam your friends and followers.
- Refer new people who have shown interest in the product or service. Be sure that the person is someone you know would like it. You will get commissions for each sale they make as well.
- Find a good compensation plan that suits what you are looking for and the time you want to put into your business.
- Create a website that is attractive, informative about what you do, and easy to navigate for people.
- Use Google Analytics or another web statistics tool to see how many visitors are visiting your site. Make sure it’s at least 250 per month in order to be successful on social media.
- Have a strong online presence on Facebook, Twitter, Instagram and more to advertise your business.
- Use social media as tools for communicating with customers – post pictures of the products, talk about upcoming events or sales in real time.
- Create an attractive email list that appeals to people who like what you have to offer. Consider sending a “thank you for subscribing” email immediately after someone signs up and an information-driven email once in awhile.
- Offer incentives to subscribe to your list such as coupons, giveaways or free samples.
- Create different content that is tailored towards different age ranges on social media – use hashtags like #millennialmoms or #entrepreneur30s.
- Consider your target audience and what they want. If you are unsure, think about the TV shows that people in your age group watch or the podcasts that are popular with their generation.
- Offer a limited time offer for new followers to get on your list – this creates urgency which will encourage them to subscribe before the offer expires.
How to choose the right MLM company
As you research MLM companies and opportunities, think about the following things:
- Expertise: Does this company offer expertise in a specific niche or market? What is their specialty? If they were ranked on best jobs to have by careercast.com, what would be their ranking and why do they rank so high?
- The MLM company’s history: Have they been around for a long time or are they new to the industry? Look at their past track record of success and find out what has happened in previous years. What were the biggest successes, failures, controversies that have occurred over the course of this company’s existence?
- Compensation plan: Does the MLM compensation plan provide commission on product sales in addition to recruitment commissions? Do they have any back-end residual commissions? What is the commission rate of these products, and are you aware that it’s likely to be lower than what other MLM companies offer for their products.
- Qualifications: Does this company require certification or qualifications from its affiliates before they can make money with them? How long does it take to attain such certification?
- Product: Does the company offer quality products which are competitively priced, or is it a rehash of what other companies offer but at an inflated price tag to make money off their affiliates and receive commissions from that affiliate’s purchases as well.
- Services offered: Are there any services being offered by this MLM company?
- Generating leads: What type of lead generation are you using to attract prospects who can become customers for your MLM products or services? Is it successful in generating enough quality leads at a sustainable rate, or is the majority coming from one particular source (such as paid advertising)?
MLM is not for everyone
MLM is not a business for everyone, and there's plenty of opportunity to make more money elsewhere. But if you do decide that it might be the right job for you, here are some tips on how to make sure MLMs work in your favor:
- Make sure you’re well-educated on the industry and understand how it works. What’s your goal for joining? Do you want to build a lifelong customer base with some side income or do you hope to generate enough leads in order to quit your job?
- Set realistic expectations. Many people who join MLMs see immediate, dramatic results. If you spend a year building your business with very little to show for it, chances are below average that joining an MLM is the right decision.
- Be honest about what’s expected of you and don’t get too caught up chasing unrealistic goals.
- Have realistic expectations: There will be days when you will do better than others. Some days you’ll make money and other days, it will be tougher to bring in a paycheck. What’s important is that you stay consistent over time.
- Work on your craft: If you’re doing MLM “part time” or as the side gig of another job, then work on getting good at what you do. If you’re doing MLM full time, then focus on building your business and not chasing the “bigger paycheck.”
- Don’t chase after bigger checks: Income in MLMs come from a variety of sources (residual income through downlines, commissions per sale). Some people think they can make more money by adding another “commissioned” job to the mix, but this will lead you down a path of increased stress and decreased quality of life.
- Track your progress: Knowing where you are today and how far you have come provide motivation for continuing on towards your goals. It also helps to keep track of any obstacles that may be in the way or things that are not working.
- Stay focused on the end goal: If you want to make money in MLM, focus all your efforts on building a successful business that has customers and is profitable (whether or not it includes an MLM aspect). This will take time but could lead to substantial income if done correctly.
Check out some of the MLM successes
If you’re researching some of the many multi-level marketing companies, check out our list of the best MLM companies here.
I buy and review courses so you don’t have to. Sometimes, I even find courses that are legitimate and worthwhile; and that’s how I accidentally came across one that led me to building a 6-figure business in a little under 5 years. Now, I still review courses because it’s my favorite hobby. 🙂 Learn more about me here.