Multi Level Marketing (MLM): A Scam or a Genuine Opportunity?

Multi Level Marketing (MLM): A Scam or a Genuine Opportunity?
  • PublishedSeptember 22, 2021

You see brochures, cards, and ads that say, Make £100K a Year from Home.

The moment you see something like that, you wonder what makes them £100K a year from home. After all, the growing popularity of work from home and entrepreneurial business opportunities make this kind of business model very appealing. MLMs are known for their direct marketing and direct sales approach, utilizing independent sales representatives to sell products directly to consumers. And multi level marketing, or MLM, has seen a huge growth during the pandemic of 2020/21, highlighting the expanding influence of the MLM industry.

You might have seen brands such as Herbalife, JuicePlus, Scentsy or Ann Summers offering tempting work from home marketing opportunities. But is this opportunity really what it seems?

Let me tell you more about it – whether it’s an actual scam or not.

Let’s Decipher Multilevel Marketing MLM – Is It Actually A Scam?

Let’s start by saying that not all MLM companies are scammers. In reality, it’s a legitimate sales strategy that some businesses choose to utilize, and there are indeed legitimate MLM companies out there. By doing so, they try to encourage existing distributors to recruit new ones.

With that being said, you have to be really careful before entering an MLM scheme because even though there are legitimate ones, most of what you see online is probably a scam. And there are plenty of online scams to watch out for, including those that turn out to be illegal pyramid schemes, which masquerade as MLM but lack the ethical and business foundation of legitimate MLM operations.

Before knowing more about MLM, you have to understand this – to make money from MLM, you need to make sales.

If you can get sales, this business is for you. If not, don’t even bother, you will just lose money and time.

The truth is that only 25% who sign up for a multi level marketing business actually make money. Among the vast array of multi level marketing companies, it’s crucial to exercise diligence and caution.

Of those, the vast majority, make a very small amount of money. In fact, only 10% of all people who sign up for MLM businesses make over £100 per week. The rest of these people make only a small amount.

As for £100,000? Only 0.5% of people who operate their own multi level marketing business make this huge figure. (source)

So, if you’re serious about MLM, how can you spot a legit company and a scam MLM company?

3 Red Flags that You Have to Pay Attention to Before Joining MLM 

If you’re not sure how to determine whether an MLM company is a real one or some scam pyramid scheme, here are 4 things that you have to check while figuring out whether the incredible business opportunity you’re getting is legit or not. Guidance from the Federal Trade Commission can be invaluable in identifying scams and ensuring the company follows fair practices.

  1. The Company Makes You Pay Before You Start Working

Legitimate companies pay YOU for the job you’re doing and not the other way around. So whenever a business is asking you to pay an entrance fee, that should immediately serve as a warning sign that something’s not right. Be especially cautious of direct sales companies that require you to make upfront payments or purchase stock before you can start selling, as this often leads to minimal profits or financial losses.

The same thing applies when a company is asking you to pay for a training session before you start working. If a job requires some additional knowledge or skill, it’s your employer who should take care of the costs for you.

  1. There Are No Products to Sell

The primary way through which a business makes money is sales and if a company emphasizes the recruitment of new people instead, that’s a huge warning sign. Even if they tell you stories about how they’re trying to “build a team” first, you should still be skeptical.

Would you be trying to find people to sell a product that you don’t even have? Probably not!

  1. They Make You Stock Up On Items

If you’re a distributor, it’s good to have products to sell and show to potential customers. However, if the company you’re working with is pushing you to stock up with items you’re not sure you can ever sell, that’s definitely a red flag. Although it’s a smaller one, still it is.

3 Signs that a Legitimate MLM Company is Authentic

At the beginning of this article, I talked to you about how some companies operate using multilevel marketing, a legitimate business model that focuses on selling products or services through a network of consultants and recruiting others to do the same. Now let’s discuss how you can separate legitimate multilevel marketing companies from the rest of the scammers online.

  1. Check if It’s a Big Corporation

If the brand that’s recruiting you to do MLM is a well-known multilevel marketing company, it can be a legitimate work opportunity. Avon is the perfect example of this type of company.

MLM is one of their primary ways to make sales and they’re well-known for it, so no one ever assumes they’re being scammed when Avon approaches them.

  1. Lack of Incredible Promises

Like I already mentioned, if a company is promising you the moon and the stars in the form of $10,000 a month without more than 2-3 hours of work a day, you should definitely be extremely skeptical. Legitimate businesses that use multilevel marketing (MLM) as a way to make sales won’t try to recruit you with crazy promises. Instead, they will present you with a much more realistic picture of what you can expect as earnings and from the job in general.

  1. Good Work Environment

If there’s some training for you, that’s a great thing because in the end your skills make you money. And if I were you, I would like to see some mentors around me, who would have achieved the goals that I’m dreaming about.

By the way, this also proves that the company really pays off those guys who really work hard for them.

The Bottom Line

In my marketing career, I’ve seen that people who consider MLM/network marketing seriously are more likely to reap the potential rewards. And those who just see it like a get rich quick thing, often pay a price.

Just remember, as long as you’re doing proper research about your company and have a basic skill like persuasion, you’re good to go with MLM. It’s crucial, however, to distinguish between legitimate MLM opportunities and illegal pyramid schemes, which are fraudulent and can lead to significant financial loss.

Read our guide: Alternative business ideas to MLM

Written By
Azfar K

Azfar is a musician and founder of a content marketing agency 2xco.com.

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