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#FreelanceFriday: Is MLM a Scam?

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  • Tip Bones

Hello and welcome back to Freelance Friday! I was inspired this time by what seems to come into my inbox every day on social media: the dreaded "multi-level marketing" message. it usually comes from an acquaintance, or an estranged friend from school, saying that they have "an amazing business opportunity for you," and then tell you all about how you too can make thousands working part time from home. Today I'm going to talk a little about what an MLM is, how to recognize one, and whether they're worth your time.

Like I said, an 'MLM' is also known as multi-level marketing. This refers to how the company is organized: usually, one contractor or distributor buys product from the parent company to resell, and earns bonuses to recruit new distributors. Sometimes, they even earn residuals from the sales that their recruits generate. The idea is that the more you sell and the more people you recruit to your team, the more money you can make. It's even possible that you'll be able to stop selling completely, and live off the commissions you make from your team's sales! Sound great, right?

Here's where it all falls apart. You, as a distributor, have to buy product or some equivalent from the company. Often, you have to buy it in bulk! But don't worry, says the company, you can sell these easily, just throw a sales party. Well that may have worked for Avon and Mary Kay in the past, and some people today are even very successful at selling essential oils, body wraps, or anything their friends will buy. Somebody has to be the success story, after all! But after the capital you have to invest in product, training, supplies, and advertising, you're not making much-- if anything-- from your actual sales. Not to mention, you still have to pay taxes on your earnings, and some companies even put in the fine print that you have to pay them a maintenance fee! So you might be in the red for months to make any profit-- if you ever do at all.

Furthermore, recruiting friends and family to join your team might prove impossible. People recognize pyramid schemes more often than not, and even if they join, they might not stay long enough to hit that 30-90 day threshold that the company might require. And if you think you're having trouble selling your product, imagine competing with your own team to sell to the exact same groups of friends and families! Even with outside advertising, MLM doesn't often yield great sales results. This, and the signs above, are all great ways to recognize an MLM when you see it.

All in all, an MLM is not likely in your best interest. Yes, some distributors in certain companies are very successful, especially if they got in right at the company's beginning. But just like with a brick-and-mortar business, not everyone who joins can be a success story. MLMs are set up to make the company the most money, not you. And in the long term, competing for resources in the same circles, increased awareness of the company's hierarchical organization in the public eye, and natural decrease in interest will probably leave your wallet emptier than it began.