Recently, John Oliver did an amazing report on Multilevel Marketing companies, also known as MLMs or, oftentimes, pyramid schemes.
What is a Multilevel Marketing Company and why is it bad? Well, Mr. Oliver does a great job of explaining, but in short:
A Multilevel Marketing Company is a business where your success depends on how many people you recruit and how many people they recruit. And what shape does that make? A pyramid. And what’s the problem with these sorts of companies? Well, first and foremost, they make promises they can’t keep. If you recruit X number of people and help them recruit X number of people and so on and so forth, and you all sell X amount of product every month, you will make enough money to quit your job and buy a yacht!
That’s a lot of “if” statements, and let’s be honest, it’s really hard to make it happen. Worse, a lot of times, these companies require you to sell a certain amount of product every month to keep your status. If you don’t, you can lose out on your payments. So to prevent that from happening, you end up buying the product yourself.
You aren’t going to get rich from an MLM. Do some people? Sure, otherwise they wouldn’t exist. But the average person will not make millions.
Don’t get me wrong – there are some MLMs out there with decent products. I may not love the way their businesses are structured, but if you like the product, just want to get a discount and sell enough to make a little pocket money and have no desire to recruit people? Go for it. But watch for suspicious MLMs. There are a lot out there selling health and beauty products that make outlandish claims. Don’t you think that if that vitamin drink really cured cancer that we would have heard about it before? Perhaps all over the news? Also, if that pill really blocked all the fat and carbs in your pizza, those fat and carbs would have to go somewhere. Remember the Olestra craze? (If not, look it up – yuck.)
If you’re going to join an MLM, make sure that it’s one that doesn’t require you to buy a lot of products up front and then continue to stock product. That’s where you can get into trouble. (If you haven’t already, read my warnings about LuLaRoe.) Many of them just have a start-up package and then you pay for your online shopping portal. There, the costs are fixed and you know what you have to do. And if you end up not selling like you thought you might, you’re not out as much money.
I don’t know about you, but my Facebook feed is currently filled with friends from various points in my life who are pushing their products. And you can easily spot the scammy posts – those are the “friends” who are constantly pushing their items and talking about what a difference they have made in their lives. I have even had old friends from high school find and add me on Facebook only to push their products. Clearly, I’m not buying. And I hate seeing more and more intelligent people getting sucked in.
If you love and want to sell jewelry or makeup or nail wraps or bags or any number of products that don’t make outlandish claims, then go for it. But pushing your weight loss products and then convincing other friends to also sell weight loss products isn’t going to help you make money or lose weight. You will likely lose friends though.
In short – be wary of multilevel marketing. Pyramid schemes have a bad name for a reason. At the very least, know what you’re getting yourself into.