Select Page
Budgetboost.co is supported by its readers. If you click on or buy something via a link on this page, we may earn a commission.

The Pros and Cons of MLM Company Opportunities: Top Scams to Beware of

Jordan Beaumont
Financial Guru
Updated: 1/2019

The Pros and Cons of MLM Company OpportunitiesPeople are always looking for new ways to make money. It’s even better if you can make money while working from home and being your own boss. That’s why lots of people turn to multi-level marketing to take control of their career and their finances.

However, there’s a lot of confusion surrounding MLM. Moreover, it’s not for everyone. This article will help you understand the pros and cons of MLM so you can decide whether or not it’s right for you. We’ll cover the basics of what multi-level marketing is and what you should know before you sign up with an MLM organization. We’ll also cover the pros and cons of MLM company opportunities so that you can make an informed decision.

Table of Contents

Understanding MLM

Multi-level marketing is a business model that’s been around for a long time. One of the best-known multi-level marketing companies is Amway. You make money by selling the company’s products. You also make money by recruiting people to sell products and earning a commission on their sales.

There are lots of different companies that use multi-level marketing. They work in the B2B and B2C sectors. These companies offer a huge range of products and services, so there’s a good chance you can find one operating within your areas of expertise.

The Difference Between an MLM Company and a Pyramid Scheme

Some people think that MLM companies are pyramid schemes and are actually illegal. However, that’s not the case. While it’s true that there are some unscrupulous businesses out there that run exploitative and illegal pyramid schemes, there’s some important differences between them and an MLM company.

The biggest difference between a pyramid scheme and an MLM company is whether or not the company sells a product that’s available to the general public. The Federal Trade Commission made this rule in 1979 when they were reviewing Amway.

A pyramid scheme works by getting people below you to invest in a company or buy products that aren’t available to the public. The people at the top of the pyramid make money and the people at the bottom lose out.

However, if the company sells a product available to the general public, then the people at the bottom of the organization can also turn a profit. That’s something they can’t do in an actual pyramid scheme.

How MLM Makes Money

MLM companies make money two different ways. First, working for an MLM lets you earn money on commission for selling the business’s products and/or services. This is the first level of profits for someone working with an MLM.

The second way you can make money with an MLM is by recruiting other people to sell the company’s products as well. You’ll make a bonus for recruiting new members. You’ll get a commission on every product those members sell.

If the people you recruit also recruit others, then you’ll earn a larger commission on their sales as well. This is why MLM is also referred to as network marketing. The more you can recruit people the more money you’ll make. Your earnings are still based on the actual sale of products.

Pros and Cons of MLM Company Opportunities

Things to Consider Before You Start Multi-Level Marketing as a Career

A career in network marketing isn’t for everyone. Moreover, even if MLM is for you, that doesn’t mean every MLM opportunity is a gold mine. You should consider these things carefully before signing on with an MLM.

Safety First – Know the Product

Make sure you know the product that you’re selling. You want to make sure it’s a quality product that will entice customers to buy. You also want to make sure the product is safe and well-reviewed. That increases the odds you’ll be able to make sales. The more sales you make, the more money you’ll earn.

Additionally, you want to make sure a real product is being offered. If there’s nothing real that the general public can buy, then you’re not actually looking at an MLM opportunity. Instead, you’re being recruited for an illegal pyramid scheme.

Don’t Expect to Get Rich Overnight

Becoming a successful network marketer is hard work. It takes time to make sales and to recruit new network marketers. That means you won’t be getting rich overnight. In fact, it can take several years before you even see a profit at all.

As a result, you’ll want to make sure your finances are in order and able to take a hit if you aren’t successful right away. If you can’t afford to wait for a few years to see a profit, then you should consider looking for something other than a network marketing career.

Do Your Research on the Company

Finally, you want to do lots of research on the company you’re considering working with. Investigate reviews and reports. Check with the Better Business Bureau and see what kind of complaints have been filed against the company.

Even the best companies can have some rough spots sometimes. However, if the company you’re considering doesn’t have a long history, has lots of complaints from people in your position, is facing a serious lawsuit, or something about it throws up red flags for you, then you should be prepared to look for another opportunity.

Pros of Multi-level Marketing

Now that you understand the ins and outs of MLM businesses, it’s time to review the benefits of working as a network marketer. There’s a long list of pros for MLM companies. These include:

  • Internet and Social Media Make MLM Easier than Ever
  • Proven Business Model
  • Flexible Schedule
  • Low Startup Costs
  • Skill Learning and Development

The Internet Makes MLM Easier than Ever

The first perk to working in MLM is that the internet makes it easier than ever to be successful. You can use the internet and social media to actively engage your potential customers and recruits. You can also make sales through a website.

As a result, there are a lot more strategies open to you to get sales. You can create a custom website and use various marketing strategies to drive your traffic. If you want, you can even run some small ads on your site to help offset the costs.

Additionally, there are lots of ways to make direct sales on social media. Social media platforms like Facebook and Instagram even allow you to make direct sales through the platform. You can use social media posts to build interest in your products, and then allow people to purchase them right from the app.

All of these abilities mean the internet is much more efficient than older models of network marketing. You don’t need to go door-to-door trying to make a sale. You also don’t need to work as hard looking for leads – the internet means that interested customers can come right to you.

However, just because the internet makes things easier doesn’t mean it makes them easy. You’ll still have to work hard to make sales and get recruits. You’ll also still need to engage in face-to-face business to get sales.

Pros and Cons of MLM Company Opportunities

Proven Business Model

Another benefit of MLM is that network marketing is a tried and true business model. Network marketing has been around for years. After all, the FTC case that differentiated between MLM companies and a pyramid scheme happened in 1979.

Also, MLM relies on residual income to make big bucks. That means that you’ll keep generating profits from one instance of work. The same logic applies to most online content and publications. Once you recruit someone, you’ll earn on their sales forever. The more people you recruit, the more money you’ll make on their sales and the less you’ll have to sell the product.

Flexible Schedule

One of the best things about working in MLM is that you get to pick your own schedule. That means plenty of people start off network marketing part-time and move to doing it full time as they expand their network.

You act as your own boss. You can schedule meetings and events on your own time schedule. As a result, you’ll get to spend more time with your family and friends. This perk also makes MLM a very attractive option to people that have hectic schedule obligations, like caring for a sick or elderly loved one, children, or any other the other things that can make it hard to hold a standard 9 to 5 job.

Low Startup Costs

The startup costs for most MLM opportunities are fairly low. You can usually get started with an investment of as little as $200. That low startup cost, plus hard work and dedication, can turn into a wealth generation machine.

The startup costs for a network marketer are especially small when you compare them to the costs of starting other kinds of businesses. Franchises usually need over $100,000 to get started. Moreover, you need to prove you have liquid assets in excess of $500,000 to even get permission to open most franchises.

The low startup costs means it’s much easier to start turning a profit. After all, how long would it take to start being profitable selling sandwiches if you’ve got sunk startup costs of more than $100,000? Network marketers see more profit faster than other types of businesses.

Learn New Skills and Develop Skills You Already Have

Finally, network marketing is a great way to learn new skills and develop the skills you already have. MLM companies always have events and conventions. They use these events to help teach you different things which help you sell the product.

Some companies will also offer reimbursement for professional development. For example, a convention or event might have a bootcamp on internet coding. You can use those new skills to improve your website and sell more online. A company might also pay you back if you sign up for a bootcamp on your own time.

These conventions don’t just focus on giving you new skills. They’re also great way to develop skills you already have. You can meet with other network marketers and learn their tips and tricks to get more sales and more recruits. You’ll also get to see the new products that are coming out and learn the features. That makes it easier to sell the products and to retain customers looking for something new.

Cons of Multi-Level Marketing

All of the pros of MLM don’t mean that it doesn’t have drawbacks. In fact, the downsides to MLM can be very significant. That’s why you’ll want to carefully review them before embarking on a career in multi-level marketing.

Some of the cons of MLM include:

  • High Rejection Rate
  • High Turnover Rates
  • Low Success Rate
  • High Competition
  • The Work Never Ends
  • Company Requirements

High Rejection Rates

The first drawback of MLM is that there are high rejection rates. Most of the people you talk to simply won’t buy whatever you’re selling. This isn’t unique to network marketing. Most businesses consider a conversion rate of 1-2% very successful.

However, being constantly rejected for a sale or recruitment can wear on some people. It can really get you down when you hear a “no” 100 times in a row.

In order to over come this you’ll need to work hard. This level of hard work to control your own destiny leads to the next drawback of MLM companies.

High Turnover Rates

Lots of network marketers simply quit. They might move to a different company or product, or they might just stop engaging with MLM businesses. That’s a problem for you because the most profitable way to operate an MLM is through recruiting other people. If those people quit a lot, then you won’t be getting residual income from commissions on their sales.

As a result, you’ll have to get back out into the field and spend more time recruiting people. This can also wear on your nerves. It can also interfere with friendships and family relations if you look to those groups for potential recruits.

This situation can lead to an annoying cycle of recruitment, residuals, residual drop-off, recruitment. Remember, in addition to recruiting others, you still need to make your own sales. As a result, there’s an even higher demand on your time to maintain your income level. If things go badly enough, it could even lead to you losing money some months.

Low Success Rates

Most network marketers won’t make any money. That’s a cold and simple fact of the network marketing business model. There are lots of different reasons for this. Usually, people aren’t willing to commit to the amount of work and effort that it takes to be a successful MLM consultant.

The low success rates contribute to the high turnover rates. Even if you have the dedication to keep plugging away at the problem, the people you recruit might not. They might be expecting easy money from sales and recruiting. They also might get deterred by the frequent sales rejections. When they quit, your network shrinks. When your network shrinks, you don’t make as much money.

Pros and Cons of MLM Company Opportunities

High Competition

There’s a lot of competition for sales. Large companies might have several thousand consultants in your area if you live in a major city. Even if you only live in a small town, there are still going to be other people offering the same product as you.

This is a problem because there is a limited market for every product. Every sale one of your competitors makes is a sale that you can’t make. However, the company doesn’t care and won’t restrict people because the company is still making a profit on every sale. You’re not likely to get a defined territory. You’re also not likely to get non-compete agreements from other MLM consultants.

Additionally, most MLM products also compete with things people can buy in stores. If you’re selling a face wash, for example, you’ll need to explain why your product is better than the five similar products people see every time they go grocery shopping.

People are creatures of habit. Once they find a product they like, they tend to stick with it. That can work out in your favor if you have a good product and make an initial sale. But it means that it’s going to be hard to get them to switch to your product if they already have a similar product they like.

The Work Never Ends

Lots of people get in to network marketing thinking that they’ll recruit a ton of people and then kick back and watch their bank accounts grow. That’s not how it works. The high turnover, high reject rates, low success rates, and high competition mean that you’re always going to be working. Granted, you’ll be working for yourself and on your own schedule, but there’s rarely a point where you can simply watch the profits roll in and not put effort into the process.

People quit, people stop ordering products, products are changed or phased out, new products are introduced, and companies change their payment models and policies. These things happen all of the time. That means you’ll always have something you could be working on.

Many people enjoy that. It gives them something to do so they never have downtime or feel bored. However, it can be very stressful for other people. For example, if you’ve finally worked out a stellar sales pitch for your products, and then the MLM company changes or cancels those products, you’ll have to start from scratch all over again.

Company Requirements

It’s important to note that most MLM companies have requirements for their members. Each company has a different list of requirements and obligations.

Some businesses will require you to automatically purchase a certain quantity of their best-selling product each month. Others might have purchasing quotas or recruitment quotas. These requirements can add to your costs to run your own network. They also help influence the other drawbacks listed above. Quotas and mandatory or auto-ship purchases are some of the biggest reasons there’s such a high turnover rate for MLM companies.

Be sure you understand what you’re committing to when you sign on with an MLM. Make sure that you’ll be able to afford and abide by whatever requirements the MLM company you work with has. If you’re not sure you’ll be able to afford autoship products or meet sales quotas, then MLM consulting might not be fore you.

The Bottom Line on MLM Companies

The bottom line on MLM companies is that they’re great for some people and awful for others. You need a thick skin, an optimistic outlook, and a never say die attitude to make it as a network marketer. You need to be good at selling products and at convincing people to sell the products.

There’s potential to make a lot of money doing network marketing. Some people who work with MLM companies make six or even seven figures a year. However, those people don’t earn that money doing nothing. It takes a lot of hard work to maintain and increase your own sales as well as recruiting people to make sales and help them maintain or boost their sales.

Having a flexible schedule is good, but you need to ensure that you have the discipline and time to dedicate to growing your business. If you can’t commit the time or energy, then you might want to look elsewhere. But if you’ve got an extensive social network, are good with people and sales, and like the idea of working for yourself, then MLM companies might be the opportunity you’ve been looking for.

Ultimately, you’ll have to decide if working with an MLM company is the right choice for you. Use the pros and cons on this list to make an informed decision. Compare the pros against the cons and against what you know about yourself. If you think you’ve got what it takes to bet a successful network marketer, then you might be on your way to huge earnings. If you’re not sure, then you should keep in mind there’s a possibility that MLM companies might not be for you.

FAQ

Multi-level marketing or MLM has gotten a bad rap in recent years, thanks to the discovery of illegal business models such as the pyramid and Ponzi schemes. However, MLM is a legitimate business model worth exploring for those looking at alternative income sources. Read our guide below to know more about MLM.

MLM Basics

Learn the basics of multi-level marketing or MLM and get up to speed with this tried-and-tested business model.

Your Title Goes Here

Your content goes here. Edit or remove this text inline or in the module Content settings. You can also style every aspect of this content in the module Design settings and even apply custom CSS to this text in the module Advanced settings.

What is MLM?

MLM stands for multi-level marketing. It is a business model where sellers of a product get commission from selling the product and recruiting more sellers.

What is an MLM company?

An MLM company is a business which takes advantage of multi-level marketing to sell their products. Often, they sell products for skincare, food, or others.

What is MLM scheme?

The multi-level marketing scheme is setup in such a way where if you earn commissions by either selling the product and/or recruiting more agents to sell the product.

What is MLM recruiting?

Multi-level marketing recruiting is one of the ways in which agents of a company earn additional income. If you recruit an agent, you get a commission both in the recruitment and in the future sales of that agent.

How does MLM work? Give an example.

MLM works by giving agents an incentive to sell and recruit sellers because of added commissions. One example is Amway, where the agents who sell the product also actively recruit more agents.  

What is PV in MLM?

PV stands for point volume or is also known as bonus volume. It is a number or value that serves as a basis for the computation of overrides and commission.

What is the best MLM business to join?

Depends on your interest and skills. Your decision must be based on the product you’re going to sell, if you really believe in it, and if its projected compensation is in accordance to your needs.

What does MLM leads mean?

MLM leads are the same as regular marketing leads, wherein they are considered potential buyers for a given product.

What are MLM products?

Businesses which use the multi-level marketing model are plenty, and their products can be food, vitamins, personal care, and many others.

How many MLM companies are there in the US?

This is difficult to answer, because almost every day, there are MLM companies that either open or close down. Safe to say though that there are hundreds, if not thousands operating in the US.

What MLM company has the most millionaires?

This is tough to know since every MLM company has its own commission scheme, but if we are going to base it on revenue, then Amway, which had a staggering $8.5 billion revenue in 2017, is at the top of the list.

What MLM company should I join?

This will depend on the kind of product you are comfortable selling. While it may be tempting to join a high-commission company, your longevity will be dependent on your interest in the product.

Are there any good MLM companies?

There are a lot of good MLM companies nowadays. It is just that the ponzi scheme and other scams really put MLM companies, even the legitimate ones, in a bad light.

What is MLM industry?

MLM industry is the one created due to the rise of companies using multi-level marketing as their business model. It is a multi-billion dollar industry that has been actively growing for decades now.

Can you make money in MLM?

As it is a multi-billion dollar industry, yes you can very much make money in MLM. However, as with any kind of work or business, it will depend on your skill and work ethic how much you will make.

Do MLM systems really work?

Yes they do. The combination of cultivating a personal relationship with the customers and an incentivized recruitment scheme lends well to various types of products which would have been ignored in traditional selling environments.

Where to find MLM Prospects?

One of the best ways to find new MLM prospects is through social media. People from all over the country signal their interests, wants, and needs using social media services and groups. That means you can use it for a great source of potential customers as well as potential recruits by offering them something they’re looking for – your MLM products.

How To’s

Interested in getting into multi-level marketing? Read our tips and tricks below before you get started

Your Title Goes Here

Your content goes here. Edit or remove this text inline or in the module Content settings. You can also style every aspect of this content in the module Design settings and even apply custom CSS to this text in the module Advanced settings.

How to start an MLM?

Starting an MLM business requires a lot of information and due diligence. You will need to find a niche and a product to target it, grow your network, create a finance structure, market your product, and so forth. One of the best ways is to join an already-established MLM business and learn from the inside.

How to succeed in MLM?

Succeeding in MLM requires a lot of the same things needed to succeed in other industries such as hard work, persistence, and diligence. You must be ready to accept negative comments and rejections from the onset, as it is an industry with a low conversion rate.

How to start a MLM company?

Starting an MLM company is the same as with other types of businesses. You will need to create a business plan, gather capital, register your business, and creatively market your products and services.

How to grow MLM business?

Growing an MLM business requires the building an extensive network of leads. A great agent training program that is customized to the type of product you are selling is good option. Also, you must create an enticing incentive program for your agents to encourage them to sell more products and recruit more agents.

How to build a MLM downline?

To get recruit someone to be your downline, you must be able to clearly explain to them the benefits that they will get once they start selling your products. Giving them a clear picture of the monetary benefits, as well as professional benefits and career advancement opportunities are among the best ways to build a downline network.

How to sell MLM products online?

Nowadays, aside from creating websites, you can leverage the power of social media to sell your products. Most of the social media platforms such as Facebook and Instagram are free, so you will only need to learn how to create and effectively manage a social media page to sell your products.

How to do MLM prospecting?

Critical in prospecting is finding the “why” of a person, or the reason he or she will be motivated to sell your products. Knowing this will help you guide your recruit in performing to the best of his or her abilities, and sell a lot of your products along the way.

How to market your MLM?

This will depend on the type of product you’re selling, and the target market. Is your product aimed at young professionals or mothers? Is your product affordable or expensive? These are just some of the questions you need to answer to be able to market your MLM business effectively.

How to get free leads for your MLM business?

Social media and other online platforms offer an easy and free way to get leads. But while you won’t be needing to spend money, you will need to spend time to set these up to generate leads for your MLM business.

How to succeed in MLM business online?

Succeeding in marketing your products online is all about standing out and creating a unique user experience. Everyone nowadays has an online presence, so you need to stand out among them by creative advertisements. Also, you need to make sure that you are responsive, as online customers expect instant response.

How to create a MLM compensation plan?

A compensation plan will depend on the type of product you are marketing, the rate of growth that you want, and your current financial status. Some offer bigger compensation in exchange for lower profit margin, while some want to keep their compensation lower to enable more competitive product pricing.

How to generate MLM leads on Facebook?

The key to having your Facebook page standout is having clear pictures with clear product descriptions, a simple instruction how to order and how to contact you, and being responsive to inquiries. Customer service is king if you want to standout online.

How to grow your MLM team?

Growing your team will boil down to your management style. Coaching them and making sure that they take care of their clients are crucial. Also, giving awards and recognition can go a long way towards building your reputation as a good manager, which will only entice more people to join your MLM team.

How to recruit doctors into your MLM?

One of the best ways to recruit doctors into your MLM is having products that are beneficial to their patients, like healthy food, supplements, or other healthcare product. This will make it easier for them to market, and thus will entice them to join your MLM.

MLM Companies

Get to know the most popular MLM companies today and choose which one you’d like to try 

Your Title Goes Here

Your content goes here. Edit or remove this text inline or in the module Content settings. You can also style every aspect of this content in the module Design settings and even apply custom CSS to this text in the module Advanced settings.

Is Lularoe a MLM?

Yes it is. It is a company founded in 2003 that sells clothing and apparel. Initially focused only on women, it is now advocating the empowerment of the family and communities.

Is Young Living a MLM?

Yes. Young Living, is in fact, one of the largest MLM companies in the country, often included in the list of the top performing MLM businesses. The company sells all kinds of essential oils and other related products. 

Is Primerica a MLM?

Although Primerica is a finance company that sells, among other things, insurance packages, it also uses multi-level marketing in order to sell its services.

Is Mary Kay an MLM business?

Ever since MLM was associated with pyramid scam, most companies tried to claim that they are not using the system. Mary Kay is one such business, but for all intents and purposes, considering that their agents earn a commission not only from sales but from recruitment as well, it is an MLM business.

Is World Financial Group a MLM?

World Financial Group (as the name suggests) is another company focusing on selling a vast array of financial and insurance services through multi-level marketing.

Is LipSense an MLM?

LipSense is among the rather extensive list of companies that sell beauty and cosmetic products using the multi-level marketing model. Although it sells assorted products, it is best known for its variety of lipsticks.

What is Talk Fusion MLM?

Talk Fushion is one of the newer companies riding on the trend of digital marketing. What’s different though is that they are selling their video marketing and video communication services through multi-level marketing.

Which MLM company pays the best?

This is hard to determine as each MLM company has a different compensation plan and determining factors with regard to how much you can receive. But the current industry rate for compensation for agents is between 45%-60% of sales.

Is Plexus a MLM?

Yes. Much in the same vein as brands such as Usana, Plexus sells health supplements, weight-loss products and other related products using the multi-level marketing methodology.

Is Arbonne a MLM company?

Yes, Arbonne is one of the more well-known MLM companies in the country. They sell a vast assortment of products, ranging from skincare and beauty products to protein shakes.

What is Liv MLM?

Liv is another multi-level marketing company focused on providing products that promote a healthy lifestyle. Their products are supposedly beneficial to those who have weight issues and other cardiovascular issues.

Is Beachbody an MLM company?

Yes, it is. However, unlike other companies, their agents do not merely sell their healthcare-related products, but they are also required to be in shape to serve as walking advertisements for their products.

Is Perfectly Posh an MLM company?

Yes. Perfectly Posh is a relatively young MLM company founded in 2011. It focuses on selling beauty and skincare products, with an emphasis on a fun, playful, and modern branding to separate itself from the majority of beauty products in the market.

Is Nerium an MLM company?

Yes. Nerium is among the numerous MLM companies that sell beauty and healthcare products. Nerium, however, is focused more on anti-aging and wellness products, and thus, have older individuals as their target market.

What is MLM essential oils?

Essential oils have become the product of choice for a lot of MLM companies in recent years. This was borne out of the numerous anecdotes peddling the benefits of essential oils to our health. Most of the time, however, these products are not regulated by the FDA.

Is Avon an MLM company?

Yes. Avon is one of the biggest, if not the biggest, companies in the world that has gotten mainstream recognition unlike other MLM brands. In 2016, it posted sales of more than $5 billion, and is currently among the top 5 biggest beauty care companies in the world.

Jordan Beaumont

Jordan Beaumont

Financial Guru

Jordan's work focuses on helping people reach their financial goals so they can spend more time with family and friends and less time worrying about their budget. After finishing college with a degree in Accounting and Communication, he realized that these are the most important things in life and that people shouldn’t miss out because of money.

Learn to Budget Better and Make More Money

Get our in-depth guide that will teach you how to save more, make more & transform your finances.

SUBSCRIBE

Popular Categories