When jobless rates are sky high and inflation is in effect, what can you do just to get by, let alone save a few dollars? Many of us go back to our roots and start doing those old school hustles we used to do in college. Maybe you haven’t taken it that far quite yet.
Maybe right now you could be looking at a multi-level marketing (MLM) enterprise, but you have a lot of questions.
What is multi-level marketing?
Like everything, there are two sides to the coin. Some call it a company; others call it a “compensation plan.” Some may even call it a scheme.
Doris Wood, chairwoman of Multi-Level Marketing International Association (MLMIA) says it is simply an industry of businesses built within businesses, and so on and so on.
“It is a non-storefront type company that moves merchandise. For me, it makes life meaningful, and it’s a rewarding position,” Wood said. The founder of the organization has been involved in the MLM industry for nearly 53 years. She explained that the industry is set up to work according to individual needs.
Bryan Franklin, founder of 1iMALL.com and saynotomlm.com, has a different take. He says MLM is not a company, but an outdated compensation plan “The compensation plan has been aggressively in place since around 1959. (MLM) is no different than real estate, no different than Wall Street, no different than education,” Franklin shared.
“They (real estate, Wall Street, and education) are all going through major reform, so I suggest because of the Internet, which was introduced in 1994, that the system best known as MLM needs to be reformed.”
In his years of research, Franklin has found that in the past the MLM model operated in a way that was profitable for both the product producer and the distributors.
He explained that in the past, technology, transportation, and distribution methods were limited.
So in order for companies like Amway to distribute their products to the masses, they recruited individuals to purchase and sell to their communities.
With the introduction of the Internet, Federal Express, UPS, and other large distribution companies, Franklin says there is no longer a need for the middleman — the MLM participant.
Can I really make money?
Most people decide to try their hand at the industry to either make extra money, save some money, or get rich. Regardless, it’s all about the money. While there are several opinions out there for and against MLM, the bottom line is generating wealth.
According to Wood, it all depends on what your goal is — whether that is to make a supplemental income or to build retirement. She says you have to make it work for you.
“Wealth doesn’t come easy or quick. It depends on how much product you are selling and how many people you bring into your organization, and the amount they sell and the number of people they bring into the organization,” she said.
In her own experience, she has made money, but she hasn’t made wealth. For her, what has been rewarding is training new people and building the industry. However, MLM is the way she makes her money. Her partner, co-founder of MLMIA, Michael L. Sheffield, has created an abundance of wealth through the industry. For years, he worked as a distributor until he founded his own MLM companies, grossing more than $30 million.
So, the industry works differently for different people. The chairwoman also shared that many newcomers come in with extreme expectations, thinking they are owed wealth.
“There are people who come into the industry thinking the world owes them (an income),” Wood commented. “It doesn’t work that way.”
According to Franklin, nearly 99 percent of people who go into MLM quit within the first three years. He says this happens because it is mathematically impossible for everyone to make money.
“If six people get six people and they got six people, approximately six to the power 13, that is everyone in the world,” he explained. “So, if all of you are selling the same thing, then who is going to be the customer?”
Basically, MLM’s design is such that everyone who gets involved cannot succeed.
But Wood says people burn out for different reasons, but if realistic goals aren’t set, people do not survive. She says making a real commitment and determining what you want to do is important, when getting into the game. She also says not everyone’s goal is to generate wealth. Many people get involved to make a little extra money to pay that extra bill or take that dream vacation.
Is it a pyramid scheme or scam?
This question is a tricky one. Many would agree that just about every industry in the world is designed like a pyramid– one boss on top with power distribution disseminated beneath. Ultimately, the pyramid is a system designed to empower a few.
Wood advises to view the two terms (pyramid and scam) separately.
“If someone asks me if MLM is a pyramid, I’d say yeah. Every organization in this country is structured like a pyramid, including the church,” she said. “The term pyramid as it relates to business, is selling the right to sell. If you are in network marketing (aka MLM), and you try to sell someone a position in a company, and you take money for that and you pay the downline, that’s a pyramid.”
A downline is the people a MLM participant recruits.
As far as a scam is concerned, she says there are a few companies out there that are scamming people, but she believes there aren’t very many.
Franklin says the current MLM model is a purely capitalistic program, a pyramid.
“The model that we understand now, the compensation model visually is a triangle,” Franklin explained, saying the geometrical shape of the model is a triangle, however people often refer to the model as a pyramid. “So what needs to change is the shape of the model. It needs to become circular versus triangular, so that you have the visual clear difference of a compensation model that is more social capitalistic versus just purely capitalistic. The social capitalistic model says lets work together, where no one is at the head.”
The 1iMALL founder believes a referral system would be a better fit for those attempting to create wealth. He says he would never recommend anyone try MLM because according to his research, you can’t win. He says people get drawn into the industry, because MLM companies take their handful of money-makers and showcase them across the country and even around the world, making people believe they too can be rich through their compensation model.
Franklin has been called to be a professional witness in a lawsuit against Amway/Quixtar. He says this company, which has been around since the late ’50s has been scamming people out of their money. The lawsuit claims that the company has taken advantage of Americans by making empty promises and making deceptive claims. More information about the lawsuit is available at richpeopleread.com.
So is MLM a good choice for you? While this article only scratches the surface of the industry, there are several other factors to consider. Wood has more information available www.mlmia.com. You can also contact her doriswood@mlmia.com. For the other side of the coin, visit Franklin’s website at www.saynotomlm.com.
