Have you recently joined an MLM as a side hustle, or even perhaps as a potential day job to pay the bills? Are you seriously considering one? Here are five things you may not realize about multilevel marketing.
Your business is you as a freelance sales person, not a branch of the company.
“This isn’t a job. This is your own business,” is a common lure used by multilevel marketing companies. And the tax forms would seem to back that up. If you sign up to sell something through one of these companies, you do file taxes as an independent contractor.
What many people do not realize is you are not signing up to own your own franchise of the company. In a franchise, the company doesn’t make a profit from your branch of the company unless you make a profit. If your franchise doesn’t make money, you go out of business. In an MLM, the company makes money as long as people keep signing up under you, whether you sell anything or not. When you sign up with an MLM, you are offering your services to the company as a freelance sales person. Selling that company’s products and recruiting others to sell them is your assignment as an independent salesperson, not your own business.
All that time spent “growing your business” is actually you advertising for the company for free.
When you agree to sell something, you have to promote it. You need to be posting about the products on your social media, putting up signs around town, going around talking to people, maybe even scheduling sales demonstrations, euphemistically called “parties.” Your upline will tell you that you are “growing your business.” In reality, you are working in advertising for the company.
Suppose your friend signs up to sell Mary Kay Cosmetics. She creates makeup looks with Mary Kay each morning, and posts them on her YouTube channel and facebook page. At least once per day, your friend then devotes an hour or more to emailing or messaging people, putting out signs and flyers with her contact information, and demonstrating the product at parties. Even if nobody ever buys so much as a clear lip balm or a pack of makeup wipes from your friend, her work has put the Mary Kay name and brand image out there in front of potential customers. This is advertising. And if your friend doesn’t get any sales, or gets only modest sales after working for weeks, she just did a lot of advertising for Mary Kay for free.
When someone offers what seems like a weak refusal to buy from you or sell under you, they’re not making excuses, they’re allowing you to save face.
People who wholeheartedly embrace MLMs like to rant about others who refuse to participate in the scheme. “You don’t have $100 to invest in yourself one time, but you have $25 to spend at Dunkin (or Starbucks) every single week!” they scold. Or “You say you don’t have time to sell Arbonne, but you have time to sit and watch YouTube videos, baseball games, or tv show marathons.”
People who respond to an MLM pitch this way are well aware that they could be making their coffee at home and buying a starter kit from you instead. They know they could skip the Yankees game or the latest drama from the Ace Family or another season of Game of Thrones to sell your products for you. They knew this before you made a Facebook post or YouTube video yelling at them for it. It’s just kinder to pretend you’re too broke or too busy to do something than to say, “No. I don’t like your product and don’t want to work with you.”
You lose money whenever you spend money you would not otherwise have spent, just to get to do something. This includes selling for an MLM.
Some MLMs look like you can’t really lose money. The starter kit costs less than the value of the products you’re going to pick out of it, the ones you wanted to buy anyway. There are no inventory requirements, no meeting requirements, and no minimum monthly sales to keep active.
In the short-term, you won’t lose money in one of these relatively low cost, low requirement MLMs. You might even come out a little ahead, if say, the home goods starter set costs $200, and you needed $250 worth of stuff for your kitchen anyway, or you found a $50 makeup starter kit with $60 worth of products you were already buying in it. But you still may lose a bit of money.
Return to the example of your friend selling Mary Kay. Suppose your friend’s sales kit cost her $120, but she chose $200 worth of products to keep for herself. She even sold enough Mary Kay to friends and family to make another $100. Your friend is now $180 ahead. But then, in order to maintain her status as a Mary Kay representative, she finds it necessary to go out and place flyers around town once per week. Since she’s stuck in town, she buys herself a meal she normally wouldn’t have gone out for. The total comes to $25. On her way home each week, she stops at the grocery store and picks up some extra food to make faster lunches for her kids, so she can devote more time to her Mary Kay sales from home. This total comes to $15. Afer only four and a half weeks, the money she saved and earned from Mary Kay has been spent to get to work for Mary Kay. If she goes another week without a sale, or takes a friend out to lunch to talk about the “opportunity,” she has now lost money, even though she hasn’t spent any more money directly on Mary Kay. Even if you make some income, you actually made less than you think once you factor in all the money spent on the act of selling the product and recruiting others.
The person intent on recruiting you is using some version of a rehearsed script designed to make you think the business is perfect for you.
You told them you were an artist, singing and playing guitar professionally and doing some acting as a hobby, and they explained that with a little effort, you’ll be able to use this income to free yourself from that hated, completely unrelated day job in retail and focus on your music nearly full-time. Or maybe you explained that your day job is a second passion of yours, or part of your career as an artist, and you just need some spare cash to make your next album. They assured you that many people work this business as a side hustle.
This business sounds perfect for you, but it would be made to sound perfect for you no matter what you said. MLM recruitment training teaches representatives to sell the business to anyone and everyone. If you don’t believe it, try an experiment. Have a friend or relative contact the same representative, but tell them a story completely different from yours in every way. Have your experimenter pretend to be in a field completely outside of the arts. If you have kids, they have no children and don’t want or can’t have any, and vice-versa. If your day is too busy, they’re bored. If you just need some spare cash, they must replace an income immediately. The “opportunity” will be perfect for them too. This is of course ridiculous, as no field, no workplace, can possibly be perfect for every person in every circumstance.
Multilevel marketing is never a good idea for a side hustle, day job, or as a part of your art career. They operate on a system set up to get their representatives to provide their own expense account, perform free labor, and engage in off-putting business practices. And they can’t even be straightforward about the work you’ll be doing or your income potential in return.