Better Business Bytes: Questions to ask before joining an MLM

The COVID-19 pandemic has forced many consumers to look for additional sources of income, preferably something they can do from home.

A trendy solution for job seekers is to join a multi-level marketing company, or MLM. Covering nearly every industry, almost anyone interested in supplementing their income is bound to find their niche.

Most often recruited by a family member, friend, or acquaintance with a “business opportunity,” MLM employees are drawn in by bold statements that often over-promise financial rewards. Unfortunately, most who join an MLM have reported making only minimal amounts of money. In fact, just 25% of members actually make a profit and a large number even leave the experience with debt.

Those financial shortfalls add to a list of reasons why many MLM employees ultimately decide to throw in the towel. Unmet earnings expectations, unfair commission structures and uncomfortable feelings about selling to friends and family (often a seller’s only market) all contribute to members abandoning their MLM efforts altogether.

Much of the skepticism directed at MLM companies is because many confuse their business model with pyramid schemes. Although it is difficult to differentiate the two, pyramid schemes prioritize recruitment over selling products. True MLM companies compensate employees based on their sales, without any reliance on recruitment.

Anyone interested in joining an MLM should investigate its payment structure before making any decisions. No two MLM companies are exactly the same.

Here are a few tips to help decide if an MLM position is a good fit for you:

Understand the cost. Most MLMs will ask for an initial investment to join the program, including the purchase of any starter kits of the products you’ll be selling. However, some MLM companies may require you to regularly keep buying more products to stay in the program, even if you already have plenty of unsold inventory.

Solution: Ask the company about their refund or return policy. Request the policy in writing to determine whether they accept returns and if they result in any penalties. Do they buy back inventory? Will you get a full or partial refund?

Do you see yourself as a salesperson? Many participants must rely on their family and friends to regularly buy products. Is this a feasible option? It’s important to consider whether you actually enjoy selling, since you are more likely to make a profit by pitching to people outside of your network.

Solution: Develop a solid sales plan. Research successful strategies and tools to help you venture out of your immediate network. Social media? Grassroots marketing?

Ask questions and do your research. The person recruiting you may leave out important details about the program they’re promoting in their initial sales pitch. What are the logistical aspects of running the program? Do you have to meet certain quotas (remember what we said about recruiting)?

Solution: Ask current and former MLM members for their advice. Here is a helpful list of all the questions you should ask: cdv.tiny.us/mlm.

Research MLM companies and learn about consumers’ experiences using their products at bbb.org.