In this post, we’re going to look Multi-level marketing and see if it’s a viable method for making money.
It’s strategy that has been around for multiple decades. The fact that is has survived that long gives me reason enough to look into it and see if it’s something I could recommend.
What is Multi-Level Marketing?
Multi-level marketing which is also known as Network marketing or direct selling is a form of marketing companies can utilize to distribute their products.
They do this by using an independent workforce (called multi-level marketers) that sells their products in exchange for commissions and bonuses based on:
- personal sales
- recruiting.
Personal sales
MLM companies make it possible for people to sell their products in exchange for a commission. The majority of MLM companies determine your commission based on the worth they designate to their products often expressed in a value called PV which stands for personal volume.
Recruiting
MLM companies often give people the chance to earn on top of their personal sales by earning residual commission based on the people they recruit. The group of people you recruit is called your downline while the person that recruited you is called your upline.
How much does it cost to become a multi-level marketer?
How much money you’ll have to invest to become a multi-level marketer differs per company but typically there’s a sign-up fee that you’ll have to pay, a starters kit you’ll have to purchase, and an annual fee that you have to pay.
I have seen companies such as Zyia Clothing that have $200 starter kits but I have also come in contact with MLM companies that obligate you to buy a full trunk of clothes for $1900 just to get started.
Aside from the normal purchases, a lot of MLM companies also have a phenomenon called “accumulating” products. These are basically the minimum of products you have to resell.
This is often obligated to stay eligible for earning commissions or maintaining your rank. The higher the rank, the more products you have to accumulate on a monthly basis.
Multi-level marketing isn’t something for those that don’t have a big budget.
How much can you earn as a multi-level marketer?
Most MLM companies have similar compensation plans that make it possible to earn commissions based on personal sales and recruiting.
In the 4 years, I have been reviewing MLM programs I have noticed that the majority of companies apply a commission rate between the 18% and 20% on personal sales. When it comes to recruiting most apply commissions between 2% and 6% based on the performance of your recruits.
How much you earn in this case, is based on the products you’re selling. If you’re a member of a juice MLM that only buys $20 products your earnings are going to be considerably lower than a fashion MLM that sells $100 clothing for the same commission rate.
To make the most out of Multi-level marketing you’d have to be very deliberate in choosing the company you want to distribute for especially since a lot of them don’t allow you to join multiple programs.
What types of MLM companies exist?
In the past, there weren’t a lot different niches for multi-level marketers but around 2008 more and more MLM companies started to appear.
I have review MLM companies that sell clothing, makeup, real estate, insurance, essential oils, wine, juices, heart monitor equipment, and even vacuum cleaners.
The Pitfalls of Multi-Level Marketing
In theory, you could become a millionaire as a multi-level marketer. The problem is a lot of the roadblocks multi-level marketers encounter decrease your chances of getting to that goal significantly.
I have summed up the reasons why it’s hard to make decent money with Perfectly Posh and MLM companies in general into 3 points.
1. MLMs are often associated with pyramid schemes
MLMs have a pyramid recruiting structure that you often have to join to be able to make decent money or at the very least not lose money. The problem is that a lot of pyramid schemes disguise themselves as MLM programs making it difficult to differentiate the two.
This is the biggest problem why most distributors have a difficult time recruiting people. The moment people hear about how you can make money by recruiting people red flags appear in most people’s minds.
2. You have to consistently invest your money to earn decent commissions
The bigger the bonuses the more product you have to buy. You do get discounts but if you can’t sell the products I can see you easily fall into a financial deficit (which happens to the majority of MLMs).
3. The price of the product often isn’t aligned with the market
It’s hard for a multi-level marketer to sell products because most MLM products tend to be a lot more expensive than similar products sold by non-MLM companies. This means even if you’re really good at recruiting your downline still needs to sell those same expensive products for you to make decent money.
You can see that translated in these statistics I found about Multi-level Marketing.
- Nearly half (47%) of MLM participants reported that they lost money.
- One in four (27%) MLM participants reported that they broke even (made no money).
- MLM participants are 7% more likely to declare bankruptcy during their lifetime.
- Direct sales have risen 79% in the last decade, but MLM participants continue to lose money.
- 90 – 99% of distributors in multilevel marketing only receive a couple of hundred dollars commission per year.
- Out of 33,000 interviewed, 90 people made enough money to cover the costs of building their business.
- 50% of the people who start a network marketing enterprise abandoned it in the first year.
Sources:
FTC
AARP
Jobsinmarketing.io
Who would benefit from Multi-Level Marketing?
Technically, the earning potential of multi-level marketing, in general, should be high but as I said those 3 points drastically lower your chances of succeeding with it.
There are only a few groups that actually benefit from multi-level marketing:
- People that got into MLM early when there isn’t a lot of competition.
- People that have a lot of influence on their surroundings or online
- Expert salesmen
- Expert recruiters
These are the 4 groups that tend to have the highest chances of earning money with multi-level marketing but even then you’ll still have to deal with the pitfalls of MLM.
Should you start Multi-Level Marketing?
Well…
That depends on a few things.
I’d ask myself 4 questions:
- Do I see myself recruiting people and do I have an aptitude for it?
- Do I see myself pitching products face-to-face to people?
- Do I have the budget to start and maintain my rank as a multi-level marketer?
- Do I want to invest time in keeping my recruits engaged?
- Are you okay with the possibility of losing money?
If the answers to these questions are all yes, you could give it a try but if 1 of them is no I’d recommend looking at other methods to earn money online.
Conclusion: Can you make money with Multi-level Marketing?
Yes, you can earn money with Multi-level marketing but statistics have shown that the deck is stacked against you.
That being said, I personally know some people that have succeeded with MLM but these were all people with a lot of influence in their community.
This isn’t the norm.
