I have been a part of many multi-level marketing opportunities. I have seen the good, the bad, and the ugly. This article is to help you avoid being scammed by these companies. You need to be very careful because it’s not always easy to tell which is which until after you’ve already invested your time or money into them. These are some of my best tips for avoiding getting scammed by MLM’s like Herbalife, NuSkin, Amway, etc.
MLMs are not sustainable businesses.
Despite what you have heard, read, or assumed – MLMs are not sustainable business models. Unsustainable even by their own terms? Yes!
Why do I say that they are not sustainable businesses? Here are some of the industry’s dirty secrets that they don’t want you to know about.
Almost all products are purchased by the distributors.
Products in an MLM are not sold they are purchased by the distributors. Anyone who is considering joining an MLM needs to read that again. When you are considering working for one of these companies, please understand this point. I have never seen any significant retail sales from direct sellers at parties or open houses.
The only place that you will ever see any retail sales are when the potential recruiters are trying to recruit people into their downline.
So where does all of the product go? It is sold to the very few distributors in an MLM who have built large organizations. These distributors make up a very small percentage of the total organization and they actually purchase almost all of the products from the company.
Yes, you read that correctly. The majority of the product is purchased by the top 1-2% at wholesale prices and resold to their downline at marked-up prices. Of course, being an MLM they have all kinds of clever names for it but discounted purchases, bonus buying, and preferred customer programs are all different names for the same thing.
Keep this in mind, because it’s very important to understand that product purchases are not profitable retail sales.
The MLMs business model is unsustainable.
Consistent with this fact, the inevitable collapse of most MLM companies is heartening news for those who are wary of losing money to these scams. It’s also great news for many retired distributors who were seduced into joining an MLM company only to find out that it was a complete waste of time and money.
One of the most recent MLM companies to collapse is Market America (also called Momentis). This time, it wasn’t caused by US regulators like the FTC or SEC, but by insiders who saw an opportunity for themselves.
According to Newsweek, “Last month, Morinda began hearing rumors about its No. 1 distributor, James Howard ‘J.H.’ Lee. Some of Morinda’s staff members, including its head of compliance, were told the company had caught the 41-year-old Lee in some sort of misconduct. The nature of these allegations is in dispute.”
The retail man was the first to publicize this development. We also published a full report, based on information provided by Inside Momentis. For clarity, we are not linking to these posts directly, but if you search for them you will find them.
According to Newsweek, Lee’s wife Susan was also caught up in the scandal. She was reportedly “charged with wire fraud and conspiracy to commit wire fraud” along with her husband. Retail man reports that James “has been charged with 15 counts, including wire fraud and money laundering. Susan is facing 12 counts.”
Many people who start an MLM company lose money rather than make money.
This article uncovers the reason why most people lose money – and what YOU can do to avoid it.
The crux of the problem is that most MLM companies are forced to sell their own product because they’re not allowed to buy products wholesale like traditional retail stores do. And, most MLM products suck.
If you’ve already spent time in the MLM business, you know what I’m talking about. If you haven’t, well… trust me on this one. Most MLM products are sub-par at best – inferior knockoffs at worst. And yet…
You Must Sell Their Product To Make Any Money At All
The MLM company you join may use the money it makes from recruiting to pay its employees… who in turn, are responsible for selling their product. And yet… if they stopped paying them tomorrow, the business would collapse like a house of cards.
There’s no way around this one simple fact: if you want to make money in an MLM company, you’re responsible for selling and convincing people to buy the product.
It’s not like all your recruits will be able to convince their friends and family to buy the product themselves. That’s why they need you – it’s YOUR job to sell the product! And that’s how most people get roped into an MLM business: they buy the product themselves and sell it to friends and family.
This is also why most people who join an MLM company end up losing money rather than making it – they find that their friends and family aren’t buying as much as they’d like (or as much as THEY’D like for them to buy).
The next step is to sell the product yourself… but that’s usually where they lose most people. They don’t do it because it requires too much time and effort and often, sales skills. Instead of trying to sell the product themselves, they just try to recruit others into the business. And when those recruits run out of friends and family to sell the product, they quit. Wash. Rinse. Repeat.
And What Sucks Even More…
The worst part of this is that even if you do make money in an MLM company, it’s usually nothing like what you had heard on late-night infomercials or on the website during your joining process.
You see, when you start in an MLM company and recruit people into the business, your recruits will usually be placed in an “upline” – which is just another way of saying that they’re part of a hierarchy. People who were there before you are at the top and you’re at the bottom. The person directly above you is your “upline” and they make money off of every sale you make, as well as the sales everyone who is beneath them makes.
Many people who start an MLM company lose money rather than make money. The MLMs business model is unsustainable because it doesn’t offer a sustainable income to the average person and relies on recruiting more members in order for someone to be successful. Not only do they not provide a sustainable income, but they also don’t have any long-term sustainability as businesses. There are many reasons why multi-level marketing can’t work; some of those reasons were discussed above!
If you’re interested in learning more about how we’ve helped our clients become successful with their online business then reach out today! We specialize in helping entrepreneurs like yourself establish an end-to-end digital strategy that will help your website grow and increase sales–without relying upon affiliates or personal referrals. At GreenPal, we know that every client is different and it’s our goal to provide you with the best tools possible (and at the most affordable price point!) to help you succeed!