Why You Definitely Shouldn’t Join That MLM

We’ve all been there. You’re just sitting there trying to live your life when the girl who bullied you in high school suddenly messages you on Facebook. 

“Hey, hun😚! I have this awesome business opportunity 💰 that I think you would be just PERFECT for 😍!”

-MLM Girl Boss

And no matter what you say, she won’t take no for an answer. She promises that this is LIFE CHANGING and that you don’t want to miss out on making 6 figures by working from home!

Other than the annoying nature of these messages, there is a lot to unpack about the companies that these women work for. 

Arbonne, Monat, ItWorks, Beach Body, Younique, the list goes on and on.

While the products these companies sell can differ, they are all structured the same. 

They are all part of a multi-level marketing (MLMs) structure. 

And the idea of making tons of money just working from your phone can be extremely enticing, especially right now, while so many people are laid off and stuck at home. 

So what is the issue?

My goal is to share information about what MLMs are, why they are predatory, why they are the worst side hustles and why you definitely shouldn’t join in on this “opportunity”.

disclaimer: All of the opinions in this post are that of my own, and are not being made by any specific company or brand. This should not be taken as financial or legal advice. The opinions in this post should not be interpreted as facts.

What Exactly is an MLM?

Multi-level Marketing, also referred to as direct sales or network marketing, utilizes distributors to sell products directly to consumers. They also recruit other people to become distributors for that company. 

Ultimately, the companies sell their products through person to person sales.

There are two ways for the distributors to make money:

1. Selling products
2. Recruiting

They make money off of percentage of sales and also a percentage of the sales that their downline makes.

Their “downline” is the group of people they have recruited to become distributors for the company. So every sale their downline makes, they also make a cut. 

Because of this structure, there is a huge emphasis put on recruiting versus selling the actual products. 

Is It a Pyramid Scheme?

For legal reasons, they are not currently considered a pyramid scheme because they have products.

Typically with pyramid schemes, there is no product. People make the majority or all of their money off of recruiting.

But take away the products, and the structure is nearly identical.

MLMs are currently legal because, in theory, distributors should make most of their money from direct sales. While their income from recruiting should be more like a bonus.

Shockingly, this isn’t really the case. Most distributors make the bulk of any income they receive from recruiting. It’s nearly impossible to make money in an MLM without recruiting and establishing a downline. 

So while MLMs do sell products, the emphasis is less on selling the products to customers and more about recruiting people to become sellers.

Hence the “Hey hun” messages. 

What Proof Is Out There?

I don’t like making claims without having information to back them up. So it isn’t just speculation that often times emphasis is put on recruiting. 

The FTC recently shut down the MLM AdvoCare for operating as a pyramid scheme. You can learn more about this lawsuit here directly from ftc.gov. 

And this isn’t a one-off. Here is another example where the FTC announced a lawsuit due to an MLM allegedly operating as a pyramid scheme. 

Distributors often claim that their company is different, but all of these MLMs are structured relatively the same.

They also claim that if their company was a pyramid scheme that it wouldn’t exist, since pyramid schemes are illegal. However, the legality of something does not determine whether it is happening or not. There are people every day committing crimes, just because they aren’t caught doesn’t make it illegal.

And as we can see, there have been many instances in the past where MLMs were operating “legally” until they were caught by the FTC and forced to shut down.

Lack of Regulation with Products

Many MLMs sell health related products such as essential oils, vitamins, dietary supplements, nutrition shakes, skincare and workout videos.

Unfortunately, there is limited regulation of these items. 

Rodan + Fields is under a class action lawsuit for not disclosing the harmful effects of an ingredient in their lash serum. 

Monat has been under a variety of lawsuits over the last few years, many related to hair loss and false information about their ingredients (including claiming to be “sulfate free” when they do contain sulfates).

There are hundreds more, but I know you don’t have all day. So let’s move on. 

Lack of Education

On top of the misinformation about ingredients, the distributors also don’t have to have any training, certification, license or degree that would make them qualified to be giving health advice.

I could have never taken a vitamin in my life and still be allowed to sell vitamins, make huge claims, and give health advice surrounding the “benefits” of the vitamins.

MLM companies often claim that there are restrictions on what the consultants can say. In reality, most of their behavior goes unchecked.

The FTC recently sent out a warning to many MLM companies. This was due to their distributors making false claims about the health benefits of their products during the pandemic.

There were people claiming that the essential oils and vitamins could prevent people from getting COVID-19. Obviously these claims are absolutely false and unfounded.

The Harsh Reality of Making Money with MLMs

Many distributors recruit people on the basis of being your own girl boss and making tons of money from home.

They portray this lavish lifestyle that you too could be living if only you jumped on this amazing business opportunity!

Unfortunately, the income disclosure statements that MLMs are required to provide don’t quite match up to the income claims that these distributors are making.

Income Disclosure Statements

Let’s take the example of ItWorks, to see how much you can really make.

This is ItWorks’ Income Disclosure Statement, which states the income ranges and averages for each rank.

This shows the active distributors, what rank they are in, how long they have been with the company, and how much they make.

The claim that you can reasonably turn this “business” into something you can live off of is completely unfounded by their numbers. 

Right there it shows that 80% of distributors make an average of $43 a year.

Now these earnings don’t even include the investments people make into the company. This includes a $99 start up kit that is required to buy in order to become a distributor. As well as the minimum $80 in products that people either have to sell or buy for themselves PER MONTH.

Just a reminder that the $43 is PER YEAR.

So on average, at least 80% of the distributors are losing money. 

And maybe you’re thinking that you’ll be above average! You could be the 1% (or in this case the .06%). 

Great! The average yearly income for the top 0.06% of the company is less than $25k a year.

Again, that isn’t including the money they have invested into products. It also doesn’t include taxes.

You can also see in fine print that 5% of distributors make absolutely no money. That means that you are 100x more likely to make nothing than you are to make a livable wage. 

Clearly, claims that you could quit your day job and just work from home by joining these companies is extremely false and predatory.

The numbers just don’t add up. 

But what about the benefit of owning your own business? Everyone knows that most businesses don’t see a profit for at least a year! 

Do You Own Your Own Business with an MLM?

Short answer? Absolutely not. 

There is a CEO of these companies and they’re not the distributors. They also aren’t small business owners. They are contracted workers who work for a commission. So despite how they swing it, you aren’t investing in becoming your own boss or owning your own business.

Business owners get a say in every level of the business. Distributors have no control over the products, packaging, distribution, pricing, branding or anything else.

On top of that, they often have an “upline” that they go to for coaching and advice. Too often the upline will make people feel terrible if they aren’t succeeding and make them believe that it’s their own fault. Obviously, you just don’t want it enough!

There are so many different ways that you could actually start your own business! And with technology, there are often ways to start a small business or side hustle with low startup costs.

With MLMs you are supporting a much larger company by selling THEIR products. 

So many distributors have tons of marketing talent. Put that talent, time and energy toward starting your own Etsy shop, blog or YouTube channel!

Common Arguments for Joining an MLM

• “I just want the discount on products!”:
  • Okay let’s be honest, these products are overpriced and under regulated. I’ve yet to find a product that an MLM sells that you can’t find for a lower price and higher quality somewhere else. It’s not worth it.
• “I can work from home on my phone!”
  • I totally understand the appeal from working from home. But as we’ve seen, you’re likely to end up investing so much time and money, with little to show for it. There are tons of other ways to work from home that allow you flexibility and a real paycheck.
• “My friend had HUGE success with this!”
  • Okay, but are you sure about that? Have you seen their income statements versus taxes and how much time and money they have spent on the business? MLMs create a culture of faking it to fit the lifestyle. Is there a chance your friend is caught up in that and not actually making tons of money from the company?
• “Corporate jobs have a pyramid structure too!”
  • Yeah, but the people at the bottom are at least getting paid something. The people at the bottom of MLMs make nothing or lose money. In order to succeed in an MLM you have to piggyback off of tons of people who are losing money. Sure there is a top CEO in corporate companies, but that is different from the structure of MLMs. Plus, in the corporate world you can work your way up. There have been very few instances of someone working their way up past their upline. It’s nearly impossible to do with the structure. 
• I want to start my own business!
  • That is so awesome! I love that for you and I am all for side hustles. Unfortunately, you are definitely looking in the wrong place. You do not own your own business in an MLM. You are a contracted worker for a much larger company. Take that money you would have spent on the MLM and put it toward an actual business plan that you have control over! Make your own name, brand, products, website, etc. There are so many ways to start your own online business now that don’t require huge monetary commitments.

Some Signs You May Be Looking At (Or Are In) an MLM or Pyramid Scheme:

• You have an upline or downline.
• You have a minimum monthly quota that you have to either sell or spend in order to remain active with the company.
• More emphasis is put on recruiting than on the product itself 
• You are encouraged to constantly recruit the people close to you to buy your products or sell for the company, even after they state they aren’t interested.
• Your upline either blames you for your lack of success or claims that everyone who is opposed to MLMs are haters and jealous of their success.
• You are expected to live for the company. You find that it’s all you think about and talk about.
• You just have this gut feeling that something isn’t right. Trust that feeling! 

Why I Could Never Recommend an MLM

I have nothing personal against MLM distributors. I believe that most of them are good people who got really wrapped up in a bad situation.

MLMs prey on vulnerable people. They target stay at home moms looking for friends, connection and a way to contribute. Also, college students who are just figuring life outside of home out and want a way to make money for themselves while in college. And sometimes military spouses who live on base and want a way to connect with others.

Those are the people that I care about and want to reach out to. It’s the companies who create a toxic environment. I just want everyone to know what to look out for, whether you are in an MLM already or are recruited by one.

You are allowed to leave and it’s not your fault that you didn’t succeed. 

No matter what your upline says, you were set up for failure. It’s not because you didn’t want it enough or didn’t work hard

This is your life. You have the right to leave something that isn’t working for you. 

A list of Income Disclosure Statements can be found here.