Bank Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays Bank.
I have always thought there were better side jobs than MLM. I don’t know why exactly…but I just don’t like it. Two weeks ago, after a friend of my wife weaseled her way over to our house to discuss a “ground floor, once-in-a-lifetime opportunity,” I refused to come downstairs. I just stayed in my man-cave and watched Law and Order re-runs until she left.
But was I unfair? Is MLM really a business worth considering? My answer is “no” and I’ll tell you why:
The attraction is the money they dangle in front of you Ã± not the quality of the product. They tempt you with all the things you’ll be able to do once that money starts pouring in. Travel the world. Buy that second home. Dream big. But any business that is founded on the profits and not the competitive edge of the product is a mirage.
MLM products are typically sold only through the MLM distribution channels, and this makes no sense. If the product was good enough to compete in the market, it would be sold through more conventional stores.
If it’s not sold through stores, then it means the product isn’t really what’s being sold – rather, it’s the process that’s being marketed. And that process is, as I’ve said, just a Ponzi scheme.
The foundation of MLM is to get other people to buy into the system. They buy in with the dream of having 10 people buy in beneath them and having that process continue ad infinitum. That is how they plan to build wealth – not on the strength of the product itself. And that is the core problem.
If you pick up any marketing literature for MLM systems, you’ll see some beautiful people jumping on private jets or ski boats. They’re usually dripping money and they have a second home in Maui – all made possible by the MLM program. Of course these stories are as synthetic as the people themselves.
And if anyone does profit from the MLM program it’s from the sale of distributorships, not from the product itself. I read recently that the founder of FUND AMERICA – a huge MLM system in the 90s – was arrested. 90% of the profits he made was from the distribution channels and not from product sales.
And even if you believe in the product, you should not join an MLM program. If you do, you’re still going to promoting ideas that you probably don’t believe in. Remember, the way to make money here is to get all your friends to buy-in to the program. So even if you believe in the basic product, you’re not selling that. You’re selling the process.
And before you become a true-believer in that product, keep in mind that you may not really know what you are getting involved with. One reason grease ball business people create MLM systems is because they know they aren’t held up to the same scrutiny as producers that advertise main-stream.
An MLM manufacturer can say anything he or she wants about a product without regard to the wishes of the Federal Trade Commission. MLM creators frequently make up endorsements, fabricate studies, and misrepresent their products seven ways to Sunday – all with very little oversight. Indeed, the FTC states that “many of these [products] are unproven, fraudulently marketed and useless or even dangerous.”
So many of the products that are sold through MLM are things that just couldn’t be sold in any other way. But by relying on your friends, the manufacturer knows you sell with an implied personal recommendation. And that is worth it’s weight in gold – to the MLM creators.
Look before you leap
Even though the MLM program you might be considering offers a money back guarantee, you’ll never get it. The reason for this is that you’ll never ask for it. The MLM creators are masters at manipulation. They know that if you ask for a refund, you’re admitting defeat and you don’t want to do that. Instead, the “starter kit” that you bought sits in the corner of the garage and your money sits in the bank of the shyster who created the system.
I dislike MLM schemes because they are by nature a lie. They take advantage of people with the most to lose. People who are borrowing money to pay their bills shouldn’t be forking over that money to “invest” in these programs, but they are the prime targets. They are often out of work and uninformed. They end up more in debt than before they started.
People like Bernie Madoff, who fraudulently take advantage of people with Ponzi schemes go to jail. But people who do the same thing by draping a product on top of the scheme cash big checks. Don’t be part of it.
Before you get involved with a multi level marketing program ask yourself a few questions:
- a. Do I know what I’m selling?
- b. Do I want to get my friends involved in something they may not understand?
- c. Do I want to sell something that can only be sold word of mouth rather than based on the product’s strengths?
- Do I want to make money based on selling a system rather than a product that delivers benefits?
Have your experiences with MLM been different? Do you know anyone who got involved with such a program that really offered value? Please share your thoughts in the comments section.
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math (692)
- Dish Network Customer Service SUCKS (534)
- $8,000 Homebuyer Tax Credit (429)
- Pay Off Mortgage Early or Invest? (424)
- How to Claim the First-Time Homebuyer Tax Credit (352)
- Termite Control: Sentricon vs. Termidor (325)
- How Much Should You Pay a Babysitter? (284)
- Ethanol Blended Gas = Lower Mileage? (272)
- Reduced Credit Limits? Share Your Experience (256)
- $15,000 Homebuyer Tax Credit (242)
- Buying Furniture off the Back of a Truck (227)
- Will Mac OS X Lion Kill Quicken 2007? (191)