You recognize the names I’m sure.
A few of these direct selling/ MLM (Multi-Level Marketing) companies are companies you’ve grown up with and are possibly companies your mom and dad grew up with. You perhaps also have several of their products in your kitchen and bathroom right now – and if don’t, you possibly know someone that does.
These are most definitely companies that are around and get around.
They are additionally companies that are extremely lucrative.
The first six companies I named above, are actually six of the top direct selling companies in the world, and made $34.5+ billion in 2014 which is an increase of 5.5% overall from 2013. (Amway topped the 2015 DirectSellingNews Global 100 List, making $10.80 billion all by itself.)
But does that mean that coming to be a direct seller/ MLM’er for a company such as Amway or Avon is a great business opportunity for you to get into?
Before you make your decision, here’s what you need to know about direct selling and MLM (Multi-Level Marketing) so you can determine if it’s a great business opportunity or rip off.
Direct Selling Has Great Advantages
Unlike lots of businesses, there are absolutely no entry barriers to becoming a direct seller.
You do not need any specific degree or education or training. (However, a proven training system is a must if you want to be successful… just saying)
You don’t need to do it full-time or even any set number of hours per week. (However, statistically speaking, a minimum of 15 hours a week is needed to make any type of money)
You can do it from your home. (However, if you want to be successful, check out my blog post on the “7 Lessons I’ve Learned From Studying The MLM Top Earners.”
It’s inexpensive to get into. Usually all you need to do to begin is purchase a starter kit; some companies offer these to brand-new sellers for just $35, although some can run as high as $97 to $150.
Direct Selling and MLM Are Not the Same Thing
Direct selling describes the business model where independent contractors (or reps or distributors) sell a company’s products and/or services directly to consumers/ customers.
They might do this via door-to-door sales, online, by having house parties, or events. There is no fixed retail place or location, however, habitually direct sellers work out of their homes.
Now I could copy and paste the above statement describe MLM (Multi-Level Marketing).
It too is a business model where independent consultants sell a company’s products and/or services directly to consumers/ customers.
The difference is that in the MLM business model, the independent consultants also make money from recruiting others to work for the company.
So if you work for an MLM company, you can generate money from your sales and also from the sales of your recruits and the recruits of your recruits – hence the term “downline” and the term “multi-level”.
Many direct selling companies are MLM companies, including the previously mentioned Amway and Avon.
Beware! Some MLMs Can Be Pyramid Schemes
That’s exactly why some unethical scammers have actually acquired the MLM business model and utilized it to create pyramid schemes.
Pyramid schemes are not MLM businesses.
Officially, the core difference between MLMs and pyramid schemes is that MLM companies generate money off selling legitimate products and/or services; pyramid schemes however, make money off you i.e. they do not provide any sort of investment or sale of products and services.
Simply put, the main effort of a pyramid scheme is to get you to put your money in and recruit others to do the same, rather than selling legitimate product or services.
If you are in any doubt that an MLM company you are interested in is a legitimate company or an illegal pyramid scheme, ask these six questions.
1) Are you required to “invest” a large amount of money up front to become a distributor? This investment request may be disguised as an inventory charge. Legitimate MLM businesses do not require large startup costs.
2) If you do have to pay for inventory, will the company buy back unsold inventory? Legitimate MLM companies will offer and stick to inventory buy-backs for at least 80% of what you paid.
3) Is there any mention of or attention paid to a market for the product or service? Multilevel marketing depends on establishing a market for the company’s products. If the company doesn’t seem to have any interest in consumer demand for its products, don’t sign up.
4) Is there more emphasis on recruitment than on selling the product or service? Remember, the difference between multilevel marketing and a pyramid scheme is in the focus. The pyramid scheme focuses on fast profits from signing people up and getting their money. If recruitment seems to be the focus of the plan, run.
These next two questions will help you determine what the focus of the company is:
5) Is the plan designed so that you make more money by recruiting new members rather than through sales that you make yourself? This is the signature of a pyramid scheme operation.
6) Are you offered commissions for recruiting new members? Another pyramid scheme trademark. It’s the number of people who are willing to sign up that matters in a pyramid scheme, not the products or services being offered.
And if the answers to any of the questions is dodgy, stuff your wallet back in your purse or pocket and run – it’s a high probability to go to jail, rather than make money.
You Could Make a Lot of Money
By working for a legitimate MLM/direct selling company though, you could make a lot of money.
In her book Second-Act Careers, Nancy Collamer tells the story of Karen, a former registered nurse and stay-at-home-mom, that now makes a large fortune as a regional manager and sales consultant for the high-end direct sales fashion company Etcetera.
What kind of large fortune? A Herbalife consultant for example on the president’s team can make as much as $500,000+, the nutrition-supplement seller says on its website. Yet that’s a reality for only 0.3% of their sellers.
Numerous MLM companies likewise offer top sellers bonuses such as Mary Kay’s renowned pink Cadillac’s.
But You Might Not
However, as Ms. Collamer states herself in Can You Really Make Money in Direct Sales? “The majority of people who go into direct sales aren’t as successful”.
And as a matter of fact, according to the Direct Selling Association, the mean yearly earnings for direct sales consultants in 2014 was $6,200, however 15% of the 18.2 million direct sales consultants exceeded $50,000.
Being reasonable, though, not every person who has signed on with a direct selling company as a distributor or consultant is actually doing it to make money. Some have become consultants just so they can get the goods or services themselves at a discount (typically about 20%+). Internal consumption, as it’s called, prevails in direct selling and MLM companies. Even the very active sellers generally use what they’re selling.
How Much Work Are You Prepared to Put Into Your Business?
The real answer to the “how much money will I make?” question depends on you.
Exactly what are your business goals?
Are you simply seeking to make a few extra bucks to supplement your income? Or do you want your direct selling to provide your main income? Or something between?
That’s one of the lures of MLM in figuring out if it’s a great business opportunity or a rip off; how well you do depends on your own consistent efforts.
You Need to Like Selling
It’s evident, I know, but it’s something lots of people who don’t succeed at direct sales overlook or ignore altogether.
Direct selling is not for the shy. You have to and want to, be willing to get out there. And no, not just out there as in onto the Internet (however this is shifting rapidly with more and more people preferring to buy online). As in face-to-face, person-to-person, door-to-door. That’s how 69% of direct sales happened in 2014 according to the Direct Selling Association.
Unless you are blessed with countless friends, you have to be the type of person that is comfortable conversing with strangers whether that is face-to-face or online. And if you choose to go online, there is an art to doing it correctly. Check out my blog post on how to “Stop Selling and Get More Customers Buying.”
Additionally, you have to learn how to sell to them, which involves a lot more than just knocking on someone’s door and saying, “Hi. I’m ________________. Would you like to buy some lipstick?” Or doing the same thing on Facebook for that matter.
(If you’re not wincing right now, that’s a great sign. Sales skills and online marketing skills can be learned as long as you agree to do it.)
The Bottom Line
If you’re willing to do exactly what needs to be done to actively sell products or services to people besides your friends and family, direct selling and MLM can be a great business opportunity or rip off if you are not will willing to do exactly what needs to be done.
The benefits of direct/MLM selling are tough to beat if you willing to put in the time and effort to succeed.
Direct-selling businesses call for salespeople to make it work. The reality is that many people don’t like the idea of going out to make sales. The approach that most MLM distributors use frequently is recommendation or sharing of products or services they think are great, and that they have personally used.
In a direct-selling business, you need to be constantly making sales or training your downlines to make sales to appreciate the incentives continuously. In MLM, you often need to create awareness, share with others your own experience with the products, and teach your downlines to do the same. In the long-run, your income is mainly earned from the continuous consumption of the products from everyone in your organization, even if nobody is selling anything to anyone.
I hope this helped you to determine if Direct Selling/ MLM is or is not a great business opportunity or rip off? What other advice would you give to someone?
Shaun & Kimberly Keizur