Multi-Level Marketing businesses, also known as MLM businesses, are often the first entrepreneurship opportunity people are drawn to when trying to make side money. If you pick the right business and are really fired up, perhaps your side hustle could become your full-time revenue stream. However, before you jump in feet first, you need to evaluate if the MLM business opportunity is the right thing for you.
What are some of the top MLM businesses you ask? Have you ever heard of Amway, PrimeAmerica, Avon, Metaleuca, MaryKay, Rodan and Fields, Arbonne, BeachBody, Jeunesse and Herbalife…to name a few. If you are considering one of these kinds of business opportunities, make sure you ask the person recruiting you a few of these questions up front:
- How long have you been in this business?
- How much time do you spend on this business weekly?
- What is the minimum monthly order requirement?
- How long it takes to make real money?
- Can you share the statistics about how many people are still in business after a year?
MLM business opportunities require upfront fees, monthly maintenance fees, inventory order minimums, and lots of your time. You must have or develop a customer base. Often, they’ll train you to go out into the world to prey on your friends and family to do business with you or better yet—sell for you in your downstream. That’s where the real money is in this business model. It’s all about the people you sign-up underneath you. Beware if there’s more emphasis on getting people to sell for you rather than the value of the products or services.
MLM businesses offer a proven system. However, you will pay money, buy products to sell and ultimately, it’s someone else’s dream. And did I mention it requires a lot of your time? Weekly meetings and conference calls are required. Moreover, direct selling involves live selling on social media these days, too.
6 Benefits of MLM Businesses
Multi-streams of revenue: People who believe in MLM businesses are sold on the dream of ultimate wealth from residual income. Multi-streams of revenue are the BEST type of income a person can literally achieve.
Small amount of financial risk: There is a certain amount of inherited risk involved when you become an entrepreneur.
Low overhead costs: Most MLM business are home-based, and thus there is low overhead costs and minimal inventory, so storage is not need.
A huge demand for good quality products: If it’s a great product or service people will buy it. Financial services, weight loss, beauty, health, and wellness products are the most popular products.
No employees to hire: MLM business is designed to be an army of one. It’s a business of people independently working together.
Unlimited income potential: There is no limit on how much money you can generate with your MLM business or otherwise, but your paycheck is limited to your annual raise and bonus if you are lucky.
Understanding the MLM Business Model
Here’s how the MLM business model typically works. The manufacturer builds a highly-motivated, commission-only sales force, to sell its products and services directly to consumers. To be a credible salesperson, you must buy and use the products and services yourself (which are purchased at a modest discount.) The manufacturer then charges the seller a monthly fee for the privilege of being a salesperson and gives them a minimum amount they must order to keep inventory to sell. The seller must purchase their sales tools and marketing giveaways from the manufacturer. So, who is making money: the manufacturer or the seller? In fact, 90% of the money in this business model goes to the manufacturer.
I have been in business for 20 years, and I have been a business expert for ten years. I do know people who have generated $5-million a year from MLM businesses, but that is an anomaly. Typically, only 1% of people make real money from these MLM business opportunities.
In a small business, your time is the most valuable thing you have to give or sell. I have seen people run to team meetings for pep talks on evenings and weekends and not make money, and worse ruin a lot of friendships by inappropriately selling to them. I think early adopters are the only people making millions.
If you put all that effort and time into a business where you made 100 percent of the money you would be better off. I think MLM businesses are for people who like the idea of being in business but aren’t really willing to put their butt on the line behind their own business idea. If you are making money in your MLM business you are fortunate–but if you are just making a little money, I would calculate the hours you put in by the money your making so that you can figure out how much your time is really worth.
I do not believe in telling people that they have good or bad business ideas—I just want
you to have good information. In my first book, Become Your Own Boss in 12 Months, I outline the steps to start and run a successful small business. Read it and decide if you’re interested in an MLM business or building your own business idea.
Regardless you need a marketing plan.