Written by Rarity
I deleted a link to a [Facebook] post last night about women selling MLM products on FB because someone I like and trust said the post was mean and hurtful. But, I’d like to explain here how I feel about MLMs, and why I feel conflicted when my friends add me to FB groups and ask me to support their MLM ventures. Feel free to not read this post, and if we are friends, I hope I can speak my mind and we can still stay friends.
I’ve been too poor for most of my adult life to support more than the occasional Girl Scout Cookie drive. But when friends ask me to support their participation in MLMs, I feel conflicted because I believe you are caught in a scam.
It is a statistical fact that more than 99% of MLM participants *lose* money on their venture. The FTC keeps a report on this on their Web site. The author analyzed 100s of MLMs and found that, with all of them, 99%+ were losing money on their MLM participation. He also spoke with dozens of tax preparers in counties with significant MLM participation, and the only people who reported making money on their ventures were people near the top of the MLM “pyramid.” The average distributors were all losing money. Of those who do manage to turn a profit, usually they are making minimum wage (or less) for the hours they are putting into it.
It isn’t because you don’t work hard enough or because you’re bad at sales. MLMs fail because they ignore one of the most basic principles of business, that supply must meet demand. They urge you to turn your customers into competition, thus oversaturating the market with too much product. They don’t conduct analyses of distributors in a certain area to make sure there’s not already too much supply there; anyone can sign up. This is because the only “customer” they care about are new distributors front-loading their inventory; they don’t care whether or not you actually are able to sell it, and the vast majority of them don’t bother trying to keep track of that.
If you wanted to franchise a McDonald’s restaurant, McDonald’s would look at your area and conduct an analysis of whether or not there is enough demand for a McDonald’s in your location. They wouldn’t let four people open four McDonald’s on each corner of the same intersection. But if you want to sell an MLM product, there could be four other suppliers on your same street and they wouldn’t care.
Just look at the offerings for MLM products on sites like eBay and the Amazon Marketplace. Those aren’t “stolen” products, those are people trying to offload product they couldn’t sell and recoup some of their losses.
Going back to my franchise comparison: if you were going to franchise a McDonald’s restaurant, McDonald’s would have to provide you with hundreds of pages of detailed analysis on what you can expect to make and why, so that you could make an informed decision on whether or not to invest in that business opportunity. But MLMs have voraciously fought the FTC on being required to release even a one-page disclosure statement of what the average distributor can expect to make. They do this because they know that their sales numbers would be abysmal.
A lot of MLMs also engage in cult-like mind control tactics, like forbidding “negativity” or telling you not to read information about the MLM on the Internet. I heard that LuLaRoe wasn’t even letting its distributors ask about when the tax system was going to get fixed because that was “negativity,” and now LuLaRoe has had a major lawsuit filed against it over that very problem.
If you are participating in an MLM, I would just urge you to do an honest breakdown of expenses versus profits versus time spent on your business efforts. What do you really make in an hour? And please remember that you don’t get any benefits or paid time off, and you will have to pay SECA (which is a bigger bite out of your income than FICA). I don’t make a ton of money at my office job, but I always remember that my employer pays half of my Social Security tax plus around $25K per year in benefits, so my employer is probably spending $70K per year on me—and I only work 37.5 hours per week, with plenty of paid time off. If I were going to work from home, I would need to be able to make $70K per year (*after* expenses) working only ~33 hours per week. Most MLMs can’t deliver that to the average distributor, not by a long shot.
If you are truly making money off of your MLM, great; I’m happy for you. But the majority of people don’t. These companies are predatory and they largely prey on women with a “work from home” dream.
And that is why I feel conflicted about supporting women in MLMs.