Is Multi Level Marketing A Good Business?

I can still remember being in my freshman year at Boston College when someone called upon me to share in the money making opportunity of a lifetime called the ‘money tree’.     It sounded like a great idea because you could really help people help other people make money.   Essentially, the person recruiting you asked you to give them $50, and then your job was to recruit 10 people who gave you $50.   You get to be in the club once you give your recruiter the $50.  It went something like that, but what I remember most is that it seemed like a good idea that all I had to do was give $50, and then simply recruit a few others to make $500.   The hard part of actually having to recruit people to give you the $50 is where the rubber meets the road in these types of schemes.

Multi level marketing has been around for a long time.   Amway is probably one of the oldest and most well known multi level organizations in the country.  If you haven’t already been to an MLM pitch, you can be sure that at some point a friend or representative from Mary Kay, Herbalife, Stella and Dot, Shaklee, The Pampered Chef, Nu Skin, Mon-A-Vie, Prepaid Legal, or one of the many other types of multi level marketing pitches will be at a house near you soon.   You can recognize many of these companies by the prominently displayed stickers on the backs of windows from drivers you see on the highway.

The allure of most of these businesses is when a distributor from their network sells you on the DREAM.  What’s the dream?   The dream is the video or brochure they show you of the person who has only been doing this for two years and is now at the double triple quadruple black diamond level earning $1,600,000 per year working only a few hours per week.    There is great magnetism to any business that looks easy and pays a ton of money.   If you have any liking toward the particular product the MLM sells, you will get excited enough to make your first purchase of the product.   Poof!  You are now a business owner running a potentially international company right before your eyes.    If you can just recruit 25 to 50 more people to do what you just did, then you too can be a millionaire.

My own opinion is that almost all businesses in one way, shape, or form have a pyramid type shape.   Even the largest of the Fortune 500 companies has the CEO at the top making a disproportionate amount of income to the administrative staff at the bottom.   It is the shape of how many organizations run.   A few at the top make gobs of money.   Some at the upper levels make really good money.    Most of the masses make the status quo.

If you decide to get into MLM, just remember that it is a business.   You should treat it that way, and really research the company and its products before you engage in becoming a distributor.  Some of these companies have good products and have been selling them for years, while others truly are scams.   Most importantly, make sure you get a disclosure statement of incomes.   This will really tell you what is going on in the organization.   I recently pulled the disclosure statement from Monavie™ (www.monavie.com), and here is what I found out.  The average annualized income for all Distributors from January 2, 2010 to December 31st, 2010 was $1,953.45.    Although it does disclose that less than 1% (who knows if that is just 1 person) did make $2,672,684, I wouldn’t count on it if this is going to be your new business.

The MLM business can be a profitable business if you remember a few things.   Your number one job will be to recruit others.    Your number two job will be to buy, sell, and consume the products.    Your number three job will still be to grow and manage the business.   Otherwise, prepare to spend money for a learning experience.

Written by:

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

Co-CEO and Founder oXYGen Financial, Inc

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About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

Hey!

My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

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