I am a pharmacist and former hospital CEO who delved into the MLM industry a little over a year ago. When I was growing up, I watched as my parents, neighbors, family, and friends joined, and failed, at several companies. They lost money and ruined trust and relationships in the process. I saw one person who was quasi-successful, but I now know it’s because she also owned another storefront where she could funnel customers- not the norm for most people. I vowed to never be a part of ‘one of those MLMs’ ever.
Fast forward 20 years and here I am. In an MLM and actually proud to be. Proud because not only am I earning a really nice income and helping others do the same, but more so because my company doesn’t at all fit the stereotype of many others. I don’t exploit or take advantage of people. I offer them legitimate tools and an opportunity. It’s up to them to decide to run with it or not. Despite all the negativity and ‘anti-MLM movement’ out there, I know the stereotypes and generalities don’t apply to me or my business.
While growing my business, I’ve also spent some time researching network marketing and the MLM industry in general. Here is what I found out- they are NOT all the same. There ARE some that are scams but MOST of them are not. Just because something is not a scam doesn’t mean its a sound business opportunity. Not everyone loses money, but a lot of people do. Why? Because they approach it all the wrong way! People see something shiny or a product they like and jump in. They never give thought or consideration to what actually makes a business profitable in the long run.
Here are 10 questions that everyone should ask their potential sponsor before enrolling in any MLM. These apply to people considering MLM as a legitimate business opportunity and are above and beyond the basics that (I hope) are obvious. Most of this will not apply to individuals who choose to join MLMs in order to gain discounts off goods they already plan to buy. I’m speaking to the people who are looking to make a real income.
Make sure you are asking your potential sponsor to answer each of these, and any other questions you have. Make sure the answers are to your satisfaction. It would be rare for a company to hit a home-run on every point, so also be listening for the sponsor to be honest where their company may fall short. It may still be a good opportunity, and you will know you are joining a morally intact organization.
1.Is this a ground-floor opportunity?
Ground floor companies are best for long-term success. While it may be tempting to join the largest or even the oldest MLMs, presumably because they have sustaining power, it’s probably not a good idea. Why? Saturation.
Think of some of the big MLMs- NuSkin, Rodan + Fields, Amway, Mary Kay, to name a few. Yes, most have some great products. They also have a lot of people in their sales force. That means competition for customers and downline recruits. Right now, I could find 15 R+F consultants in a snap to place an order. I could do the same across dozens of other companies. Do you want to have only a 1/15 chance when someone needs your product? Or do you want to be one of the very few?
2. Does the company offer a truly exceptional product or service that has minimal or no competition that customers actually want or need?
Network marketing is a genius logistical problem solver and the absolute quickest way for companies to get products in the hands of their end-user en masse. For that same reason, the distribution method is often used, or even exploited, for financial gain. How many shake companies do we actually need? How are the new ones really any different? That said, don’t dismiss the entire industry due to some bad companies. It’s still a great model, when used and implemented in a fair and honest way.
Treat your MLM planning as you would any other business. You wouldn’t open up a burger restaurant right next to another restaurant that has burgers as their main food, would you? If you would, you need to revisit Business 101.
For the rest of you that agreed, no, that would be a bad idea, you are right. Don’t join a company that offers a product or service that customers can easily get anywhere else. There are a few exceptions, such as legitimately better quality or price, but in general, steer clear. You will not have long-term success.
Also, make sure the product is something many people actually need or want. Key there, MANY- not just something YOU need or want. My parents made this mistake. They found a company with products that were wonderful- for THEM. But they were also very expensive, not needed by most people, and therefore they struggled to find customers.
3. Is the compensation plan transparent & do you have a placement suite for team builders?
Pay transparency is huge- your potential sponsor should be able to explain what commissions look like and when/how you get paid. This doesn’t mean the compensation plan may not appear confusing- there is a difference here. Comp plans in the industry often have grids and a lot of acronyms. If you aren’t used to this, you may be confused. That’s not the same as a lack of transparency. A transparency issue is if the sponsor cannot explain it to you, has a vague answer, or cannot show it to you on a company developed template.
For instance “I make around 40% of my sales and I’m not always sure what day I get paid but I don’t think I’ve missed a paycheck yet” is not the best answer (sadly, I’ve heard it before). Even worse if they cannot show it to you on a company letter-head.
However, an acceptable answer might be, “I earn 4-30% commissions off sales in my organization depending on where and by whom the order was generated. I can collect 5 levels down based on my current promotion with the company, as a director. Let me show you what that looks like for each promotion level on this comp plan attachment.”
You should also be able to make decent money through sales ALONE! If you can only achieve real success through recruitment, stay away! That’s why many MLMs get dubbed pyramid schemes. It’s ok if you can earn more money through a downline than without one, but there should be an opportunity for a single salesperson to make decent commissions off their own sales.
My final point is about placement suites. You may think it has little to do with the comp plan, but it’s actually a huge-deal! Placement suites may go by other names, but essentially it is a way that individuals can move their enrollees within their own organization. It helps them build balance but also can help enrollees to promote and earn more money. I can’t think of a reason I would ever want to be in an organization without a placement suite. It’s been crucial to my success and that of my team.
4. What are the startup and ongoing costs?
There is no right answer to this necessarily, other than it needs to align with what you are ok with. Also, you are looking for honesty and transparency.
Some very general rules-
- Startup costs should be reasonable and realistic- This may vary based on the average customer sales and that could be a good gauge in many cases. For instance, if the average customer purchase is $20 and it’s not auto-ship, startup costs of $1000 would be crazy. However, if the average customer spends $100 on auto-ship, $500 or even $1000 startup is quite reasonable.
- Monthly website fees and/or annual fees are not a bad thing. Again, they should be reasonable.
- Many companies have zero startup or ongoing fees. Let that sink in….What’s easy to do is easy not to do. These companies have a constant need for endless recruitment. Very few people will actually commit to the business because they have nothing invested in it. Be cautious.
- Remember, this is a BUSINESS you are starting, not a JOB. If you are not willing to invest reasonably into a business then you are going down the wrong path considering MLMs. That said, MLMs can offer the best of everything for starting your own business. You are essentially getting a website, logistical plan, product, customer service, etc tied up with a nice bow and for a price much less (assuming its not a scam- they do exist, beware) than you would pay to start the same business on your own.
5.Are the products or services sold in need of frequent replenishment?
This one is huge! DO NOT- I repeat DO NOT join a company hoping to make long-term income selling a product that is a one-time buy or needed less than every 30-60 days.
What falls into this category? So many MLMs- kitchen supplies, makeup (for most people, especially since the pandemic), clothing, that one “romantic” company, jewelry, etc. You will be constantly searching for new customers and competition is fierce because your own teammates are doing the same. It will wear you down.
Not only should the product be consumable and need replacement at frequent intervals, but the company should have auto-shipments with customer incentives to use it. This will help you to ‘snowball’ your customer base. If you can create just 3-5 new customers each month on an auto-shipment, in a few months you will have plenty of customers. This is one of the ways to build passive income.
6. Are there any quotas or minimum personal purchases required, and if so, what happens if it’s missed?
It’s not necessarily bad if a company requires one or the other, but be cautious if they require both ongoing. Also, missing quotas or minimum purchases should not cause you to lose your spot in the organization.
Quotas are often set and require a minimum number of customers or sales dollars in a certain time-frame to remain active. This is not bad if it’s reasonable. In fact, it’s great if you are truly attempting to build a team and want dedicated people. It can be bad if the quotas frequently go up or are not realistic. Also, to be clear, I’m not talking about target quotas for promotions or bonuses, I’m talking about baseline ones for everyone.
Required personal purchases is something I personally dislike. I will not join a company that requires it as I feel it can take an MLM into the realm of a potential pyramid scheme, something I will avoid at all costs. Optional personal purchases, in lieu of quotas or otherwise, may be ok depending on the plan.
Also, if there are certain requirements in place, failure to meet should not force you down in the organization. It’s one thing to have your commissions for that month affected. It’s entirely another to lose a team you recruited. I currently have a prospect who once lost his entire downline after a 2-month break while he went through a divorce. He came back to NO TEAM, they were moved to his upline. How awful!
7. Does the company require or strongly suggest you do parties?
Oh the parties, I despise them. I feel so terrible for some of my friends. I have dozens of friends in MLMs, especially on social media. They are required to do parties either by quota or as a necessity to earn money. The problem is the companies are saturated, people like me are being invited to 5-7 every week, many times with the same company. I have personally reached a point where I decline all invites. I feel so bad about it, but I don’t have time or money for all the parties. Neither does my network!
The other bad thing about parties- having to constantly find someone to host it for you. It’s like recruiting, but somehow worse. You wind up using your network up quickly and can easily get stuck.
Find a company whose sales overwhelmingly come through methods other than parties. Caveat- a ‘launch party’ is perfectly acceptable. This is when you announce to your network your new business and what you’re doing. The problem with parties arises when they are frequent and necessary.
8. You said this was not an MLM, but it sounds like one?
OK, so this question might seem weird but I had to add it. Why? Because I DAILY see people in organizations that I personally know are MLMs posting on social media and claiming they ARE NOT an MLM! Yes! This is not only wrong, it’s flat out illegal! I see the majority of these posts coming from the same “shopping club”, where I have actually purchased products before and liked them. But I never will again due to the lying taking place on social media. I see many others skirting the question and not being forthright with it. If it hasn’t come out in the first wave of exchanges between you and the potential sponsor, they are not being transparent.
No, I don’t advertise ‘GREAT MLM OPPORTUNTY RIGHT HERE’ but I also don’t hide behind it. I’ve certainly never said ‘Great CBD opportunity, Not an MLM, PM me now!’
If your organization allows or encourages you to recruit more sales people “under you” from which you earn some money at any point, you are in an MLM. Stop lying and saying you are not. If you still don’t think you are, let’s talk. You have been lied to by YOUR upline sponsor.
If you responded to one of these posts, and it sounds like an MLM, just do a quick google search. If it is, tell the individual never to contact you again. They are not someone you should do business with based on their lies alone.
9. What is the company culture like?
This is huge! Do you see reps from this company posting vague cick-bait posts and potentially illegal claims? Or do you see positive, honest posts? Were you approached by a ‘hunbot’, or by a professional business person? Meaning, did it start out with ‘hey hun…’ or ‘Hi Lisa! I wanted to reach out to you about…’ I personally am put off by the hunbots, hey babes, and the like. It sounds unprofessional to me and I don’t want to be affiliated with it. Call me crazy, but it’s not my style. If it’s ok with you, that’s your choice, I’m just citing my own example of the type of culture I would not want to be a part of. And no, I’m not talking about if someone reaches out to a friend, I’m referring to individuals who lower themselves by acting ‘sugary’ and insincere towards people they don’t know.
As far as culture, if it’s unclear after a conversation with your potential sponsor, there’s a few other ways to find out. Ask to see recorded videos of training, opportunity calls (or attend a live one), or speak to another company rep. A 3-way call with their upline sponsor is a good tell too. Don’t dismiss this if offered, you may learn a lot. A legitimate professional will be able to offer any or all of these options.
10. What’s the worst part about your business?
This can be the biggest eye opener. If the answer is “there’s nothing bad about this company or working here, I love it” then that should be a deal breaker. Even the best companies have opportunities for improvement. If someone tells you there is nothing, they are either lying or lack experience. Steer clear.
On the other hand, be open and non-judgmental if someone offers you an honest answer. The best part of this isn’t their answer, because assuming you can handle whatever ‘the worst thing’ is, you’ve just found yourself a really great person. Deciding to link-arms will ultimately depend on all these other answers, but at least you know you have someone honest if you do decide to move forward.
So there you have it! The top ten questions I suggest everyone ask before joining an MLM. There are certainly other things you may wish to see or know- but these will help you a lot in your research.
One thing I will add- even if the company gives you the ‘right answer’ to all, if its not a fit for you, it’s not a fit. Likewise, if there are a few answers you don’t like but they aren’t deal breakers for you, it may still be ok to proceed. My deal breaker list and yours may look different. Here are my dealbreakers- no placement suite, not ground-floor, required personal purchases, unrealistic start up costs, unfair commissions (or commissions that are so high I would be ripping off my customers), poor culture, or if I caught them in a lie.
Best of luck!
For those wondering– here is how I answer all these questions for my company and opportunity. If you would like to learn more, send me an email to firstname.lastname@example.org.
- Yes, this is ground floor. In network marketing, 22k-25k active in the salesforce is the max to be considered ground floor. At the time of this writing, we have about 14k advocates and about half of them are active. Due to the nature of our products, many people join for the kit and discounts but not to grow a business.
- Yes! Our products are exceptional. We sell NC grown organic farm-to-family CBD. It’s true, you can get CBD a lot of places now, even gas stations. Ours is different because its USDA certified organic, not just the CBD/hemp or farms, but everything in the bottle. This is important because most CBD on the market is grown overseas and used for its ability to clean pollution from air, soil and water. That same pollution is present in most CBD on the market. We also differ because we own our farms, are vertically integrated and don’t outsource anything, aside from 3rd party lab validation. This is crucial to quality control. We offer the ONLY USDA-certified organic water-soluble nano-CBD product on the market. We also have skincare, topicals, and more.
- The plan is transparent and my example answer in the article is what I earned at a former rank. However, we rolled out a new plan March 1st, 2021 and it’s even better. We can now earn 4-38% depending on where it’s sold and how far down is related to your current promotion level. They’ve made promotions easier to achieve and dropped minimum sales requirements, which have been $150/month OR $100 personal auto-ship. These no longer apply as of 3/1/21. They’ve also added product credit on top of all that plus extra level bonuses. It’s really a great plan! Yes, there are some CBD companies offering 50% commissions but let me ask you this- how would you feel if a customer asked you how much you’re making off the sale? If you would feel bad answering, or felt the need to apologize for it, something is wrong with the quality or the price.
- You can start with my company at one of three entry points depending on if and how much product you want- $49, $299, or $499. Its 9.99/month website fees and $29/year annual fee beginning 1 year after enrolling. That’s it! Less than the business licenses where I live. All tax write-offs.
- Yes! Most of my customers, I would say 99%, order on autoship. They don’t all maintain it, but most do. The same holds true for most of the sales on my team.
- No quotas or minimum purchases here beginning 3/1/21.
- No parties, unless you just enjoy them. We do encourage everyone to do a launch party or some sort of announcement, but it’s totally up to you.
- Not really applicable to this because I would NEVER tell someone we are not an MLM. We are an MLM, and I believe we are the best one!
- Amazing! We have people from all walks of life. Moms, dads, retirees, young singles, couples, you name it! We have people with former MLM experience, and people like me with zero. Most people start this as a side-hustle, but not everyone does. What I will say is that everyone who works hard and remains consistent meets with success! We are laid back and easy-going, but we will not settle when it comes to our quality control or open ourselves up to regulatory issues. I can share examples of this to anyone who asks.
- Haha! So seriously, the worst part about my company is the website! There, I said it! We have grown so fast our website/servers sometimes can’t keep up! During the holidays and certain flash sales, we even locked it up a few times. It’s totally functional, and I’ve only lost one sale from this (during said flash sale) but sometimes it irks me. The way I see it, if this is as bad as it gets, I can handle anything else.