Hello and a very warm welcome to the main faqs about MLM companies. Covering the Worst MLM Companies To Join and 16 of your other questions solved.
MLM stands for multi-level marketing and has other names such as network marketing, direct selling and pyramid schemes.
Many people have very differing views about this type of company because of the controversial way that products can be sold.
This post is going to answer many of the questions people ask about MLMs.
This post may contain affiliate links. If you click a link and make a purchase I will receive a commission. The price you pay will not be affected.
Let’s dive right in.
What Is A MLM?
A multi-level marketing company is a business that has no retail shops and relies solely on people joining it and selling the products through parties held by the distributors, word of mouth and through online methods: Websites.
This type of business does not solely rely on selling the products, it also has a huge sponsor aspect.
Basically to advance through the company you have to recruit others to join.
How Does An MLM Work?
The best way to describe how an MLM works is to look at the business as a pyramid with you at the top of it.
As an example, I’m going to place myself at the top my name is Lisa.
Lisa is the main distributor and is at the top of the upline, everyone I or you recruit, and all that they recruit become the downline.
This is what I was saying in point 1 not everything is about selling the product!
Money and advancement in rank are most often made through gaining more distributors who then go on to sell the products.
on that note, I will also be covering how you make money!
What Should You Look For Before Joining A MLM Company?
Carrying out research before joining any company is an absolute must-do.
There are 5 things to look for before joining an MLM.
- Check that the company has been around for a minimum of 5 years.
- Ensure you are happy with the way you are paid and what you have to do to earn that money
- You can only sell a product that you really like and are of high quality. You should also use them before trying to sell them to others.
- The company needs to provide training.
- Make doubly sure that the company doesn’t think you should promote the products to your family and friends. That is the biggest way to fail!
How You Make Money From Joining An MLM?
This is a question that everyone needs an answer to before deciding to join.
Years ago when this type of company first started the distributor would hold a party for friends and family to attend Tupperware is a great example.
Now technology has taken over and MLM companies normally provide a replica website for you to use that has the products pre-loaded.
Your job is to drive traffic to the website as well as get new people to join your downline and sell the products yourself, there are criteria that you must meet every month to be eligible to get paid.
These are typically sales targets and a certain amount of new distributors.
Payments are made on a commission basis from every single person that joins under you and who sells the products as well as recruiting others.
If you can build a huge downline then you can make a lot of money, however, that is a big IF
To be honest These compensation plans are generally very complicated.
Having written a couple of reviews on different MLM companies I’m going to link to one with a video compensation plan so you can get a better idea.
Most people that join MLMs are led to believe that they will make a lot of money, however, 95% that join don’t make a full-time income or anything close to it.
Are MLMs Illegal?
A multilevel-marketing company is deemed to be legal as long as it follows certain rules.
As long as the company sells products or services and the majority (70%) is sold by its distributors to non-company members then the MLM is deemed to be classed as legal.
There is no actual way of knowing if the distributor is buying inventory and stashing it on their property!
What Is The Difference Between An MLM And A Pyramid Scheme?
Pyramid schemes are defined as scams by the FTC. They are illegal In Canada and the US.
A pyramid scheme concentrates on recruiting more people to join it as opposed to selling any products.
People often argue that MLMs are in fact pyramid schemes in disguise because you get paid more when you recruit more that makes sense because it is hoped your recruits start to sell.
For an MLM to not be deemed a pyramid scheme it has to be more focused on selling the services or products as opposed to recruiting new members.
Can You Sell MLM Products On Amazon Or Etsy?
People ask this question a lot about the ability to sell products on places like Amazon and Etsy.
Most MLM companies will not allow you to do this as you are supposed to sell products through direct selling and you could be breaking their terms and conditions.
People have had lawsuits levelled at them for not abiding by the MLM company’s rules.
Some Indian MLMs allow you to open a store on Etsy and sell the products.
Why Don’t MLMs Sell Brand Name Products?
MLMs don’t sell brand name products because they manufacture the products themselves and they are all from their own particular brand.
They are not going to help their competition out by selling their products for them.
Why Are MLM Products So Expensive?
This is a valid question to ask. Many MLM products are a lot more expensive than buying them from other sources.
One explanation is the company’s compensation plan requires them to have a certain amount of personal and/or group volume each month in order to qualify for commissions and bonuses on the volume in their organisation.
Another reason is that the products use far superior ingredients than the cheaper sourced item.
How Much Does It Cost To Join An MLM?
There is no set price to join an MLM they all set their own prices.
Let’s look at a few examples:
Travelling Vineyard is a wine MLM and it costs between $49 To $179 to buy a kit and you have to maintain a personal volume of $15.95 every month.
Perfectly Posh Is a company that sells beauty products and joining it costs between $35 to $105 for a kit + fees, taxes and shipping + a $10 annual fee.
Forever Living sells aloe vera products and you can buy from them without joining or if you wish to make it a business it costs £199.75 Pounds sterling.
Are You A Business Owner If You Join An MLM?
MLM companies have different titles for their distributors like ” independent Consultant” “Wellness advocate” and “Consultant” and these titles make some think they are business owners.
According to HuffPost, you are an ” Independent Contractor” not a business owner.
Can You Get Training From MLM Companies?
In a traditional sense, you don’t get any step by step training from MLM companies.
It works by attending seminars that help you to build up your business and this is all funded by you.
Some do provide marketing materials but it is mainly left up to you.
Many members struggle with this concept because they have to build a team and train them to build their own teams!
10 MLM Companys That Earn The Top Money
Here are the top 10 MLM companies that earn the most money.
Amway was founded in 1959 it sells nutrition, beauty, personal care and home products and has a top rank based on revenue of 8.50 billion USD in 2020.
Herbalife was founded in 1983 they sell meal replacement protein shakes, dietary supplements and skincare products and had a revenue of 5.80 billion USD in 2021.
Avon was founded in 1986 it sells makeup, toys, seasonal gifts, and a small selection of underwear and clothes in 2021 it made approximately 3.4 billion dollars.
4. Vorwerk. (This is the oldest MLM company)
Vorwerk has been around since 1883 it sells household appliances, beauty products, and vacuum cleaners revenue of 4.23 billion dollars.
Infinitus started in 1992 and sells Personal care products, Homemade household products, skincare and healthcare products the revenue is 4.5 billion us dollars.
Natura started in 1969 and sells Natura Cosmetics, The Body Shop, Aesop, and Avon. it has an estimated revenue of 3.66 Billion dollars
7. Mary Kay.
Coway started in 1989 its products range from air purifiers, water purifiers, and bidets its revenue is estimated to be 2.59 billion dollars.
9. Nu Skin.
Nu Skin has been around since 1984 it sells skincare products and dietary supplements the revenue for 2021 was 2.7 billion dollars.
10. Forever Living.
Forever living started up in 1978 it sells Aloe vera based products and has a revenue of 4 billion dollars in 2021 according to Wikipedia
What Are The Worst MLM Companies?
These are the top 6 worst MLM companies to join LuLaRoe, Rodan+Fields, Herbalife, Nerium, Monat, and the one I joined Jeunesse.
Not all MLM companies are good and there is one that has serious costs to get started.
LuLaRoe sells women’s apparel and it costs $6,000 to get started and you cannot choose what you receive either!
The problem with Rodan+Fields is with one of their products a Lash Boost eye serum that costs $150. They failed to reveal the side effects of a key ingredient.
A Class action suit has been filed against them.
Herbalife’s products are nutrition and they had to refund 200 million dollars as a settlement in 2016 with the FTC as well as restructuring the business.
Nerium is another MLM with a class action filed against it for operating as a pyramid scheme. They sell very expensive skincare products.
Monat is a company that sells hair care products and that also has a class-action suit filed for the product causing balding, itchiness, hair loss, and scalp irritation.
Jeunesse is continuing the trend of the class action lawsuit but in this case, the amount is a whopping 1 Billion Dollars!
This list could continue on for at least another 10 companies that include: Advocare, It Works, do Terra, Amway, Primerica, Younique, Le-Vel, Nu-Skin and Arbonne.
These companies are not liked because the majority of people who join them never make any money.
How Do MLM Companies Fail?
Any business can fail if it is not run correctly and MLMs are no different.
Let’s assume the products are very good that would mean growth can happen quickly and that can cause the 1st problem.
- An inability to run a large scale business model.
- Not making the right calculations inside the compensation plan for the number of people that will eventually join.
- A lack of training on selling the products.
- Paying distributors too high a percentage will mean the company doesn’t have enough left to sustain them through the following year.
- You have to have good communication skills and keep in touch with your team Upline/Downline etc.
- If the company operates internationally that can be a problem because the different countries have differing rules.
- Language can be an issue for some.
- The compensation plan can be unattractive as well as unsuitable
- Failing to market properly will cause the business to close.
How Do You Leave An MLM Company?
This can sometimes prove to be difficult to leave an MLM if you don’t have thick skin.
Step 1 is to visit their website and look for the buyback policy so you can get your money back for any products that you didn’t purchase through a sale.
Some companies don’t accept the products back in that case you can contact other distributors and see if they want any of it at a discounted cost.
Step 2 Again on the company website cancel your “Active Consultant” Status. (There will be instructions to follow)
Step 3 Speak to your downline and upline to explain that you are leaving the company.
Uplines lose money in this case and can try to persuade you to stay or be not very nice, if that happens block them!
Step 4 Does your contract say anything about an inactivity fee? If it does you will effectively have to pay to leave.
Do MLMs Sue Distributors?
This is not a joke!
There are terms and conditions about joining MLM companies and if you do not follow them then you can be sued.
New U Life is one such company that sued 2 of its distributors.
These are their T and C conditions:
MLM Companies Warned About Corona Virus Claims.
16 MLM companies received warning letters from the Federal Tade Commission regarding claims about Corona Virus.
Distributors were claiming on social media posts that the products they are selling can either treat or prevent Corona Virus.
There was no scientific evidence of these claims being true.
Other claims suggested that it could also help people to earn money when most were losing their jobs.
Do I Personally Recommend MLM Companies?
Sorry to be blunt No I don’t recommend this as a lucrative business model.
There have been many studies carried out on MLMs which is easy to do as most do publish their yearly figures.
What has been found is only a few of the thousands of members make any worthwhile money.
The diagram below is an income disclosure statement published by New U Life for 2021.
As you can see from the top line 98.7% of people remained as an associate and only earned $3.36 for the entire year!
That equates to just 0.28 cents a month.
And they also had to keep up a 140 PV over a rolling 5 week period to be eligible to be paid.
Based on these figures all of the associates are losing money.
Many end up in debt because of having to purchase a certain amount of products a month to be able to keep active.
I personally prefer to write blog posts and use affiliate marketing techniques to earn money.
My Final Thoughts
I get asked about MLM companies a lot because I was involved in a couple and that’s what really prompted me to write this post.
Having everything answered in one post will save many people a lot of time doing the research!
Have I answered your specific question?
If not leave it in the comments and I’ll be happy to get back to you.
Thanks for staying to the end.
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Lisa. CEO and founder of mistakesbloggersmake.com