Multi-Level Marketing, What You Need to Know
Multi-level marketing (MLM) is a concept which has been around for a few decades now as a work from home business concept. The two previous posts deal with companies which fall into this category. The whole idea behind a work from home business based on the MLM concept is to get other people involved below you in the business. The more people you have working under you, or buying from you, obviously the more money you are going to make. So, if one can make such good money by getting a lot of people involved in the same business, what’s the problem?
Detractors of MLMs as valid work from home business opportunities essentially list four problem areas.
Unless you get in on or near the ground level of an MLM, it is likely that you are going to be up against the problem of market saturation. If a product is truly new and innovative there is generally a market for it. However, no matter how good the market is, it can only sustain so many businesses of a given type, regardless of whether they are work from home enterprises or of the more traditional type.
You don’t see a McDonald’s on every block. There is a good reason for that. They would go broke. The market might sustain a McDonald’s every mile or so in a dense urban area. However, fifty or sixty miles apart may be as close as profitable in a rural setting.
The same concept applies to MLMs. You can only have so many people selling a given product in a certain area and have anyone make any money. So it is a good idea if you are looking into establishing an MLM as a work from home business that you search out something that is indeed new and innovative that has not yet saturated the market.
- Pyramid type of structure
MLM detractors are quick to point out the pyramid like structure they are based on. In case you didn’t know, pyramid structures per se in business are deemed to be illegal. That being because only the person at the top of a pyramid really makes any money. However, as the courts rules regarding Amway in 1979, if there is a reasonable expectation that a new person entering into the existing structure can in fact make a profit, then it is not a true pyramid. Since there are enough charismatic people out there who are willing to push an MLM zealously, they can actually make a profit. Thus, MLMs are not considered to be pyramids.
If they are not pyramids then they are legal aren’t they? Yes they are. However, the question then becomes are they moral. Otherwise can you really justify going out and recruiting other people to sell under you knowing that the expectation for making a profit is limited to a very small percentage of the population joining the structure?
Are you willing to alienate friends by recruiting them into an MLM? The fact is that MLMs are a perfect way to ruin good relationships with others. While you may in fact make a killing in a specific MLM many of your friends whom you’ve recruited probably will not. So, is it worth it? Think about the four aforementioned considerations before investing in an MLM.