When it comes to business, Americans love two things: “get-rich-quick” scenarios and a good sales pitch. To the delight of many, Multi-Level Marketing (MLM) fulfills both desires. The MLM concept is a popular one, recruiting consultants to sell everything from skincare products to kitchen supplies. Consultants sell products in order to earn a percentage of the profits, building their business by recruiting new members known as “downlines” to join the sales team. Primary consultants earn a percentage of their downlines’ revenues as well. Whether or not you’ve participated in an MLM business, you’ve probably heard of this particular method of marketing and a mixture of success and failure stories. If you’re considering a future in sales, read on to learn the pros and cons of MLM. What you discover will help you make an informed career decision.
- Pro: The product name is popular. “These products sell themselves” is true in many cases. Selling a popularbrand is easy with the right following. If you have a large network of friends, colleagues, and acquaintances, the MLM business model may work well for you.
- Con: Limited income. Don’t expect the profits to roll in quickly with MLM. Consultants’ earnings are based on a commission of continued sales and team expansion. Many MLMs also require consultants to purchase a starter kit of products when they sign up. Initial fees can range from several hundred to several thousand dollars, reducing your initial income. Consider the following example:
Stephanie recently became a consultant for a popular skincare line. She earns 20 percent of her sales profits and 10 percent of her downlines’ revenues. In her first month, she sells $450 in products and her team earns $650, providing Stephanie with a total income of $155. Stephanie invested $499 in her consultant starter kit, bringing her first month’s revenue to -$344.
After 22 hours of effort, Stephanie’s payoff is meager at best. Ignoring the cost of her starter kit, Stephanie’s earnings break down to just $7.04 an hour, below the national minimum wage. She must also earn another $344 before recouping the cost of her initial “investment.” Unless you are able to bring in thousands of dollars in sales every month, don’t bank on big earnings with MLM. If savings is your goal, find a part-time telecommuting job that provides a decent hourly wage.
- Pro: Learning marketing and communication skills. A shy salesperson is sure to benefit from the MLM model. Direct marketing forces consultants to hone their communication skills and express themselves. If you are trying to become more assertive, joining an MLM business may help.
- Con: A slow rise to the top. Your career isn’t likely to skyrocket within the MLM business model. Promotions are usually based on sales alone rather than hours worked or skills acquired. What’s worse, rewards are bound to be small. In Stephanie’s case, advancing to Level II Executive may sound prestigious, but will only result in a 5 percent bump in commission. If you want to build a career based on the full weight of your qualifications, it’s time to consider another business model.
The bottom line: If earning money was easy, everyone would be rich. Building a profitable career requires skill, time management, a good employer, and a little luck. Multi-level marketing may offer big rewards to a few, but many are left disappointed. Research your MLM business carefully before signing on.