You can't get very far down your Facebook friends list without landing on someone who is a part of a multi-level marketing (MLM) company. Essential oils, leggings, makeup, and "wellness" regimens are just a sampling of what people are peddling. The basic premise of an MLM is a team of distributors selling a product for a company, rather than the company selling in it a store. The distributors make money in a couple of different ways: by selling their inventory, and by recruiting other distributors to join their team. The more people you have on your team, the more money you can make.
It can seem like a really great business opportunity! We've all heard the success stories, of moms just like us who've made big bucks with their businesses. They make it sound so simple, right? Well, if you're considering joining an MLM as a way to earn some extra cash, or are hoping to be able to leave your office job and support your family, there are definitely some things you'll want to consider.
Make sure you've researched the product, and are prepared to stand behind it 100%.
Sure, leggings and candles are pretty straightforward. But if you're thinking of selling something like a wellness regimen that makes sweeping claims about its ability to help people lose weight, cure illness, or something of the like, you need to research the product very, very carefully. Verify that there is solid research to back up the claims. If you don't believe in a product, you're going to have a very hard time selling it to other people.
Research the market: how many people in your own circle are selling the same thing?
When Lularoe hit the market, EVERYBODY got on board. You very likely knew 10 people who were selling leggings and dresses, right? Well, all those people are dipping into the same customer pool, and over-saturation happens very quickly. If you've found a product you love and believe in, ask the people in your circle if they've heard of it, or are interested in it. Then ask them to ask THEIR circles. You don't want to be just one more person in a sea of people selling the same exact product.
Figure out how you'll make your money!
Generally speaking, if you work in direct sales, then you should be making most of your money from selling. For every product you sell, you'll get a portion of the proceeds. But, if the MLM is set up so that you make the majority of your money by recruiting other distributors, that's a huge red flag. The FTC calls that a pyramid scheme, and not only are they illegal, but the vast majority of the people involved end up losing money.
Find out what your upfront cost would be, and get the return policy in writing.
Some MLMs require very little start-up cash from a new distributor. They may have to purchase their own "starter kit", but don't have to actually carry inventory, and can fulfill orders by buying direct from the manufacturer. However, several require a significant financial investment before you can make a single dollar. If you're in a financial bind and are hoping that an MLM will be the answer to your money problems, you very likely aren't in a position to shell out thousands and thousands of dollars to purchase and carry your own inventory. It's incredibly risky, and it doesn't pay off for a lot of people.
Additionally, if you do join an MLM that requires a major financial investment to purchase inventory, make sure you full understand the return policy and have it in writing. Many MLMs will allow distributors to return unsold product for a partial or full refund. But as we saw with the Lularoe business a few months ago, return policies can change suddenly, leaving you out thousands of dollars for inventory you can't sell.
Multi-level marketing companies aren't for everyone, and there are a lot of bad apples that tend to spoil the whole bunch. But, if you have the time and energy to devote to running a full-time business (and have a knack for closing the deal), you could very well make some good money in an MLM. Just make sure you know exactly what you're getting into before you start down that road.
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