My take on Multi-Level-Marketing (MLM)

A reader of Nadlique’s Blog, Armandd, has asked for my perspective on Multi-Level-Marketing (MLM). I was supposed to do this write-up a couple of day ago. Sorry for the delay.

This entry might cop me some flaks from the Multi-Level-Marketing (MLM) hardcores. So, allow me to say that these are just my own personal opinions. Thus, it could be wrong. Anyhow, do share any ideas or comments through the comments section. Let’s have a constructive discussion.

Ok, let’s get down to the nitty-gritty details.

MY ARGUMENTS

So, what does Nadlique think about Multi-Level-Marketing (MLM)? Read on…

MLM is pretty similar to the pyramid scheme, except that you also sell products. However, it is not the same as Ponzi schemes or other illegals pyramid schemes in a sense that a majority of profits are made from sales of products. When I say sales of products, I’m also referring to earning money through sales made by downlines.

But whatever it is, you still work under the pyramid models.

Also, in the MLM industry, you need to work bloody damn hard to actually succeed (granted, you need to work hard as well in other industries!). So, don’t be blinded by promises of easy money or overnight success.

Okay, to me, when it comes to MLM, you can only succeed if you’re the pioneer or… among the pioneers (i.e. you’re at the apex of the pyramid).

When it comes to any pyramid-like business models however, there is one major problem. There’ll be a point in time when the pyramid base is so wide that it’ll be very very hard (to the extent of impossibility), to find new members to join. That means, there’ll be a point in time when a particular MLM business will reach a plateau (flat land). In other words, little to no expansion.

Yes, in the MLM industry, money can be made. In fact, TRUCKLOADS of money can be made. Just that, when you’re right at the bottom, i.e. you’re at the base of the pyramid, things tend to be much harder.

It’s like this you see. Imagine a place where there are only 100,000 people. Say, half of that are interested in MLM and products of MLM. So, that’s 50,000 right?

Assume that you’re in the MLM business yourself and you’re the first one to join. You then recruited another 2 of your mates to be as your downlines. These two found another two for each of them, to be as their downlines. Now, you have 7 fellas in the business. Each of the 4 then found 2 downlines of their own. Now, there are 13 fellas. Soon, it will vastly multiply, further closing to the 50,000 mark. Now, if you happen to be at the bottom, who else are you going to find to be your downlines?

See the diagram below

Yes, you can just maintain only on selling the products instead of finding downlines but remember, others from your pyramid level will also be doing the same thing. You’ll be competing against each other. Not to mention, out of the remaining 50,000 (minus the ones already in the MLM business) in the place you’re staying, how many are actually interested in the products you’re selling. Do you reckon you can replace your income only through selling?

Granted, it might take a while before these problems actually surface, but it will happen sooner or later. And you do not want to be at the bottom of the pyramid.

Of course, one way to encounter this problem is that after one MLM company’s membership base has become too big, change over to another company, i.e. start fresh. That’s why you can read about people in the MLM industry trying their luck in a number of different companies before actually settling with one and hitting the jackpot!

It is also wise to remember that out there, not all MLM companies are legit. Due diligence is necessary to determine the integrity of the company.

I actually know of somebody who is in the MLM business. She made truckloads of money through MLM but after a while, she said that it is not challenging anymore. No new members to be recruited. No more growth, she says. I think this was after 5 years plus.

She now works as a motivational speaker in the MLM industry (seems like more money can be made there!).

So, can money be made from MLM? The answer to that question is… MOST DEFINITELY YES! I’ve read and heard stories of so many folks becoming millionaires through MLM.

Just remember that in the business world or the financial markets, hard work is needed and there are no guarantees of success.

Remember also of the adage of “high risk, high potential returns. Low risk, low potential returns.”

CONCLUSION

Knowing where you actually are within the pyramid structure and join a reputable MLM company is also a help.

In a nutshell, to make lorries of dough in MLM, you need to either be amongst the pioneers, be a motivational coach in the MLM industry, or….. OWN A MLM COMPANY YOURSELF!

Personally, would I be in a MLM business? Honestly, I haven’t actually put much thought into it. As of now, I don’t have any intention to do so but who knows, in the future, I might actually venture into MLM.

P.S. Pardon me if I used any MLM jargons wrongly.

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Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.

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About nadlique

This blog is about the journey of a 28-year-old Malaysian towards financial freedom. This blog was started back when the blogger was 21 years old. However, his journey towards financial freedom had begun way before that. Materials such as investing, business, entrepreneurship, equities, and real estate are presented. The author also posts his thoughts and observations on life in general.

Comments

  1. Nadlique,

    I have a interesting video presentation about MLM business.

    This MLM biz is big in US, so much so in the US, a university offers it as a subject in itself.

    Do go to my blog and check up the article on “Brilliant Compensation Video”

    It is a little long, but I think they have it presented nicely.

    My blog address: http://www.jeanchai.wordpress.com

  2. armandd says:

    Thanks Nadlique! So far I’ve joined 3 MLM businesses, all of them returned ZERO profit. Your thoughts are the same as mine. You see, when people approach you to promote their MLM business, they only tell you all the sweet things & the ‘assumed’ profits you’re supposed to make. They NEVER mention anything about the risk involved. That is just wrong..

  3. Exactly armandd. I think it’s the same thing with our unit trust industry as well. A lot of unit trust agents (not all of them) care only about selling unit trusts. They tell you things like “ahhh, this fund will return you 70% within the next 3 years” but do not really emphasise on the sort of risks you are about to undertake. It’s just wrong to do that to those who haven’t got much financial knowledge. I guess, when it comes to money, ethics can go out the door. However, like I said, not all of them are like that. I’m sure there are plentiful who are honest and maintain a level of professionalism.

  4. Armandd,

    I have little knowledge on MLM and perhaps I can say I have never had a good impression on MLM. I always feel that the products are over-priced.

    But I do see a few have made it big. Like Nadlique
    said, all trade needs hardwork. But one good thing of some MLMs, they do provide you with passive income after years of hardwork. Unlike employment, once you retired, you just have to start depleting your years of saving.

    I think the main thing, be it you are in MLM or unit trust business, you have to look for a good and genuine products to offer to the public. The consumers are not fools.

  5. Hi… I’m Lemy.

    I joined several MLM business. i am not doing the business anymore.
    What i think about MLM…hhmmm…

    Well, i think MLM is good business as long as You like the business. MLM is totally different from Money Game (pyramid scheme as told)… When a MLM business has a support system that build your mental,success mind, leadership, good personality, well I think it’s a good MLM…

    Thanks…

  6. The biggest problem of MLM is you will never know when the product is saturated. MLM to me is just another pyramid scheme with products. The early you join the game, you have a better chance. But still, you need to work very hard.

    My father in law is doing MLM business and he is now a president. 🙂

  7. I agree with ChampDog, the big problem about MLM is market saturation. Once you’re at the bottom, you’re a goner.

    I don’t think it has got anything to do with liking the business or not, all that matters is to join early and work hard.

    True, after years of hardwork, you can pretty much kick back and relax, and enjoy the passive income from MLM. But what about when the market saturation problem surfaces?

    By the way, something puzzles me. The person I mentioned in my article. The one who left MLM to be as a motivational coach. If I’m not mistaken, in the MLM hierarchy, she was amongst the top. Diamond manager? Crown Manager? Can’t remember what is it called. I’m assuming, if you’re already that high, you can rest and reap the benefits of passive income. Why then did she exit? Why give up the passive income? Hmmm… Need to ask her one day.

  8. By the way ChampDog, good timing for your father in law. Hehe.

  9. Ya, you should ask her one day and share with us. It is always a money factor if I guess correctly.

  10. You know, it’s like investing my money in a business, and then earning RM10,000 per month of passive income from that business, and one day I say, nah, I’ll just dump the business and do something else.

    If it was me, I’d leave my MLM biz alone, still earning the RM10,000, and in addition to that, do the other things that I wanted to do.

  11. Ya, you have the point. Maybe it is not a passive income yet?

  12. But considering she was a crown/diamond manager, I’m sure she was enjoying passive income. Somebody told me she was earning a five figure income per month.

  13. Ya, that is possible. That is the reason to attract people to join too. 🙂

  14. Perhaps her type of MLM will only allow her to enjoy the passive income provided she meet a certain sales target or stock purchases.

    Whoever that wanted to join MLM, it is very important to understand the whole MLM structure of that particular company. I am sure it varies from one to another.

    Whereby for unit trust biz, we do have sales target to maintain, but is such a min sum that hardly anyone that is serious about the biz will not be able to meet it. Passive income, I can say, it is great! But again like all biz, only those that are committed and with great passion can make it.

  15. Hi Nadlique,

    Incidentally, I have just written a post on my blog about my personal views on Network Marketing and here i saw you article on similar topic!

    As the saying goes, there is no true “free lunch” in this world! Many people were deceived that MLM makes tonnes of money and they do not need to work hard any more. Quite the contrary, i agree with you that they still need to work hard, first to establish the foundation and then to nurture and to maintain, and this process can never stop!

    As such, it does not quite fit my definition of passive income, in which is the means to make income derived from a business that an individual is not actively involved. The term “residual income” is more fitting in this case.

  16. Hi Ps,

    I do have have friend from Singapore involves in a type MLM biz which provides passive income. This friend of mine will never go for any biz that do not provide him with Passive Income.

    I don’t have much info to share though since I am not quite into MLM biz. If you interested to find out more, perhaps I can let you have his contact.

    He is very successful in his biz.

  17. Hi Jean,

    Thanks for the feedback and recommendation. I am actually not looking to join any form of MLM biz at this stage, so thanks for the tip.

    I fully understood the power of network marketing, although the business model does not appeal to me at the moment.

  18. Hi PS Thoo!

    Been a while since I last heard from you! 🙂

    In my opinion, passive income in MLM is not really a sustainable passive income. That’s because of the fact that you rely on your downlines. If you lose your downlines, your whole passive income structure collapses. To maintain downlines means to continue working with those people. As such, the income can’t be categorised passive at all. It is a source of income nonetheless, just that, I don’t think it is passive. Just a thought.

    It is the same thing with my CFD/stock trading business. Income derived from my trading activities can’t be treated as passive due to the fact that if I stop trading, no money will come in. Yes, it is a source of income, just that, it is not a passive income.

  19. Multi level marketing says:

    Multi level marketing is a form of business practice that receives or has received a fair amount of bad press and to be honest in some cases justifiably so.

  20. hi there…yes MLM business might not work or works…it depends…and IT IS TOTALLY HARD at beginning …those who are not strong enough will lose and blame MLM instead of themself…THERE IS NO SUCH THING as market saturation …you can see Celcom.Maxis and Digi still produce new numbers phone everyday because human number isn’t static,everyday new babies are born and most of families exist in this world have more than 1 child .The only problem is to change people mindset.you might sell same thing with what other companies offer..the product isn’t that matter…but the point is how you promote the product… .I’m not crown or any kind of manager….I have experienced failed in Luxor(MLM) before but it doesnt make me to stereotype MLM won’t works. i just starting SCOREA business around two weeks and getting based on what i have been told. if you want to have long discussion about BUSINESS PRINCIPE (NO, i dont promote anything!) , please do contact me radzi UTP – 013-4372508

    • Hi radzi,

      Indeed, the concept of MLM has its merits. I did write about some of the advantages of MLM. Read it here>> http://www.nadlique.com/2009/05/07/is-multi-level-marketing-mlm-all-that-bad/ .

      Okay, for argument’s sake, I don’t think it is fair to be comparing phone numbers and some of the MLM products. My reason is this. A communication network is a necessity in this day of age. Population will keep on growing and the market for better communication channels will be needed. However, for some MLM products like ‘Jeli Gamat’ & other types of ‘Pil Kesihatan’, that’s not a necessity. An individual can live without those things. Just because my family is expanding, it doesn’t mean I need more ‘water filters’ or more ‘jeli gamat’ right? And it’ll take years before my kids will be of age to consume those things anyway. At the same time, MLM participants need to maintain their periodical stock levels.

      Of course, talking about market saturation, it’ll be a long long time before the company matures to that point, but for how long do you reckon one can go on before hitting a rut while promoting some ‘Produk Kesihatan’?

      I know I’m generalising here a little bit but you get the picture.

      But for some products like unit trust and insurance, then I do believe it is different. MLM may work in this industry. While an individual don’t need a few ‘water filters’ or many ‘produk kesihatan’ in his/her house, an individual can never have too much of investments right?

      Whatever it is, yes, I do agree that one can always be successful in the MLM industry. It requires an immense hard work that’s for sure. And also, take whatever I said with a pinch of salt. This is just my own personal views.

  21. yea…

    i just join scorea , elearning business and it is really works

  22. Products that are engaged in MLM… as of today…like Amway… are insanely over-priced. Such product-factors malign the otherwise ‘could-be’ nice concept like MLM sound bad… i don’t know what to say. I am not a great fan of MLM. (Oh and yeah… people who do that (MLM) are one leech-breed of a human… i wish they could employ some other way of marketing their product… they just make themselves appear abhorrent and repulsive.)

  23. i have tried selling different products from Multi Level Marketing and i can earn a decent amount of money from them.;~,

  24. i have tried selling different products from Multi Level Marketing and i can earn a decent amount of money from them.;~,

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