I have always wondered how an “at home business” actually works. I think the vast majority of us have all wondered this at one point or another. We’ve all heard the term MLM (Multi-Level Marketing) and I think we generally assume it to be some type of get rich quick scheme where many fail and one or two people succeed.

A lot of people are understandably skeptical that you can sell drinks, powders, food, clothes or cosmetics from your home and somehow end up with a free car. Yes, I am one of those skeptics because it’s one of those things that sound way too good to be true. I know I’m not the only one who feels this way so I thought I’d share my findings.

How Do MLMs Make Money?

Many of the at-home businesses, or MLM’s, are cash rich and successful, even though the majority of people selling their products and services are neither. The MLM sales model is essentially a sales model focused heavily on marketing and sales strategy in which those doing the sales are compensated and ultimately motivated by the sales they create for customers but also for those they “recruit” to become a salesperson as well. Those recruited individuals fall into a “downline” underneath that salesperson, creating a hierarchy of salesmen and women, all be compensated for selling. The more they sell, the more they make. So, the more people they can recruit to sell underneath them, the more they stand to make. Here is where a lot of the criticism for this industry comes into play. Skeptics believe that these salespeople, or “distributors” as they are more widely known, are primarily compensated for recruiting people to sell things. The truth is, the more they can recruit, the larger that sales force becomes, hypothetically increasing sales profits. These distributors, independent consultants or executive leaders as they are often called are urged to sell the MLM product to consumers through referrals or various forms of marketing.

Are MLMs Legit?

Technically speaking, there is nothing illegal about this form of business. The negative light on the MLM industry comes into play primarily due to the numerous lawsuits the public hears about each year. Undoubtedly, Herbalife has been in the press several times in the last few years for lawsuits, FTC issues, SEC-related issues and investors calling for the fraud of this company to be exposed for what it is: a pyramid scheme.

Are All MLMs A Pyramid Scheme?

The negative yet valid claims about Herbalife have cast a long and dark shadow over the entire MLM industry, affecting many good companies as well as bad. Think of companies like Avon, LulaRoe, Tupperware, Kyani, and even Mary Kay. These are MLM but you focus on their products first and foremost.

There is a fine line that divides the organization of an MLM and a pyramid scheme. While the shape of the overall sales hierarchy is the same, the difference, again, lies in how those sales individuals are compensated. Additionally, some companies have come under fire for encouraging their salespeople to only use their own products, to buy those products in excess, and charging the new sales professional a high premium to start their sales business. Others have required much of their salespeople without adequately compensating them but leading them along to continue purchasing with the hope and expectation they will one day earn that big check or free car if they just buy more product for themselves. These practices are all highly illegal.

How To Tell If An MLM Is Legit

Legit MLMs are focused on providing all the assistance they can to their network of independent sales consultants. They will regularly instruct their independent consultants to go out and sell their product honestly to consumers. They address the issues of false claims made by their independent consultants and correct the behavior. Many of the salespeople for legit MLM’s are not simply there to make a buck and move on. They genuinely care about the product or service they are selling and they even regularly use or consume the product in order to benefit from all of the features the products pose.

Would I Do Well In An MLM?

Similar to almost any other job, the success you stand to enjoy is based almost exclusively on the amount of hard work, determination and effort you are willing to put into selling and building a business. There is no get rich scheme or lazy way to succeed in the MLM industry. While it may not be for everyone, one thing is certain – it is not illegal, nor a negative job to have, especially when considering some of the perks such as working at home with family, being rewarded with free travel and maybe a free car.

If you are interested in joining an MLM, do some diligent research into the many choices of MLM companies available to join as well as their detailed compensation plan.

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