When Scott was 19 and I was 20, we joined a legal pyramid scheme, otherwise known as a multilevel marketing company, or an MLM. You’ve probably heard of them – Amway, Herbalife, Market America. But if you’ve never had the pleasure of being approached about joining an MLM, let me break it down for you.
You typically pay a fee to join the company, under the person who convinced you this was a good idea, for the privilege of selling the company’s exclusive products at exorbitant prices. You make a small profit off of the product you sell, but the real money is from building your team.
Your team is made up of people that you, in turn, convince this is a good idea.
With traditional MLMs, you build wide. So let’s say, you are fantastic at convincing people that this is an ideal way to make money, and you get 5 people to join under you, you’ll typically have a 5 person wide team, who in turn, also have teams under them. This is collectively referred to as your downline. Some people are better at selling than others, so the teams will be uneven. They won’t tell you this when they are signing you up, but a lot of them will die off completely. Because this shit doesn’t fucking work.
You get paid a percentage of each dollar the team immediately below you sells, and in some MLMs, a smaller percentage for what their team members sell, and so on. Some MLMs limit how wide you can go. In some MLMs, high performing teams can break off, and you get a smaller percentage. There are a ton of different systems, and different pay structures. It can be unbelievably complicated, and I don’t know the ins and outs of most of them. So for the rest of this post, I’ll stick to the one we signed up for.
The MLM we joined had a binary system, which meant you only built 2 wide, but you had to recruit 2 people to even start getting paid on your downline sales. For real go getters, you could buy 3 spots (for a special reduced price, of course), 2 directly under your first one, and you still had to recruit 2 people to start getting paid on your downline, but when you got 4 people, you would be paid triple. TRIPLE! Who would pass that up? Not us, that’s for sure. We fell hook, line and sinker.
In addition to signing up for 3 spots, to prove that we were serious, we purchased the biggest product package that they sold (because in order to reach a certain level within the company, you have to buy a certain amount of product). It contained sample sizes of their most popular products (and even though they were samples, you were still supposed to sell them, because “no one values anything they get for free”), pamphlets for products and the business (because you had to sell both to earn any real money), and some training tapes and booklets. We also signed up for the phone service they provided to make sure we didn’t miss out on any of the important messages the millionaires from up on high were relaying down to us.
It cost us over $700 all told. Just to sign up for this MLM.
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Once we were in, we had to sell a certain amount of product quarterly, to prove that we were actually selling product, and not just in it to earn commissions on our downstream (because that would be illegal). I mostly did that by selling vitamins, at cost, to my mom. I sold a product here and there and when they came out with a make-up line, I had a single booking for a party, for which, one of the attendants canceled her order 3 days later in an angry voicemail message because it apparently took me too long to get her product to her (which I had to order and then deliver to her).
But the real cost of this business was in meetings. There were weekly local meetings (to which you were supposed to bring prospects so they could see how the whole thing worked. I don’t remember the cost, but I think it was $10 per person), quarterly regional meetings ($50 per person. At these meetings they would pressure you into purchasing not only your tickets for the next regional event, but also tickets for prospect. And if you didn’t, you weren’t committed. I can’t tell you how much money I wasted on tickets that no one used.), and yearly national events (again, I can’t remember the exact price but I want to say it was $150 per person for a 3 day event, plus travel and lodging). Altogether, that’s $870 (not including the travel and hotel costs) a year. Per person.
I found out years after we had left this shit show behind that the meetings were a great source of income for our upstream. Because once you became a trainer, you got paid to have the meetings.
And at every meeting the same bullshit was fed to you by different people. People with bigger and bigger incomes would repeat the same mantras: 80/20 rule; Fill the funnel; J.O.B. = Just Over Broke; The definition of insanity is to do the same thing and expect a different result; Work only 20 hours a week; If you can’t make money doing this, don’t start a traditional business, because this is much easier. In hindsight, it was rather cultish.
We were in this MLM for a few years before we finally decided we were wasting our money and time. I am an introvert, so it was never right for me, but Scott is one of the most extroverted people I know and even he couldn’t sell this shit (and he has also managed to start and run several successful businesses, despite their warnings). Unfortunately, our first experience didn’t burn us enough to keep us from joining another one a couple years later, that was radically different, and yet all too much the same. We were in that one for a whopping 6 months before we wised up.
I found out a couple years ago that 99% of people in MLMs lose money. The entire time I was involved in the MLM, I felt like a failure for not being able to do it. Turns out, I was just average.
So, please, save your time, money, and energy. And stay the fuck away from MLMs.