What is the real MLM business?

MLM Multilevel Network Marketing
Questions and Answers
1. What is multi-level marketing?
2. Is MLM a scam, legal, moral, ethical, etc?
3. Is recruiting wrong versus just selling product?
4. How do pyramids differ from legitimate MLM?
5. Are MLM and Network Marketing the same?
6. How can you succeed in MLM?
7. How can you identify a good MLM?
8. Can you really "Earn $50,000 in 90 days?"
9. Can you recruit or advertise products on the Net?
10. What about compensation plans? (matrix, etc.)
11. What MLMs operate in what countries?
What is multi-level marketing?
Multi-level marketing, also known as MLM or Network Marketing, is an alternative channel for a manufacturer to deliver its products to market.
(Other channels include retail storefronts, catalog shopping, and door-to-door sales.) Depending on the particular company, the MLM channel
may provide both word-of-mouth advertising and distribution. Why would a company choose the MLM route to product distribution? There are
several good reasons:
• Low overhead. There are virtually no up-front advertising costs. Unlike a typical retail company, the MLM company doesn't have to spend
massive amounts of money to "pull" customers in. Instead, it pays distributors to "push" the product out into the marketplace. In addition, the
company only has to pay the distributors for *results* - that is, a percentage of products actually sold. Ordinarily an MLM company will use the
money that *would* have gone into advertising to pay its distributors. (Consider a major manufacturer of consumer products. With sales of say
$25 billion with an advertising budget of $10 billion, they would spend 40% of their sales on ads. MLM companies typically pay 40-80% of their
sales volume to their distributors.)
• Low distribution overhead. Typical retail companies generally use a series of national, regional, state, and local warehousers to distribute
their product to the retail stores. Each of these intermediaries wants to make a living, and marks up the cost of the product. Using the
traditional major manufacturer, typically, a tube of toothpaste that sells for $2-$3 in a store costs the manufacturer roughly 13 cents to
manufacture. If it sold for $2, 40% (80 cents) would go to advertising, leaving $2.00 - $0.80 - $0.13 = $1.07 for distribution costs and the
company's profit.

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real hard-working go-getter, YOU can't do all of it. You can't enroll the 90,000+ people in this group by yourself. Each person has to find 5 of
his own - and the sad truth is, most people are not that ambitious. It's hard to find the ones that will work.
So it's almost unheard-of for someone to actually build an idealized group like this. Some "legs" in the downline will build faster than others,
and some will grow slower. If you don't work hard yourself, you might never start ANY legs that go anywhere.
But that's the concept: a whole lot of people doing a little bit each, and you getting a small reward on each one. If you have the initiative and
work ethic to build that group, you can make a very nice income in MLM - maybe even get rich.
But MLM **IS NOT** a get-rich-quick deal. It DOES take a lot of work, and most people won't put in the work it takes. The large majority of
people will never get rich; quite a few hardly make a dime. But the beauty of it is, as long as you pick a good company with a good product or
service, the size of your success is up to YOU.
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Is MLM a scam, legal, moral, ethical, etc?
The short answer is: maybe.
This is the cause of 99% of the flamefests, arguments, and general disagreements about MLM. Many people contend MLM is immoral or
unethical. Many Attorneys General (who ought to know what they're talking about) say a properly-run MLM is perfectly legitimate and ethical.
Who's right?
The truth is, MLM is not inherently good or evil any more than capitalism is good or evil. Both can be done ethically, and both can be done
unethically. It depends on how a particular company is designed and managed.
Since the MLM industry is very young (about 40 years old), the law is still in flux. There are admittedly many MLM companies that are nothing
more than scams, get-rich deals for the owners and their cronies, glorified chain letters, etc. Some of them even manage to skirt around the
legal issues and avoid prosecution. There are other companies that have legitimate products, and may have been in business for many years,
but which are run in such a way that many people get burned - elderly ladies investing their retirement funds to buy a garage full of products,
and so on. Most people would agree these companies, or at least the distributors that do the questionable practices, are not very ethical.
On the other hand, there ARE companies that are run legitimately, legally, and ethically. They produce good products that are valued by

But many anti-MLM folks think that the only purpose of ANY MLM is to enroll new people, instead of selling a product. What they don't
understand is that ENROLLING NEW PEOPLE *IS* HOW YOU SELL THE PRODUCT IN MLM.
If you focus only on selling, it isn't MLM - it's plain old sales. Nothing wrong with that; it's just not MLM.
MLM works with a DIFFERENT PROCESS than typical sales. Rather than finding a few people who sell a ton, you find a bunch of people who
sell a little. (And, since each sells so little, self-consumption can account for a significant portion of those sales.) Enrolling new people and
building downlines is how you find the people who each do the small amount of sales. (Note: EACH do a small amount of sales. NOT just the
"suckers on the bottom." In any legitimately-run MLM, ALL people, from top to bottom, contribute to the sales effort.) Product still gets moved -
that's how bonuses get paid in a legitimate MLM - it's just done in a different manner than in traditional sales or retail.
MLM works differently than traditional methods, but just because it's different doesn't make it bad. It's just DIFFERENT. Just like franchising
was different from traditional retailing, and was considered to be a scam for many years. But when properly implemented, franchising is not a
scam; it's a very effective way to do business. Similarly, when properly implemented, MLM is different from traditional retailing AND
franchising, but can be a very effective way to do business.
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Is recruiting wrong versus just selling product?
This is a common opinion with MLM detractors. In one sense they are right; if the only driving force behind an MLM is to bring in new people,
for example if new-member fees are the only thing that pays bonuses, then that's definitely not OK.
But many anti-MLM folks think that the only purpose of ANY MLM is to enroll new people, instead of selling a product. What they don't
understand is that ENROLLING NEW PEOPLE *IS* HOW YOU SELL THE PRODUCT IN MLM.
If you focus only on selling, it isn't MLM - it's plain old sales. Nothing wrong with that; it's just not MLM.
MLM works with a DIFFERENT PROCESS than typical sales. Rather than finding a few people who sell a ton, you find a bunch of people who
sell a little. (And, since each sells so little, self-consumption can account for a significant portion of those sales.) Enrolling new people and
building downlines is how you find the people who each do the small amount of sales. (Note: EACH do a small amount of sales. NOT just the
"suckers on the bottom." In any legitimately-run MLM, ALL people, from top to bottom, contribute to the sales effort.) Product still gets moved -
that's how bonuses get paid in a legitimate MLM - it's just done in a different manner than in traditional sales or retail.
MLM works differently than traditional methods, but just because it's different doesn't make it bad. It's just DIFFERENT. Just like franchising
was different from traditional retailing, and was considered to be a scam for many years. But when properly implemented, franchising is not a
scam; it's a very effective way to do business. Similarly, when properly implemented, MLM is different from traditional retailing AND
franchising, but can be a very effective way to do business.
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How do pyramids differ from legitimate MLM?

distributor does, AND go out and find a few people to work with, AND teach those new people. Until you have "taught your people to teach
their people to teach," you have not really duplicated yourself.
Keep plugging away. Unless you're incredibly good at this, it will take time to build a group. It takes time to find good people and teach them
what they need to know. Sometimes your best people will give up and drop out. Sometimes it can be very discouraging. Sometimes you may
be tempted to give up. (And if your company isn't working very well, maybe you should. But if the company's working well, and others are
succeeding, you need to take a look at what YOU'RE doing that isn't working. It may be that you wouldn't do any better in another company,
even if the grass looks greener, because you're doing the wrong things.)
It is a sad fact that a very small percentage of people who enroll in any particular MLM will succeed big. This is NOT, however, a fatal flaw of
MLM; it's a reflection of real life. 90%+ of small businesses fail within 1-5 years - and the owners lose a whole lot more than the few hundred
dollars an MLM person typically invests. 98%+ of corporate employees will never achieve executive levels. 95% of 65-year-old retirees in the
US (according to insurance & Social Security statistics) are dead or broke. The sad fact is, very few people succeed big in ANY endeavor.
Most people simply will not do what it takes to succeed.
MLM is no different in this regard.
However, many people get into an MLM with the idea that it's some kind of "easy road to riches." It's not. It takes work. It takes time and
dedication. But most people don't see that, either because their sponsor misled them with rosy predictions of instant wealth, or because they
chose to hear the easy story. People like this enroll and don't do anything, or give it a try but give up after a few months. This is where the vast
majority of "MLM failures" comes from.
The biggest problem with MLM is that it's "too easy" to get into it (usually no more than a few hundred dollars), so it's "too easy" to get out.
With only a few hundred bucks committed, it's easy for someone to say "Ah, heck, I talked to four people and none of them were interested.
This doesn't work! Guess I wasted $200." (And, often, "So MLM is a scam!")
You should approach your business as if it was a "real" business, one that you had invested your life savings into. If you had sunk $200,000
into your MLM business, would you let 4 "nos" stop you? Hell no!! You'd get back OUT there and KEEP working until you MADE it work,
because you had too darn much money in it to give up! Well, guess what? That's what makes MLM work too - that dedication to keep working
until you make it work.
If you work consistently, and effectively, and build your group faster than the faint-hearted people drop out, your group will slowly but steadily
build. And if you've taught your people the correct ideas of "work consistently, work effectively, and teach your people how to duplicate your
efforts," you should see a consistent rate of growth. It will probably take longer than you'd like (hey, that's the way life works!), but as long as
you keep working at it, your income will eventually build to the level you want.
The problem is, most people don't do this. Most people who get into MLM give it a half-hearted try, then give up the first time they get a "no"
and complain that "It doesn't work." Only the people who determine to put in the effort, and actually DO what it takes to succeed, will stick it

letter mailings). Unless the product is a REAL product that real people would buy even if they weren't in the "MLM," then it's a pyramid.
Never, never, EVER fall for mail-order "MLMs". Even if you happened to pick one that actually WAS a legitimate company, your sponsor is
likely not to be very helpful. He's focused on sending out thousands of direct-mail packets, not helping and supporting his downline. Look for a
sponsor who believes in working with people and helping THEM to reach THEIR goals.
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Can you recruit or advertise products on the Net?
Overt recruiting ads ("Entrepreneurs needed for international marketing company!!" and the like) or product ads ("Improve your life with XYZ
product!") are strongly discouraged, and often are flamed into oblivion. Do yourself a favor and don't do it.
Why? Consider what would happen if the Net community allowed it. There are already hundreds, maybe thousands, of MLM people on the
net. If each of them posted once, and picked up one or two recruits, and each of them posted once, and picked up one or two recruits, and...
You get the picture. The Net would soon be awash in MLM recruiting ads. (Note: the above was written in late 1993. Guess what? Since then,
thousands of people have ignored the rules of "netiquette" and blasted their ads all over the place. And alt.business.multi-level ,
misc.entrepreneurs, and many other groups that once carried lively and useful discussions have indeed become awash in MLM recruiting ads.
They are now absolutely unusable for any form of productive discussion. THAT'S why ads are discouraged.)
Similarly, people often post recruiting ads to inappropriate places like misc.entrepreneur. They say "Other business people post here looking
for partners, why can't I?" The difference is, looking for partners or investors in "traditional" businesses is a very infrequent event, and no one
minds the occasional post. But looking for new "partners" (distributors) is a CONSTANT activity for any active MLMer, and most folks don't
want to read constant MLM recruiting posts. Do us all a favor and DON'T DO IT.
Besides, the majority of folks in misc.entrepreneurs.moderated have EXPLICITLY stated that they DO NOT want MLM ads OR discussions
there. The moderator accepts limited MLM discussions, but ads are NEVER allowed. But alt.business.multi -level.moderated is a more
appropriate forum for MLM discussions. Even if you feel MLM is an entrepreneurial activity (and most would agree),
misc.entrepreneurs.moderated is not the appropriate place to discuss MLM. "Ren & Stimpy" is a cartoon, and so is "Tiny Toons," but the folks
in alt.tv.tiny-toon would NOT appreciate it if you posted constant R&S comments there. Your comments would belong in alt.tv.ren-n-stimpy,
where the readers would be much more interested and receptive. Please treat the folks in misc.entrepreneurs.moderated with the same
courtesy.
Remember that the Internet is **NOT** your private free classified ad section. There ARE places that explicitly allow ads, mostly on
CompuServe and AOL, and ads are fine there. But unless a newsgroup EXPLICITLY says ads are OK, you SHOULD NOT post ads there.
So, can you recruit over the net? Absolutely, as long as it is done tastefully and discreetly. If you see someone post something about a
problem that your product could help, there's nothing wrong with telling him about your product - preferably via email, not in news. Just make
sure to be up-front that you market the product, and he could get it from you if he wanted to. You can offer to tell him more if he's interested,

potential rewards. Most MLM fortunes have been made in breakaway plans. You can get paid hundreds of levels deep in a breakaway, unlike
the other (matrix and unilevel) plans. But you have to work to earn it.
That does NOT mean that breakaways are necessarily the best plans for your average Joe - because your average Joe **IS NOT** a "serious
hard-core worker!!" Many part-timer MLMers find breakaways to be too difficult for them.
Originally, companies made use of this "breakaway" design because it simplified their record-keeping and inventory problems. Without
computers, it would have been impossible to track hundreds of thousands of distributors, so the companies DIDN'T track all of them. The
"breakaway" levels were the only ones who worked directly with the company, and acted as distribution points to their downlines. Often they
were responsible for paying their downlines as well. Most companies have relieved the distributors of this overhead, but the breakaway
structure is still a popular design.
The "matrix" is a newer structure that came about since the advent of cheap and plentiful computers. A matrix plan has a fixed "shape" that
determines the size of a downline you can be paid on. For example, if your company uses a 5x7 matrix, you can have no more than 5 people
on your "frontline," and can be paid no more than 7 levels (people, not breakaway generations) deep. If you already have 5 people on your
frontline, any future people you enroll will have to be "placed" somewhere below those 5 frontline people. This is called "spillover."
At first glance you might think this means you can only have 5x7 or 35 people in your downline, but that's not true: each of the 5 people in
your frontline can have 5 people on *their* frontline, and so on. So a 5x7 matrix can actually hold as many as 5+5^2+5^3+5^4... or almost
100,000 people. In theory, anyway. In reality it is very rare for a 5x7 matrix to be more than 2-3% full. The restricted width quickly forces the
growth in active legs down and out of your matrix. "Spillover" is either a curse or a blessing, depending on how you look at it. Matrix
proponents say it's a great way to force people to help their downlines, since they'll have to place people below their downline distributors.
Spillover also tends to keep people active, because they don't want to lose out on the "free" downline spilling over from their upline. Matrix
detractors argue that spillover is a form of "MLM welfare" that rewards weak and non-performing distributors; if they're working, they already
have people below them, so you're more likely to place people in the "holes" under non-workers. Matrix plans also punish top performers,
since they have to place new recruits farther and farther down in their matrix. After a while they get so little benefit from those new recruits that
they lose much of their incentive to keep producing.
Many newer companies are using matrix plans. There are 5x7, 3x9, 2x12, 3x3, lots of different shapes. Study the plan carefully to understand
how it will work. Don't assume that a matrix will fill evenly; most often you will have an active "leg" that will grow out of the bottom of your
matrix long before other legs have filled in the rest of the matrix. But the simplicity of the matrix plans makes them very attractive to many
people. (A lot of people really like matrices, and are happy with the results they get with them. You decide what's right for you.)
Recently the "unilevel" plans have become very popular. These plans are similar to a matrix with no width restriction. So, for example, you
might get paid 6 or 8 levels down, like in a matrix, but you can have as many people on your frontline as you want. This has the great
advantage of being very simple to explain and to understand, and it doesn't have the growth restrictions that limit matrix plans. It loses the