You have probably heard of multi-level marketing also called MLM or network marketing. A multi-level marketing company is a company that recruits people to sell their products to their network including their friends and family. Network marketers typically buy inventory and then try to sell it. They can also recruit people underneath them and create a triangular shape in which they can collect commissions on the people underneath them who are also making sales.
Casey Bond is a certified personal finance counselor and a lifestyle reporter for Huff Post covering money, home, and living. Her work has also appeared on Business Insider, Yahoo! Finance, MSN, The Motley Fool, U.S. News & World Report, Forbes, TheStreet, and more. Casey has been reporting on MLM's for the past year.
The big question many people wonder is if multi-level marketing is a great business opportunity or an opportunity to lose thousands. On today's episode, Casey shares her expertise to help you make the decision that is right for you and help you beware of possible red flags.
Show Notes:
- [01:13] - A multi-level marketing company is a company that recruits people to sell their products to their friends and family and their network. It is also called network marketing or direct selling.
- [01:29] - They typically buy inventory and then try to sell it. They can also recruit people underneath them and create a triangular shape in which they can collect commissions on the people underneath them who are also making sales.
- [02:14] - You will find a wide range of products offered including everything from kitchen knives to insurance products.
- [02:23] - Most multi-level marketing companies sell products that are traditionally marketed towards women.
- [04:06] - These days the gig economy is huge. One-third of adults are involved in the gig economy somehow.
- [05:02] - It is often presented as a way to make a ton of money in your spare time, and be able to win vacations, cars, and extra products. That is usually the case for a small percentage of people involved in MLM's who usually got in very early and built a huge downline.
- [05:41] - The key for being successful in an MLM is not necessarily making a lot of sales, but instead recruiting a lot of people underneath you.
- [06:37] - A big red flag is having to buy your inventory upfront.
- [08:10] - Another big red flag is when the initial details of this opportunity are vague or coming from someone you don't know very well.
- [09:40] - MLM's really play into the emotional side of people who would really like to have something of their own and who would really like to become more financially independent.
- [10:39] - The FTC watches and keeps an eye on the MLM industry.
- [12:14] - Illegal pyramids schemes do operate legally until they are caught.
- [12:50] - The Direct Selling Association oversees all MLM and direct selling companies.
- [13:48] - Casey is very hesitant to recommend multi-level marketing to anyone because it is so easy to get in a hole with debt or overspending when there are so many other ways to make extra income.
- [14:28] - It's best to go out and create something for yourself instead of relying on an MLM.
- [14:52] - The FTC does have an option on their website to report companies that are operating questionably.
- [15:46] - Working for an MLM can put strains on relationships and friendships.
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