MLM, or network marketing, has been around for decades. However, people still do not understand what it is and confuse this business with the Ponzi scheme. In this article, we will understand what MLM really is. Moreover, we will explain how to make money out of MLM companies.
What is MLM?
MLM stands for Multi-Level Marketing. It is a scheme for the distribution of products or services. It is based on attracting people who become distributors and themselves in the future can attract new customers and partners. The more people they involve in the multi-level structure under them, the higher their earnings become. The final income depends on the volume of sales and the number of people who have registered with the company through their referral links.
In this business, distributors look for clients mostly on their own: they call friends, organize master classes, or create groups on social networks. This is called direct selling. The company provides the distributor with only products, promotional materials, education, and training that help to competently offer products to customers.
Is it possible to make money in MLM Companies?
A networker can make money in MLM companies, …
- if he is one of the first people who entered the business (at the top of the network).
- if he has a good product.
- if he likes what he is doing.
- and if he has chosen the right company.
The Indicators of a Successful Network Business:
- The company must be registered officially. The licenses and all necessary documents must be obtained under the legislation of a particular country and available on their website.
- The network company must have its own high-quality real product, which can be bought at a bargain price only from its distributors.
- The turnover of goods in the network company must occur regardless of whether there is an influx of new customers or not.
- There must be a prospect of career growth, and earnings must depend on the volume of sales of products.
- A network structure that has been developed over the years can be transferred to heirs or sold as a share in the business.
Is MLM Legal?
MLM is a sales system that can be used in two ways. You can use it for legal business or you can use it to fraud people and cheat them.
It is perfectly legal to sell goods or services through network marketing as long as they are not defective or harmful. However, MLM becomes illegal when turns into a Ponzi scheme or a financial pyramid company.
The main difference between network marketing and a Ponzi scheme is that a network company is based on a real product that needs to be promoted and sold. In Ponzi schemes, unlike network businesses, the capital grows at the expense of investments of new participants which can be membership fees or starter packs. Such companies receive income while the number of investors grows. As soon as the influx of newcomers stops, the pyramid ceases to bring money and collapses.
How to distinguish a legal network company from scammers?
There are seven characteristics of the Ponzi scheme or Financial Pyramid companies that scam people:
1. Low Cost at a High Price:
Often financial pyramid companies sell cheap products at high prices, or the product itself is inexpensive, but only a representative of the company can buy it, and in order to become a representative, you need to make a large investment (entrance fee).
2. Lack of Products:
The product either does not exist or has no real market value. It is just a cover for a Ponzi scheme. They will say that this product is the future or that the market for these products is growing rapidly, so you need to invest and offer it to friends.
3. No Documents:
The Ponzi scheme companies work without the necessary permissions or official documentation. Moreover, they may present fake documents and fake addresses.
4. Promises of Quick Profits:
The company informs each potential investor that it has developed a unique scheme. The organizers talk about high income in a short time, but at the same time, they deliberately keep silent about the serious risks of losing all the money.
5. Contract Specifics:
It is usually compiled in such a way that in the event of the collapse of the company, the organizers have the right not to pay anything to the investors.
6. Postponed Sales:
Ponzi schemes may offer to buy goods now and receive them later.
7. No Profits without Referrals:
In some companies, you can make money in two ways. You can invest money in the company and get periodic profits and at the same time, you can get money from referrals. If you don’t invite people and build a team you will not be able to withdraw your profits.
Advantages of Network Marketing:
1. Obtaining passive income:
If you work long and effectively, then over time you can achieve a large network of partners that will bring you income regularly. you can make a respectful amount of money out of MLM Companies.
2. Networkers get paid for purchases that they recommend:
When you buy a good product, you tell your friends. They can also buy it on your recommendation. Usually, you get nothing for such advertising, but in MLM companies you get paid for it.
3. Personal growth:
In the process of working in MLM, you acquire useful skills like planning, personnel management, communication skills, and leadership qualities. This will be useful in other professions and areas of life.
4. Contacts around the world:
With the help of the Internet, you can have people from anywhere in the world on your team and build relationships with them.
5. Opportunity to start your own business:
Many people are interested in the idea of starting their own business. But they don’t know how to do it. Everything is easier in MLM. To start, you need minimal funds (but not always). There is a team working with you that is directly interested in your success.
6. Financial freedom:
With MLM you have a free schedule and you are the boss. You decide how long to work and what strategies to use.
7. Network business can be run from home:
You can work from anywhere and run your business wherever you are. You don’t need to wear suits and ties and go to an office.
8. Work can be automated:
A selling page or group on social networks works around the clock. You can set up a mailing list for beginners so that they regularly receive motivational letters. You can also record training webinars and send them to your prospects.
Disadvantages of Network Marketing:
1. Unstable income:
A beginner marketer will receive little. This can go on for a long time if the person does not develop sociability and leadership skills.
2. Responsibility for other people:
Network marketing assumes that every newcomer will need to be trained. You are personally responsible for the partner’s results. Many people are not ready to take responsibility.
3. You need to buy the company’s product:
Network companies prescribe specific conditions in their contracts. For example, a partner must, at his own expense, buy the company’s products every month. At the initial stage, expenses outweigh income.
4. Disgusting attitude towards MLM in society:
Many people identify network marketing as a scam. Therefore, it can be difficult for a beginner to find people who would like to become customers.
5. You have to look for clients on your own:
This is the main problem for the networker. Although the company teaches you, it is still your responsibility to find clients. The company doesn’t care whether you go to apartments, call people or advertise via the Internet. They give you a product and you have to sell it.
6. In the beginning, they pay little:
Often companies pay newcomers less. To make good money, you need to work hard, constantly build a structure, and acquire regular customers.
7. Networkers annoy a lot of people:
As a networker, you have to constantly offer goods to different people and often encounter negativity.
8. You can’t stop:
In the beginning, you need to work hard to build your team, and then you have to work even harder to maintain it.
The idea of MLM companies is when satisfied consumers recommend products to their friends. The purpose is to popularize products and increase the turnover and financial well-being of each distributor. The success of network marketing is based on the quality of products, the effectiveness of training, and the support of newcomers. You can make a lot of money of MLM companies if you understand the idea well.