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Is a multi-level-marketing scheme (MLM) a good way to make money? 

You’ll have likely seen the invites on Facebook and Instagram or might have been invited to the parties. Tupperware made them famous, but now multi-level-marketing (MLM) schemes are big business and seemingly everywhere. 

What is an MLM? 

There’s no easy way to describe what a multi-level-marketing business (MLM) is. People within MLMs may call it direct selling or network marketing. Typically an MLM will be a large organisation made up of hundreds of individuals selling merchandise and services such as beauty products, candles, cleaning products and books from home. 

An MLM can easily be identified by three things: 

  • You’ll have to buy a starter kit to join the MLM and become a seller. The kit will include some of the products you’ll sell, catalogues you can use to show products to potential customers and might include the cost of a personalised website.  

  • You’ll make money by getting other people to sign up to become sellers and purchase a starter kit. These are known as your ‘downline’ recruits. 

  • You’ll also earn a commission from sales. You usually also earn some money if your ‘downline’ recruits perform well. 

Often MLM sellers will use social media like Facebook to contact potential customers. Or, they might host ‘parties’ either online using Facebook or Instagram Live, or in real life where the aim is to showcase and sell their products. 

Is an MLM a good way to make money? 

It might be tempting to join an MLM, perhaps to earn some income on the side. Or you might view it as a stepping stone to starting your own business. 

However, to actually make money from an MLM is hard. You should consider: 

  • How much it costs to join the MLM (this might involve purchasing a pricey starter kit or purchasing stock upfront) 

  • How much you need to sell to earn back the cost of your starter kit 

  • How much you need to sell a month to start earning commission 

  • How much time you need to spend working to earn that commission. Is your hourly rate even close to minimum wage? 

  • If there is a minimum amount you need to sell each month to remain a representative of the MLM 

  • How much the products cost for customers to buy. If you were a potential customer would you think they were good value? Or would you look for better value alternatives? 

  • How many people are already representatives of the same MLM in your area? It might be hard to sell the products in your area if you have too much competition. 

  • Do you have to recruit people to the company to make more money? 

  • Are you willing to constantly pester friends and family to encourage them to buy your products or join your MLM? Will you have to make bold claims that haven’t been scientifically proven? 

Before joining you should be realistic about how much money you can make and how much time you will have to sink into it to make that money.  

It might be useful to talk to someone you know who used to be a member of an MLM. Or perhaps you could join a Facebook support group for former MLM members.  

You could ask your MLM recruiter these questions too but remember they will benefit if they manage to sign you up to the MLM, so you might not get entirely transparent answers.   

Beware of any MLM that makes unrealistic claims that you can ‘get rich quick’. If something sounds too good to be true, it probably is. 

You should also consider the impact it will have on your relationships with friends and family, especially if they will form most of your customer base. 

What’s the difference between an MLM and a pyramid scheme? 

Pyramid schemes are illegal. A pyramid scheme won’t sell a product or service. Instead, the only way to make money is to recruit other people to the scheme. It means most people who join a pyramid scheme will lose money. Only a few people at the very top of the ‘pyramid’ will make money. 

An MLM might have a similar pyramid structure, however, a legitimate MLM will sell an actual product and it should be possible to make some money (although not necessarily much) without having to recruit others to the MLM. However, in many MLMs it’s much more lucrative to recruit others than it is to earn commission from sales. 

What can I do if a friend or family member is part of an MLM? 

If a friend or family member asks you to buy their MLM products, it’ll probably be hard to refuse. Even if you think the products are overpriced, badly made, or they’re just not something you’d ordinarily buy, it’s tempting to still buy something to support them in what they believe is a legitimate business venture. 

However, all you’ll be doing is giving them false hope that they can be one of the rare MLM business success stories. 

Instead of buying products, be supportive of the reasons why your friend has decided to join an MLM.  

If their motivation is to boost their income, point them in the direction of resources such as our free Budget Planner.  

Encourage them also to sit down and calculate exactly how much money they make from sales each month, remembering to deduct any expenses including costs of purchasing the products to sell, and any tax they might have to pay on their profits. They might not be aware that they’re actually making very little profit, or if they could be losing money. 

If you think that your friend or family member is using an MLM to try and escape debt problems, then free help is available.  

See our guide on how to prioritise your debts to help them work out which ones to pay off first. 

Find free confidential debt advice online, over the phone or near to where you live using our debt advice locator

What are some other ways to make money easily? 

If your main reason to join an MLM is to increase your household income then consider using our free Budget Planner which will help you take control of your finances, make savings and cut costs. 

If you want some ideas for quick ways to make cash then MoneySavingExpert has some tips too.

And StepChange has some great ideas for saving money and increasing income.

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