What is MLM About?

silhouette of business woman on blue background

MLM also goes by the name of pyramid selling, direct selling, referral selling and network marketing.

It's all about selling products and recruiting people. This form of business plan has been around since the 1920's in some instances. It is very popular because it is so easy to join.

How Does it Work?


You are usually recruited by someone you know who is in the business. With tall tale stories of how you can male a lot of money and complete trust in your father or friend you sign up. That is how I got started in my first company back in the 1980's. The price to enter 99% of these companies is cheap. This is what makes getting started with MLM so cheap.

If you want to make the big commissions with an MLM it's been my experience you usually have two choices. They are:

  • buy a higher level of membership to boost your earning potential on new recruits. This is a strategy that is used to entice you into upgrading your level of membership. Your sponsor (usually a relative or friend) will reap and skim from you a part of that commission.
  • ​you buy higher priced products contained in their stable. When you do you are allowed to sell them for higher premiums. In most of all the MLMs I've looked at, researched and been a part of. This is always the case. You are not allowed to promote and sell the product unless you yourself has bought it.

You are fed these pitches because your sponsor won't make any money if you didn't buy more stuff. When you recruit your own people into your own network then the same thing will happen to you.

How Do I Join a MLM?


In my own case I was recruited by a co-worker who later became my roommate. He was living in Texas at the time and unemployed, well he couldn't work because he didn't have a green card. He was married to a nurse who was doing a one year contact at a local hospital. He then heard about a new company selling water filters. 

It's funny when I recall some of our earlier conversations when he lived in Texas, when I asked him "how's it going and what are you doing now"? He would say, "I'm selling water filters, you should look into it". I said, "ya maybe sounds cool". Good luck.

word maze of sales and marketing

Well, the seed was planted in my head and then revived again when I found out my Dad was involved in the water filter selling business. Fast forward a year later when my friend moved up from Texas, we attended a seminar put on by the same water filter company and I signed up on the spot for a distributorship. It was too good to pass up, I always wanted to own my own business and now I did. I was going to make it big selling water filters, because hardly anybody else was doing this right?

Why Do So Many Fall For This Scheme?


I blame it on The Flintstones and The Honeymooners. Say what?

I can never forget watching these shows as a kid and reruns as a teenager, showing the way the two male characters tried to make extra money. Yes, I was influenced by what I saw on TV. These guys were always trying out some angle to try and make some extra cash without doing a lot of work.

It's just always been there, this desire to be our own boss and set our own rules. At least it always has for me and watching characters on TV trying to do it, made this little kid (at the time) want to search for it too.

We fall for it because we believe our friends and family. I thought my Dad and my roommate knew what the hell they were talking about and knew what they were doing. Boy, what a bad assumption to make.

The fact is they were just dizzy from all the sales pitches and fell for everything they were told hook line and sinker. I then turned around and fell for the same pitch from them.

This is why getting in is so bloody easy, you have been recruited by people you know and trust.

Selling vs Buying


It takes awhile but you soon realize, at least I did, that I was sold something by someone I knew. I didn't go out and buy something because I needed it. I purchased water filter products because they were sold to me by my sponsor. I didn't go out and purchase water filters because I woke up one day and thought, Hey, today is a great day, I need a water filter.

This is how MLM really works. Your sponsor has a house full of products, they could be from Melaleuca or wherever. They have been sold and they have bought so much just to earn higher commissions, they need to push it out the door to make they're money back.

I decided to upgrade my starter distributorship to make more money so I spent a further $5,000 on more products and the potential to earn higher commissions.

Marketing word on gold and bronze background

What I was shocked to find out was the products were coming from previos inventory that she had boughtto achieve a higher level when she came into the business. We bought from each other. I was then encouraged to try and sell her products for her to earn even more. Say what? You mean, I can't sell the water filters I bought?

She said, "well you can do that, but there is more money in selling the business than selling the products". Oh OK I whispered not knowing what the hell was going on.

I didn't know how much trouble she was having unloading her water filters until I got my inventory from her. She couldn't wait to recoup that cost for herself. Meanwhile back at the ranch, I still had $5,000 worth of water filters to sell. Even when I had one friend of a friend who wanted to join up, her water filters came from my sponsor and not from me. I was still stuck even when I had a prospect that was buying.

You see, she was using my people to enrich herself and dump inventory. This was never revealed until you're right in the middle of thinking your starting to get ahead with this business. I was promised to get fast tracked to the next level if I had another four people to sign up. I was devastated that I couldn't even sell my own water filters.

I decided right then and there that the only way to get some of my money back was to sell these water filters to any friend or family member I could. I needed to get my 5K back.

That is NOT what your coach or sponsor wants to hear. You SELL the business, who cares about the water filters. In the course of selling the business they dump their inventory on others.

It's a Pyramid and Always Will Be


If you are in on the ground floor then you will probably make some of the early money. What happens is, you are really late to the party and there are lots of people in ahead of you and climbed up the pyramid a lot further. You have no way of knowing where you are on that pyramid.

black and whie pyramid displaying levels of membership

What also became more clear to me that, somewhere along the way people had to buy the product. Someone has to. You can't just sell a business idea for very long without selling inventory. This is the main reason you see so many launches of so called new products. The old name doesn't work anymore, the products don't sell and it dies a slow death. This is why you see so many survey, click for dollars and make money emailing all over the internet in one form or another.

Two Of the biggest programs out there are MOBE - My Online Business Education.
​You can read my in-depth review of how MOBE works here.

The other major MLM out there is Empower Network.
You can read my in depth review of Empower Network here.

They have so many levels of membership and so many products, new recruits end up being mesmerized by it all and never, really fully understand what it is they are buying and who the company is. I didn't and was just blinded by all the sales pitches and confirmation from my Dad and friend. We all lost money because of our combined ignorance.

The MLM of Today


It just keeps evolving. If you are like me and have been searching for ways to make money from home just like Fred Flintstone, Barney Rubble, Ed Norton and Ralph Kramden tried to do back in the day. You know how hard it is to make a choice. What company do I want to get involved in? What do I really understand about this business? I just want to make some extra money to help out my family. How do I do that?

As they say, this is not your father's MLM. Today's MLM world is full of new digital companies using new words like viral, systemization, cashflow, social media and online ads. There are autoresponders, hosting companies, domains and niches for you to deal with and decide if you need one. It can be very overwhelming to make choices nowadays. This has been my problem when searching for work from home opportunities. 

white boy character climbing up red columns

What I really find intriguing when I go out and search for an online business is just how many sites are out there pushing and promoting a particular company. These are totally biased reviews. Everything I'm trying to relate to you here, is based on my own research and experience.

The webinar has now replaced the old time MLM revival meet ups of the past. They are all so outrageous with claims of making a fortune in such a short amount of time. Video training has replaced physical contact with coaches or sponsors to show you the way. They only want to sell you more, that has not changed. The methods they use have been refined for the digital world that's all.

What I Hate about MLM


There is not really a whole lot I like about MLMs and their whole business model and structure. It is solely dependent on people at the bottom to keep people at the top in the money. When there is no more money coming in at the bottom it folds up like a cheap lawn chair. The main business is in recruiting new prospects.

Once those prospects pay their admission price, the job of the sponsor/coach is immediately to sell them an upgraded membership or higher priced products that they offer.

picture of the mlm tree in blue and red

You are then pitched the higher commission structure which gets you to the top of the pyramid faster. Only they never call it a pyramid. That's what it is no matter what anybody says, congratulations you are part of a pyramid scheme.

You will never be left alone, instead you will be constantly badgered and harassed to buy more. Do you like to be sold something all the time? I know I don't and I would hate that to be my only source of income.

You of course then turn to your family and friends and try and sell them on the same business idea you just bought into. They will eventually hate you and turn their back on you, your sponsor/coach will then tell you it's OK they just don't understand what a great opportunity this is.

The other maddening thing about my MLM experiences and I don't care whether you are selling water filters, beauty products, plastic containers, jewelry or perfume. You are in it because you LOVE THE PRODUCT. Really? I have to buy a business that sells jewelry because I you love their jewelry. Yes, I love it so much I bought a membership to sell it.

This is also the only business model I know of, where you have to pay them to sell their products to receive a commission. Think of how ridiculous that sounds. They should be paying you a commission when you sell a product for them. It should be the other way around.

That's how Amazon the biggest retail giant in the land does it. That tells me something right there. Yes, Amazon with all their billions of dollars in annual sales still needs people to help them sell. They don't ask you to buy anything first. If you sell a book from their site and you are a member of their affiliate program you earn a commission. Anywhere from 4-8% every time. All you need is your own website and be approved by Amazon, which is very easy and simple once they see you have traffic coming to your website. You see, with MLM it's all back asswards. Also:

  • too many upsells
  • commission structure is sometimes very confusing
  • One Time Offers or Bonuses offered up to entice you into earning more
  • no help or support when you struggle
  • you don't own a business you are part of an organization

What I Like about MLM


There is isn't a whole lot I like about it other than the life lessons it will teach you about being in business. There is no greater teacher to your business success than when you fail. Everyone who joins eventually quits in frustration or goes broke because the pestering never stops. I've seen far too many of my family and friends fail at this to know otherwise. It's always the ones who can least afford to lose, that end up losing the most. 

logo in red black and white

It is cheap to get started and some of the training materials offered are good, depending on what scheme you end up joining. You will never ever convince me that MLMs are good so don't bother trying.

What Business Do You Want To Be In?​


You really can start your own business online on your own if that's what you want. There are so many free tools on the internet to help you get started there is no need to pay some MLM thousands of dollars on something you have no control of and know nothing about.

Make Your Money With Affiliate Marketing


​I like the affiliate marketing business model because of all the various choices I can make on my online business journey. If I want to sell jewelry, beauty products, plastic kitchenware or water filters, I have the flexibility to do that on my own website because I have control over it.

Whatever your interests are you can review products and services that you use and then earn a commission from any sales that come your way just from people reading that article on your website.

Because you own your own website and blog, it allows you to build an audience and stay involved with your site, this will result in more profit for you.

You never know, maybe if you become successful enough with your own site, the work will be too much and then you can outsource some of it.

I am not Superman, not even close and if I can start my own website and thriving business online then anybody can. You don't need any special technical skills or experience to get involved with affiliate marketing. You just need training, good training. The main site that I recommend for doing that is Wealthy Affiliate. It offers you the most comprehensive and updated training you will find on the internet. It is where I got started and still hang out today.

Have you ever been a member of any MLM scheme? I would love to hear about your experience or any experience you may have had with one. If you have any questions, comments or feedback for me just drop them in the box below. Thanks for stopping by and reading my post on MLMs.

                                                 

 Hi there, my name is Peter, it's so great to meet you. I started this website back in 2015 to help educate and inform people on the many ways to make money online. There are so many scams out there that need to be revealed. I also explore ways on how we can turn our time into dollars working from home.

I hope you find some of the tips and suggestions that I've experienced helpful on your own online journey.

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28 Comments

  1. Hi Peter,
    What a great article! I am so over MLM myself. The last one I was in I got really passionate about it. I was thrilled, making daily pay etc and meeting great people in the process, only to find out there was no product at all and the monthly membership paid the daily pay. I could not join people up to a scam. I was so disappointed and now so happy I have found something that yes, I have to work at however my hard work will give me the reward and like you it is along the path of affiliate marketing. I could not be happier!!!
    Cheers, Sharon

  2. Sharon Whyte

    Hi Peter,
    What a great article! I am so over MLM myself. The last one I was in I got really passionate about it. I was thrilled, making daily pay etc and meeting great people in the process, only to find out there was no product at all and the monthly membership paid the daily pay. I could not join people up to a scam. I was so disappointed and now so happy I have found something that yes, I have to work at however my hard work will give me the reward and like you it is along the path of affiliate marketing. I could not be happier!!!
    Cheers, Sharon

  3. Angel

    Dear Peter,

    Interesting Blog Post Article on what an MLM is. If my memory serves me well MLM stands for Multi-Level Marketing. An example might be Empower Network.

    However, I sometimes did get confused on what makes MLM different from affiliate marketing though. I guess in terms of MLM you work for someone else, you are essentially at the bottom of the pyramid versus at top position like the CEO of the MLM.

    You kind of read my mind when you mention watching The Flinstones, great minds tend to think alike, it is very true.

    Wealthy Affiliate is the best place to be. I think WA beats out all the other MLMs and other Business Models that are out there. It is also cheap and convenient too.

    I am sorry to hear that the lady tried to earn commissions on her own versus working like a team sport member with you on how to do business online together. I guess the prospect of making easy money in her mind meant having someone do the hard work first and then she earns the commissions without lifting a finger.

    I sure do hope that this same incident doesn’t happen to you in the future my dear friend.

    Wishing you all the best with your online success above and beyond the horizon,

    ~Angel

    • Peter

      Thanks for the kind words Angel. I agree on WA vs all MLMs it is definitely superior and not even close. Thanks for stopping by:)

  4. Bob

    I almost got pulled into an MLM but decided ultimately that I’d have a better time just starting my own business. It’s funny because my Mom was the one who suggested I join one. I was so close to actually participating until I did my own research. I know you said failing is sometimes the best teacher and that’s super true but I’m glad I never got involved.

  5. Jim

    Hey Peter, Boy, I guess a lot of us have been through the MLM wringer. For myself I have many family members and friends who have constantly been trying to get me into Amway, and later Herbalife. It was always obvious to me that they were a pyramid like you say, but I never could convince them. I’m thankful I’ve stayed away.

    • Peter

      Good for you Jim. Those are two of the biggest and longest lasting. I could not in good conscience ask anyone to buy any product from those companies.

  6. Kurtis Quick

    I think the thing that is so attractive about MLM is that you are running your own business. But that is also the same thing that is why people fail. MLM will let anyone join and start because it usually does not cost the company a penny. If you do not have experience at networking and running your own business then the majority of time you will just be harassing your friends and family. You will always lose. And if you have business experience you usually know it is best to stay away from MLM

    • Peter

      Thanks Kurtis. That is very true except for the fact that the majority of people recruited are just helping out a friend or family member. Thanks for dropping by:)

  7. Brad

    What do you think is the biggest sign of something being a true rip off and a pyramid scheme? So many people hear things they think are great offers and get sucked in. They do not think about how they are getting sucked in and how difficult it will be to make money. What in your opinion is the biggest sign of something that won’t make you any money and something to look out for and avoid?

    • Peter

      Hi, Brad
      When these programs try and get you to buy products off of them so you can sell them. If you don’t own them you won’t make a commission. Also trying to upsell you another membership to increase your earnings potential. These are signs of a pyramid scheme MLM. I think I described it pretty good in my article and also cited MOBE and Empower network as 2 examples. I think you should go back and re-read them so you don’t get ripped off.

  8. Outer Beauty

    Hi Peter,

    Ive also been through all that. I was reading your article and thought “here’s another person just like me”

    I was in Melalueca for awhile and how you described selling water filters was exactly how i got into it. My aunt signed up my dad who then signed me up. I also felt the disappointment of not selling enough products to make profit – in fact I did lose money. Even today there have been other companies that relatives have been trying to get me into.

    I do agree that Wealthy Affiliate is a great program. Its the first one that I have had a great feeling about since I logged into on day one. The tools and wealth of information in this program is one I would also recommend for someone looking to learn more on how to succeed online and/or affiliate marketing.

    • Peter

      Family and friends mean well they just don’t do enough research for us to trust them. It’s really too bad because this has been going on for decades with no stopping. The products change but the pyramid stays in tack. All the best to you at Wealthy Affiliate:)

  9. Hi Peter, again great post describing the MLM. I really feel your story because I had been selling the ideas of ” Be your own boss” and the ” mouth watering offers ” from several MLM companies. I never got involved in water filters from NSA. I never knew the MLM system has a potent recruitment strategy and cycle like practices that can brainwash anyone that is looking for a quick fix. I like your recommended affiliate marketing, but don’t know where to start. Can you please write up the step by step how to start in the affiliate market? Thanks.

  10. Steve

    Great post about MLM’s. Foolishly, got into Amway back in the 80’s. Then I did few others more recently. MLM’s have several major flaws.

    As you described, they are a pyramid. So if everyone in the world was to join, the lowest layer which is the last people to join plus the largest group of people will lose. It has to happen because there is no one left to recruit. Then the entire structure falls apart. So the entire concept runs knowing that if the could recruit everyone they would all fail. They always need new unknowing people to join.

    Plus as you said, it’s easy to join. Which means the people you recruit have very little vested in their business. If things don’t go their way it’s very easy to also walk away. That makes it very difficult to build a network that will actually generate an income for you. In an MLM, you’ll need to recruit 100 people just to find a small handful (i.e. 2-3) that will actually work hard at their business.

    I’m done with MLM’s and always happy to see others that are trying to help prevent others from getting into these MLM’s.

    • Peter

      Nicely put Steve and my thoughts exactly. Somewhere along the way somebody has to buy. When it stops so does the business model.

  11. Pretty much the same experiences I had with MLM. Everybody’s trying to recruit and nobody’s trying to sell. People on the tip of the pyramid flourish while those at the base flounder and fail.

  12. Marta

    Hi Peter,

    I nearly fell for one of these MLM system two years ago, when I was trying to find ways of making money online. It’s so true about the pyramid you illustrated on this post. You hardly ever have the chance to sell because they’re are already so many people doing it. Then you end up paying for the product and not making any money.
    Do you think affiliate marketing is going through the same path with so many people selling online these days?

    • No Marta, competition is healthy and there is always room for affiliate marketing. Companies want help selling their products and services. Look at Amazon. They still want to pay you to help them sell even more of their inventory. It’s only going to get better for affiliates in the future.

  13. Mark

    I totally agree with this article and MLM is something to watch out for.
    I market supplements and have tried out the MLM with no success.
    I will continue to read your articles in the future and look to your site for the information I need to be successful.
    Thank You again.

  14. I honestly can’t remember ever hearing or reading anything very positive about MLM, it seems lke there was always that “stay away” or “its a scam” vibe associated with it.

  15. Ilias

    Hi Peter, great story.

    I have paid before some money on MLM products that I was needed.

    Not much, about $150. I am not happy with this investment but they could not take more from because I could not afford to spend more.

    Well, they recommended me a business a plan and I wanted to tried it. I had not heard about MLM until that day.

    I lost time but at least I did not lose more money.

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