Are MLM Reps Actual Business Owners?
Today, I’m going to spill some tea – and hopefully give some helpful tips at the same time. If you’re in network marketing, I think you’ll get some really solid things out of this video. However – it may make you mad. I'm answering the question: Are MLM reps actual business owners? Let’s dive in.
Are MLM Reps Actual Business Owners? | Am I Anti-MLM as a business coach?
Want to watch a video version of this post? I’ve got you covered!
I have to start with a personal story.
I have been part of a multi-level marketing (MLM) business before. I’ve ordered and currently use products from MLMs. I am not inherently anti-MLM, and I think that’s important. I did a lot of research for this video because I wanted to get behind-the-scenes information MLMs, and it led me down an anti-MLM rabbit hole. But for now, I am not anti-MLM. (I’m literally drinking a fizz stick from Arbonne right now).
Back in 2010, I was part of an MLM. If you know anything about my business story, you know that I quit corporate and came home to start my business. When I made the decision to leave my job, we did anything we could to save money AND I was doing anything I could to make money. I knew that you could make money with MLMs, and for whatever reason, I signed up to sell Thirty-One bags. I have no idea why! It’s not like I had a passion for Thirty-One bags or used them often. I just saw the money opportunity. I had two parties: one for my mother-in-law and one for my mom. With those two parties, I made $700, and I thought I was rich. It made a big difference when I didn’t have any money!
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That’s one of the reasons that I am not anti-MLM. They can be helpful for some people in a certain season in their life. But I only had those two parties because I quickly realized that I would end up forcing my family and friends to come to parties and purchase for me because they felt sorry for me. So, I stopped.
Did I like the bags? Sure. Have I bought products from MLMs since? Yes. I tell you that story because I want you to know that I’m not coming from an anti-MLM standpoint when we dive into this.
I might make some people mad here, but I want you to give me a fair chance at my opinion.
If you love a product that is developed by an MLM, it has a place. But I think most people do it wrong and think about it wrong.
If you are a network marketer or an MLM rep, you are not a small business owner.
Let’s look at the definition of a business owner. “A business owner is the legal proprietor of a business. An individual or group that owns the assets of a firm and profits from them.”
I talk a lot about passive income on this channel, and one of the ways I talk about passive income is with affiliate marketing. Multi-level marketing companies are basically just a big affiliate marketing system. Except that you’re rewarded for people who then come under you and sell as well.
So are MLM reps actual business owners? MLMs are a stacked affiliate system – but MLM reps are not actual business owners. I’m sorry. You’re just not. You don’t create the products, you don’t set your own prices, and you aren’t really in charge of anything but how much you work.
I see tons of MLM reps saying, “My company has this amazing product,” or, “my company does this.” But you are NOT a business owner and it is not your company.
Let’s get into some of my research.
I asked my Facebook friends who have been in MLMs, who currently are in them, and who have never joined MLMs a few questions. When I asked some current MLM reps if they consider themselves business owners, they said yes. I think a lot of people are told that they will be business owners by joining. You do have to pay taxes on the income you make because you're considered a 1099 contractor – but otherwise, you don’t own the company. If the company goes down, it’s not your decision.
About 90% of the people I asked who USED to be in an MLM and have since left told me that they considered themselves business owners while they were in it. But only because that’s what people told them to think and they were naive. That was the standard answer among that crowd. Multiple of the people who responded this way have since gone on to start their own businesses as actual small business owners, and they have a different perspective now.
When MLM reps talk about how easy it is to “start a business” with a company, it discredits the hard work that it takes to be a small business owner.
Let’s get legal.
I looked at the Federal Trade Commission (FTC) page about MLMs and found it really interesting. The FTC is obviously not pro-MLM. They say things like:
“Most people who join legitimate MLMs make little or no money. Some of them lose money. People who become involved in an illegal pyramid scheme may not realize they’ve joined a fraudulent venture, and typically lose everything they invest. Some also end up deeply in debt.”
When I was doing my research, losing money was the biggest theme. Lots of people told me that they lost more money than they made while in an MLM. Then, there would be a response from someone else saying “well, then you didn’t do it right.”
I have a few friends and contacts who are really high up within their MLM company. Side note here – if you haven’t listened to The Dream podcast, you should. Season One is really enlightening on this topic. But it’s also a VERY skewed, anti-MLM podcast, just so you're aware.
In The Dream, she talks to someone who is at the very tip-top of the Thirty-One company. She’s in the top one or two percent of the WHOLE company, and she says that after expenses, she makes about $42,000 per year.
$42,000 is nothing to scoff at, especially if you’re someone who’s home with your kids. I get it. But I GUARANTEE that the hours required to get there were insane, and the company could literally pull the rug out from underneath her at any given moment.
I did talk to a couple of people who, at their time in the top 1-2% of their particular companies, were making something like $200,000-$400,000 per year. When I asked if they thought those results were achievable for most people, both of them said no. They said it was because they got in early, had influence, and worked INCREDIBLY hard to get that and keep it. As soon as they slowed down, it was gone.
MLM reps are NOT actual business owners. The federal government doesn’t consider you a business owner, and other people don’t either. You’re not making decisions like a business owner or in the definition of one.
So what is the place for MLMs?
I said that I wasn’t anti-MLM, and I very much believe that MLMs have a place. I just mentioned that I see MLMs as a stacked affiliate system.
With affiliate marketing, you make a commission for sending someone to purchase something – which is exactly what an MLM is. You make commission for every sale that you make. The part that makes it pyramid-y is because you make a certain percentage of commission from the sales that you make; then, when you sign someone up underneath you, you make a commission off of their sales, too.
There are some differences here. With affiliate marketing, there’s often a certain level you have to hit before you can get a payout. You might need $100 sitting in your account before you can access the money. But for the most part, there aren’t a lot of restrictions about how much traffic you need to send or anything. With MLM, there are requirements for how many sales you have to make. That is where skepticism comes in. After my research, I’ve found that a lot of people will buy products themselves so they can hit big milestones within the company when they can't reach their sales goals. And that’s just skeezy.
I live in a very small town, and the MLM rate here must be higher than elsewhere because I see it so often. I put out a post on my personal Facebook about MLMs, and while I was combing through comments, I get a friend request. We have 52 local, mutual friends – and in that instance, I generally accept those requests because I probably do know that person (and I have a lot of filters set up on my Facebook to make sure only people I want to see my posts see them). Within 30 seconds of me accepting her friend request, she tried to add me to her $5 Jewelry MLM Facebook group.
The marketing strategies behind MLMs is a whole other level of video. They’re slimy, skeezy, and not any good. While I was asking for comments from people in MLMs, this girl literally did what MLM reps are made fun of for doing.
I made a specific post asking my local friends in MLMs why they made the decision to join. Every comment I have so far said that they loved the products and thought, “why not make a little extra money.”
Guys – I AGREE. I do that all the time with my AFFILIATE LINKS. This is where I think people go wrong, and the main thing I want to say in this video.
If you are in an MLM, treat it like an affiliate relationship.
Think of MLMs like an affiliate relationship. You CAN’T make money with affiliates unless you have a brand or personal influencer status. If you don't have an audience, you don't have people who want to buy the things you have. Because I have almost 100,000 people on YouTube or 13,000 people on Instagram, somebody will want a link to the thing I’m showing. If I didn’t have an audience, I couldn't do that.
The misstep that happens in MLMs is that people jump in thinking they’re business owners now whose job is to get other people to want to sell what they’re selling. When really, you should build a personal brand or influencer status in whatever industry you want to be in and share that MLM product. The only people making good money are the ones at the top.
As an affiliate for something, your mindset shifts to “well, I was going to share it anyway and why not make a little money.” The idea that an MLM is the only thing you’re working on just won’t work out.
While I’m not anti-MLM, I am anti-MLM-is-a-business.
There are some people who I follow that have adopted this MLM as an affiliate relationship/influencer status well. I follow a girl who sells Monat and she does it so well because she has built a personal brand where people love her hair. It makes sense for her to mention Monat because people already ask about her hair. AND she has a personal brand, even if the company goes out of business tomorrow.
I know another girl who started building her personal brand because she sold Arbonne. She’s sold Arbonne, AND created an app AND made a ton of other things. She knows that she can’t possibly put all of her eggs into an MLM basket because she doesn’t own the basket.
You can make the switch from MLM to entrepreneur.
When I talked to people who were previously in MLMs and have since left and actually started their own business, I heard some really cool things. The overarching thing that all of these people told me was that they feel like they wouldn’t have started their business if they hadn’t joined an MLM. The MLM was really the catalyst or that brought them to start their own business. The things about personal development taught in those MLMs (albeit taught wrongly) were a bridge for them to entrepreneurship.
If an MLM brings someone to the point of owning a small business, that’s awesome. But to think that you’re a small business owner when you’re in an MLM is just not true. If you’re in an MLM and what you love about it is the freedom and the flexibility, I highly encourage you to look at what kind of business you can start that’s yours.