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Why MLM’s Are A Terrible Side Hustle

By September 13, 2018 15 Comments
Essential oils - multilevel marketing product

I live in the multi-level marketing (MLM) capital of the world.

Don’t believe me?

Utah is headquarters to over a dozen of the largest MLM companies in the world:

  • NuSkin
  • dōTERRA
  • Morinda
  • Young Living
  • Younique
  • And the list goes on

In fact, a number of my friends either currently work in the corporate offices of these companies or have worked for one of them in the past.

(Shh…. If you know me in person, don’t tell them I wrote this!)

For a time earlier this year, my daily commute would take me past one of several billboards dedicated to “the father of the modern essential oils movement.”

I remember searching for jobs during my freshman year of college. As someone with limited work experience, I was always excited to hear back when I applied for any position.

Recruiters would provide a very general description of the opportunity (“direct sales”), affirm that I was the “the perfect candidate for the job,” and invite me to join a “group interview” with several other perfect candidates.

With so many frequent interactions with MLM companies, it was necessary for me to personally learn about what multi-level marketing is… and why even as a self-motivated entrepreneur and side hustler, it’s not for me!

What is an MLM (multi-level marketing)?

Multi-level marketing, sometimes called network marketing or referral marketing, is a product distribution strategy where companies pay “independent distributors” a commission for selling their products.

Distributors, typically stay-at-home parents, college students or other part-time workers, make money through one of two ways:

  1. Earning a direct commission for products sold to friends and family
  2. Earning an indirect commission for products sold by additional distributors they’ve recruited

Multi-level marketing companies promise an opportunity for financial independence, a flexible work schedule, and membership in an exclusive community of like-minded, ambitious go-getters.

So why the hate on MLM’s?

What’s wrong with multi-level marketing?

For starters, most people who participate in MLM’s don’t earn any profits at all!

One study, by Jon M. Taylor of the Consumer Awareness Institute, reported this surprising finding (shout-out to Apathy Ends for sharing this report in a recent post):

“The loss rate for MLMs is at least 99%. This means that less than one in 100 MLM participants make a clear profit, and at least 99 out of 100 participants actually lose money!”

This is because there are often significant costs to getting started with an MLM. As a new independent distributor, you may have to pay a racket for your “first-time distribution kit,” training and coaching, product inventory, and more.

Remember those two revenue streams for MLM’s?

  1. Commission from your sales
  2. Commission from your recruits’ sales

The most likely profitable path for MLM distributors isn’t from selling products. At the end of the day, it’s all about building a “downline,” or recruiting other distributors who will earn a commission for you.

Doesn’t that sound like a pyramid scheme?

Yes, indeed.

MLM’s can be an extremely profitable venture for individuals who get involved early. However, their reward isn’t for selling the product – it’s for helping to build the sales force.

Unfortunately, the average MLM distributor is going to:

  • Struggle to sell the product to others. The exact compensation structure varies by company, but generally speaking, distributors will need to move tens of thousands of dollars in product each and every month to earn a reasonable income.
  • Spend lots of their own money on the product. MLM distributors want to sell a product they use and believe in. This sometimes means spending hundreds of dollars each month on beauty products, nutritional supplements, or whatever the product might be. In this case, MLM distributors will often become their #1 customer, spending more than they actually earn.
  • Spent lots of money on training and marketing. Business cards, house parties, group training, national conferences, private coaching, a personal website… Distributors can quickly spend hundreds of dollars on non-product expenses that claim to help speed up the path to riches.
  • Make the MLM company very, very profitable. As mentioned before, only 1 in 100 MLM participants earn a profit from their efforts. Meanwhile, the MLM companies themselves are sometimes worth hundreds of millions of dollars. Who’s paying who?

So what makes a great side hustle?

Just because working as an MLM distributor isn’t the right option for pursuing your financial goals doesn’t mean it’s time to give on your dreams of finding a flexible way to earn some extra income.

Even though MLM’s may not be everything they claim, you’re still on the right track if you’re looking for a side hustle! Some of the features and benefits of a good side hustle include:

  • A change of pace from your typical daily responsibilities
  • Little or no startup costs to get started
  • The chance to connect with new mentors and peers
  • The opportunity to develop new skills

While at first glance, it may seem like an MLM offers these benefits, just remember…

Most MLM’s require an investment that’s rarely earned back, and participating in network marketing often burdens your existing relationships rather than building them!

What should you do instead of MLM?

If you’ve found yourself spurned by the idea of multi-level marketing – whether due to your own personal experience or the endless solicitations on social media – you may be asking yourself:

“Not an MLM… But then what?”

Well, good news:

There’s an almost endless supply of great side hustles out there that can fit your passions, skills, and resources. Whether you need something with full-time income potential or just want to earn some extra cash for a vacation or the holidays, you can find a side hustle that works for you.

If you Google “side hustle ideas,” you’ll find dozens and dozens of examples, but here are four popular side hustle ideas to get you started:

Find freelance work

Not sure how to find your first client? Good news: you can start making money with Upwork in just a few days by creating a targeted profile and submitting persuasive proposals. There are all sorts of projects available on the site, so whether you’re interested in writing code or writing blog posts, you can turn your time and skills into a source of income.

Offer consulting or coaching services

You don’t have to be “the world’s best expert” on a given topic to offer consulting or coaching services. You just need to further along the path than those you’re trying to help or have experience with solving a very specific problem. You could offer to coach a small business owner can how they improve their social media presence, offer personal training sessions within your home, or offer up your career/work experience to help companies on a project-by-project basis.

Start a blog

Earning money through blogging is one of the most popular side hustles because of it’s low barriers to entry. You can get started for just a few dollars. Bloggers earn income through banner advertisements, affiliate marketing, and selling their own products.

While it’s difficult (alright, impossible) to start earning money from blogging overnight, the flexibility of blogging makes it a great lifestyle business!

Launch your own shop

Instead of selling other people’s products, why not create your own? Whether it’s handmade jewelry, wedding decorations, or baked goods, you can enjoy lower costs and higher margins by selling your own products. Depending on what you’d like to sell, you can create an Etsy shop, put up listings on Facebook Marketplace, or set up a table at your local farmer’s market.

Why MLMs are a terrible side hustleConclusion

If you’ve ever joined an MLM but felt disappointed with the outcome, don’t be ashamed of your choice.

You’re seeking something that appeals to everyone: a flexible work environment, some additional income, and an opportunity to develop new skills and relationships.

While multi-level marketing companies may not be the answer, there are plenty of other side hustles out there to help you pursue your goals.

You don’t have to be an entrepreneur to start your own side hustle, but don’t be mistaken… A side hustle requires hard work, discipline, and time. Find a side hustle that fits your passions and strengths, then take the first steps to get started today!

What’s your experience with earning money through multi-level marketing (MLM’s)?

15 Comments

  • You hit the nail on the head! MLMs are the devil and promise you the world, but people rarely see the hard work and time that must be put into them to achieve any type of success.
    They are definitely not passive or part time income streams and should be entered into lightly.

  • Ashley Morgan says:

    I was a hard NO to network marketing companies because my perception was all the things you listed – expensive to start, most people lose money, etc. I’m a former financial analyst however, and once my first daughter was a year old, I was at the breaking point with the corporate world too! Then I was introduced to the social marketing company I’m now a part of (and have been for 2.5 years now), and am happy to say that my income now matches that of my corporate job, WITH the perks of setting my own schedule, working from home, being present for my children, etc. So, perhaps the issue isn’t with the industry in general, but PLEASE do your research! A solid company should have easy to find compensation summaries so you can see what the average incomes and timelines to promote are, as well as low startup costs & no inventory requirements. Yes, it is work!! But it can also be a wonderful option if you’re willing to put in the time and effort.

  • Mark says:

    Hey Middle man took my line. As I was reading this I was thinking you hit the nail on the head. My brother got involved with one and so did my uncle Amway. I know my brother made no money. I have to check with my uncle but I am certain he didn’t. The only reason these companies get away with it, and it’s not illegal is because they have a product/. They don’t sell their products, they sell the pyramid part of it. And the meeting they go do are motivational meetings with their bible Rich Dad Poor Dad. I call them their “Rah Rah” meetings

    • Kate says:

      Please be aware away is one company out of thousands. I’m not a fan of them, either. I’m not a fan of many MLM companies, but that doesn’t mean the model is to blame, it’s the COMPANY

  • Marc says:

    I know a few people who have done really well with MLM, but like you mentioned, 99% of people fail. A lot of people don’t like them because of the pyramid structure, but in my opinion that’s not such a big deal. Most sales-oriented companies have a pyramid-like corporate structure with a few different levels of sales managers that all get commissions or bonuses based on their team’s performance. If it’s a typical employer – employee relationship the pyramid structure is usually ignored and no one has a problem with it. What I don’t like about MLM (as has already been mentioned) are the exaggerated promises, the huge failure rate, overpriced products, and forcing people into buying products to be a part of it.

  • Simon.C says:

    I had the same thought as you do.,that MLM is not working.After realizing the potential of this sector,it Amaizing.Even morons with dreams have potential to become successful in MLM.No any qualifications or experience required.Today am proud to be a networker.Network marketing not only provides a great business education, it also provides a whole-new world of friends—friends who are going in the same direction as you are and share the same core values as you do.
    Here are some of the critical skills that the real-world education of network marketing teaches:
    • An attitude of success
    • Dressing for success
    • Overcoming personal fears, doubts, and lack of confidence
    • Overcoming the fear of rejection
    • Communication skills
    • People skills
    • Time-management skills
    • Accountability skills
    • Practical goal-setting
    • Money-management skills
    • Investing skills
    End of day it depend where is your focus,being positive or negative.

    • Kate says:

      Yes!!!!! The personal development I have achieved is unparalleled to that gained in the rest of my nearly 50 years on this planet!! 😊

  • Young Hustler says:

    I agree with your pointers but I believe if you do your due diligence before jumping into any MLM or even starting your own business you need to do your research and follow the right system and right network. It’s not about the structure or the product or company, I believe it’s about the mindset, the right people and your persistence.
    Like the saying goes “ everyone wants to achieve a certain goals however somewhere in the journey they face obstacle and usually decide to give up.”

  • Kate says:

    MLM isn’t for everyone, but neither is being an entrepreneur or ANY industry for that matter.
    I too was an MLM skeptic and additionally had no respect for the industry or those working in it. I stumbled across a company 6 years ago that had a product I LOVED (I didn’t know it was an MLM until after I was exposed to the product), I ended up joining for the discount. It was a low start up (under $100 with everything I needed for my biz and the products I got were worth about twice that), there are NO sales minimums or quotas, I don’t earn ANYTHING if someone signs under me unless I’m a team leader (which I am) and they two are earning (compensation from the company for my time spent as a TL, training and supporting, just like my team leader for at the old corporation I worked for)…we’re not required to have inventory, the only friends I sell to are people who were customers and then BECAME my friends, my hostesses earn a ton of free stuff for their hour of “work” (many of them are very thankful for the opportunity because they can’t otherwise afford the product which happens to be in the category of a “need” and not a want)…
    Technically, I’m a rep for 3 companies, but only use one as my business (the others are because I love the products and want the discount). One does give a financial reward for recruiting and that makes me uncomfortable even though I understand that corporate recruiters also get paid for doing the same), they other has sales minimums and if I were to work the business, would probably have so drop a few hundred bucks into it. It would probably be worth it, but I don’t care for the mentality of the company executives or the sales minimums they impose the stay an active rep. Those things said, they are not shady companies and people who are committed to doing the work (as you have to do with ANY job or business) can succeed in their goals.
    I know there are shady companies, I know there are shady sales people, but that’s in ANY business, not just MLMs/direct sales. As far as the pyramid structure? I can’t speak for other companies, but I can speak for mine and my experience in corporate America. In CA there are grunt workers who process, etc and then there are the team leaders, supervisors, managers…there are people who have jobs that don’t exactly fit into that system, they’re their own…pyramid structure within the main one, but that’s basically how it is, at least in my experience. With my MLM company, it’s basically the same: consultants, leaders, senior leader, directors. Each level has a job and each gets paid accordingly for their time and effort. If we choose to be a sales person and a recruiter (which to me is really offering the opportunity because you never know who might need it and I know MANY people who have needed it, it literally changed their lives and the lives of their families…for the better, of course) then we can work up to leading our own team (those we recruited) and be paid accordingly. Upper level leaders train and support their sales people and the leaders under them… there’s nothing shady about it. As someone else who commented suggested, I did my research and asked LOTS of questions because I WAS skeptical and I think everyone should.
    Bottom line: if you’re someone considering an MLM, know what you want from it (discount, part time income, time away from other life duties, a career opportunity, etc), follow you passion in choosing a product/company, do your research , be aware and willing to set a work schedule and actually spend that time working every day (at least in the beginning), do the trainings recommended, have a growth mindset and don’t give up unless you can honestly say you’ve don’t what’s required….

  • Brittany says:

    Great article, thank you for including some statistics. I do have a few friends who make a bit of side money with selling DoTerra and Norwex, but I also think they mostly do it to get wholesale prices on products they want to purchase anyway. It’s incredibly difficult to actually make a profit unless you’re willing to pour your entire life into the company.

  • Terri says:

    You could change the title of this article to “why driving for Uber is a bad side hustle or why opening your own business is a bad side hustle” because every single point you’ve made about mlms is also true about those as well as most start-ups! Uber doesn’t buy you a car does it? Nope you need a car so you’ll have a car payment, gas, insurance repairs etc and Uber keeps a % plus you’ll need a phone and a phone plan $$$$. How many people actually work long enough at Uber to “make a profit” then? Not even 1%? Ok now let’s talk about a lease, employees, inventory, insurance equipment permits accountants kawyers and taxes for a business start up. How long do you have to work to make a profit?. Years and years and years and most fail leaving them in huge debt.
    So it seems to me that most people want an mlm to be a pyramid bc they don’t want to work – they want the $$ to roll in. That’s not how any business works. Plus you mentioned how each of these businesses employed people corporately as well.

    Btw, you can also throw a College degree in this mix. 4-7 years of working with no income and then working for the next 30 years to pay it off and try to live at the same time?. Are you still paying on yours? Seems like a pyramid scheme.

  • Thank you for writing this. I hope your readers can see through the comment section BS as everyone is trying to boost their ego so they don’t have to face the reality that they too have been scammed. #antiMLMmovement

  • Brenda says:

    Thank you for this article, and for reigning in the bias. I recently joined a MLM and while I don’t think that they all are spawn of Satan, I am experiencing many of the same points you made firsthand, and definitely agree that MLM’s solely are not the best idea when you NEED a reliable income. I will definitely be returning for more articles here:)

  • Alan says:

    It’s a bit unfair to paint every MLM with the same brush. Perhaps do some due diligence before signing up with any MLM? Focus on the product or service AND check the compensation plan thoroughly. Be sure the product or service is something you can get excited about because if you’re not enthusiastic, how can you expect others to be?

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