What is MLM?

Ever heard of the term MLM, Multi-Level Marketing or Network Marketing in a conversation about business and had no idea what was being discussed? If so, don’t worry you are not alone. I come across people all the time that are not familiar with these terms and some of these people have been in business for 20-30 years and are successful executives.

These terms all refer to the same thing, a type of business. An MLM company is very different from a conventional company in a few key ways. First, there are generally a smaller number of employees that are on the company payroll. Instead, anyone can join but as an independent representative (some MLM companies use different names, but they all basically mean the same thing). To be an independent rep for an MLM company you need to first find someone who is already an independent rep of that company and that person will sign you up. You will probably not have to look to hard, they tend to be pretty good at finding you. This will not be free though, it can be as little as $20 and as much as $1000 for some companies and perhaps even more than that. For most companies it costs a few hundred dollars initially. For this fee you receive a starter kit with various selling tools and sometimes product samples. Your job is two-fold. One, is to order products from this company on a consistent monthly basis. Two, to find more people and sign them up just like the person that signed you up did with you. You are now in his/her downline and you need to form your own downline.

The company makes money on all product sales and initial fee and you make money in the form of a commission from the product sales of the people in your downline. Still confused? Check out the diagram pictured which shows a very basic idea of a downline. In this diagram, you are the blue cirlce and you are looking to sign up a couple of people that will do the same. This is like a pyramid, only legal.

This is a very basic idea of an MLM compensation plan.

This is a very basic idea of an MLM downline.

If you are thinking about joining an MLM company, you should first think about if it is right for you and what you will likely see from it. MLM companies are not for everyone. They work best for those who are good sales people. If you think of yourself as a ‘people person’ and are good at sales then this may be right up your alley. However, if you want to start your own company and be responsible for everything that an entrepreneur is responsible for, both good and less good, then you will not find that here. Don’t forget, you are not actually the CEO of this company and although you do not actually have a boss and that does bring some freedom you still cannot make the types of executive decisions that a real CEO makes. Think of yourself more like a business owner that is only in charge of your sales and your team’s sales. Moreover, regardless what anyone tells you, only a very few number of people actually earn enough money from the MLM alone to do it full time. It is really meant for some extra income on top of your current job.

The last bit of advice I have is if you have decided that this is something you want to do, then don’t just sign up with the first pushy MLM rep you speak to. Do your research about all the MLM companies out there. It helps a great deal if you actually like and believe in the products they sell and also look at the compensation plan. Every MLM company has a slightly different compensation plan, even though the basic idea is the same the devil is in the details. Go with the company that has the products you like best and will actually use (don’t forget, you need to buy them consistently) and a compensation that works best for you.