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What to know about multilevel marketing companies

If you’ve taken a financial hit due to the pandemic, you might be considering a side hustle like signing on with a multilevel marketing company (MLM). However, before diving in, you should know all the ins and outs of these companies. The devil is in these details.

How It Works

A MLM is a business that depends on independent contractors who sell products via social media, house parties and more. If you sign up for a MLM, you’re not an employee of that company, and the only money you gain is from sales and commissions (minus expenses). Often, even selling products isn’t even enough to actually come out ahead. You’ll likely be asked to recruit other, underling workers who in turn share a portion of their commissions with you. That’s why MLMs are sometimes referred to as “pyramid schemes.”

The Money

Ignore all the sales pitches about “leaving real work behind forever.” The reality of MLMs is that sellers rarely make money. And even when they do, it’s not much. According to a study of 32 MLMs by TruthInAdvertising.org, 80 percent of contractors made less than $1,200 per year. And that’s before expenses. The report also found that about 50 percent of MLM contractors made no money.

Research Can Help

Before you sign up for a MLM, do some research. Check the Better Business Bureau website for any complaints about the company. Then, as US News reports, ask current contractors about the company. Question them about how much money they’ve been making after expenses and how much time they put into this side hustle. Ask them if they’ve had to recruit underlings to make a profit. The more info you have, the better. Remember: Get rich quick plans like MLMs sound too good to be true because they often are.

Chris O'Shea

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