Amway. Mary Kay. Primerica. Pampered Chef. Any of these companies ring a bell? All of these well-known companies sell vastly different product lines, but have one thing in common — they’re multi-level marketing companies. This means that those who sign up with the company can make money both through direct sales of the company’s products or services to customers and by recruiting others to sell for the company as well, capitalizing on both their sales and recruits. These businesses are often characterized by business opportunity meetings or parties, after which visitors are invited to purchase products and/or pay a fee to join.
People join multi-level marketing businesses for the chance to earn extra money to pay off debt, supplement their current income, or replace their income entirely. Others are attracted to the six-figure salaries — or even pink Cadillacs — earned by those in high levels of the company, or the opportunity to go into business for themselves and set their own hours. However, some get burnt out, losing what could be a significant investment of their time and money in the process.
Is a multi-level marketing company worth your time and effort? The answer to that depends on the way the company operates, the value of the product or service being sold, and ultimately, on who you ask.
What Are People Saying?
Amanda Bewley, who along with her husband Wes is an independent distributor with the health and wellness company AdvoCare, said that bad actors in the multi-level marketing industry give companies like hers a bad name. Bewley said she had a lot of preconceived notions when she was introduced to AdvoCare, but came to realize that some of the marks of a solid company are the type and quality of the product being sold. She also said that she was pleased the lion’s share of her and her husband’s income with AdvoCare comes from sales of the company’s nutritional products, rather than from signing others up to join the company.
“I’ve seen a lot of companies that are ‘wheel ‘em, and deal ‘em, and sign ‘em up’ kind of companies,” Bewley said. “We do make money when we sign someone up, but that is nothing compared to what we make through royalties from products sold.”
Bewley said that what set AdvoCare apart from many other multi-level marketing companies was that the nutritional products offered were consumable, meaning customers who enjoyed the products would keep coming back to their distributor to purchase more as they ran out.
“There’s a lot of selling that we do that takes place automatically,” Bewley said. “Our products come in two-week packages. In two weeks, they’re up so (the customers) have to buy more. That’s the difficult thing for people who are part of companies that sell one-time products or services — once that person makes that purchase, they’re done and won’t be coming back for more. When considering these companies, people need to look at something that’s consumable — something that’s going to have to continue to be bought over a long period of time. Ultimately, that’s what makes us successful.”
Bewley and her husband have worked their way up over the years to become diamond-level distributors, meaning their income from AdvoCare has exceeded $400,000 a year. Bewley said she has trouble wrapping her head around their current income, and said that her satisfaction from her line of work comes less from the money and more from the freedom it provides, which allows her to be a stay-at-home mother to her young son and choose what she wants to do with her day, rather than having to report to a standard job every morning.
However, not everyone is pleased with their experience with multi-level marketing companies. Scott Padgett, who has been involved with two multi-level marketing companies — Fortune Hi-Tech Marketing (FHTM) and Melaleuca — said that he felt that the first company encouraged him capitalize on his friendships too much, and the second required him to spend too much on products as part of the startup process. Outside of the money required to stay involved with both companies, he indicated the cost to his relationships were far greater.
“I saw how much you had to change as a person to be successful, and it wasn’t worth it to me. I was losing friends,” Padgett said of his experience with FHTM. “The way they coach you is to see that everyone, everyone is a potential prospect [to join the business]. I lost friends because I kept badgering them about it. You start to have a sales mindset. You’re asked to reach into your own past experiences to find prospects — even to rekindle friendships from high school. They’re grabbing at straws with the friends you have to keep the business going. After a while, you’re no longer contacting people for friendship reasons, but to join Fortune.”
Padgett does believe that it is possible for someone to earn a substantial income with FHTM, but that the person’s life will change dramatically in the process. As you build your business, you become consumed with it, Padgett explained, and sooner or later, all of your friends become people who are involved in the business with you and those you are coaching beneath you.
“You have to really look at yourself and see how far you’re wanting to go,” Padgett said. “Do you want to change your life to make money? Then sure. If you’re not willing to put too much time in it, it’s not worth it. It really takes all of your free time, and get ready for it to cost you some friendships as well.”
Jenny Childress, who is an executive sales manager with FHTM, paints a different picture of what it’s like to be a part of the company. Childress joined FHTM at the suggestion of her brother-in-law after realizing her salary as a teacher and coach wasn’t enough to help her repay the student loan debt she had acquired in college. Childress and her husband transitioned into working for FHTM full-time in 2008 after their income from their business replaced their incomes at their current jobs. They haven’t looked back since.
“FHTM has allowed us time, freedom, and the ability to raise our beautiful daughter Kennedy ourselves (instead of day care), and the opportunity to free us up to [do] mission work with our church and to pursue our passions,” Childress said. “There’s more to life then working a job 40 hours a week for 40 years, and we are thankful for the time that we have.”
Childress said their earnings have helped her and her husband repay a large amount of debt, including credit cards, their vehicles, and most of their student loans, and have allowed them to earn more money in five years than their traditional jobs would have allowed. Childress said the biggest challenges in her line of work are the limitations she places on herself, and that people are not educated about her industry and network marketing. She also said that some people are better-suited for the business than others, namely those who are “motivated, hard-working, goal-oriented, enjoy people, and want more out of life than a paycheck.”
Is It a Pyramid Scheme?
While success stories like that of the Bewleys and Childresses encourage many to give multi-level marketing opportunities a chance, consumers should still proceed with caution. After all, some businesses that appear legitimate may be scams in disguise. The Federal Trade Commission warns consumers that some multi-level marketing businesses are illegal pyramid schemes, or unsustainable businesses that offer payment based entirely on how many people you recruit, and end up benefiting only a few people at the top of the pyramid. The FTC recommends that consumers not get involved with companies in which distributors make more money by signing up new recruits and selling to them than by selling products and services to people outside the company. Along with a healthy dose of skepticism, the FTC also recommends the following before getting involved with a multi-level marketing company:
- Research the company’s track record and reputation
- Find out how much distributors spend on business expenses such as meetings, training, fees, licensing, and if there are restrictions on returning unsold products
- Talk with distributors at all sales levels and get your questions answered to your satisfaction
- Ask a trusted friend outside of the company for a “reality check,” and run the company’s compensation plan past a lawyer or accountant
- Take your time in deciding whether to sign up rather than caving to high-pressure recruiting tactics in meetings
- Evaluate whether you have the talent and drive to be successful selling the company’s products or services
The Washington State Department of Financial Institutions offers additional advice for consumers considering multi-level marketing:
- Ask yourself if the product or service being sold is unique, or if similar products can be obtained at stores at a better price. Would you pay the advertised price for the product at a store on its own merit, without it being attached to a business opportunity?
- Find out if the claims made by the company about a particular product can be substantiated
- In researching the company, look at Better Business Bureau reports, and determine if the company is associated with any lawsuits.
- Recognize that with any new business, multi-level marketing aside, more people tend to fail than succeed. Recognize that engaging in a new business is risky, and ask yourself if you could afford to lose the money you invest.
In short, multi-level marketing companies may be a great means of making money for some people, but will leave others with a bad taste in their mouth. Only you can decide if you have what it takes to be successful selling an MLM’s products and services, and urging others to join as well.
Company Name: AdvoCare International, LP
Headquarters: 2801 Summit Avenue, Plano, TX 75074
Products: Nutritional products (weight loss, energy, sports nutrition, and more)
Buy-in Cost/How to Join: Individuals initially sign up to become a distributor; Advocare membership is $79 a year, which includes a set amount of product and a website for ordering
Company Name: Fortune Hi-Tech Marketing
Headquarters: 880 Corporate Drive, Suite 300, Lexington, KY 40503
Products: A diverse selection of products and services, including Dish Network, cell phones, Internet, electricity, hair and skin care, contact lenses, identify theft protection, and more.
Buy-in Cost/How to Join: Individuals sign up as independent representatives, and sponsors provide support. Joining fee is $249.
Company Name: Melaleuca, Inc.
Headquarters: 3910 S. Yellowstone Hwy, Idaho Falls, ID 83402
Products: Health and household products (nutritional supplements, cleaning supplies, personal care products)
Buy-in Cost/How to Join: Individuals sign up to become distributors, and mentors provide support. Membership fee is $29 (promotions can bring membership fee down to $1)