From my basic knowledge of mlm, you are basically just recruiting more people to work in a particular company, right? Why are so many people against mlms if you’re just helping people get jobs?
Edit: Okay I understand now
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In a normal company, if you work hard, you get promoted. And when you get promoted, there are some laws that dictate you should be paid roughly the same as other people who have had that position. We consider this fair. If you start as a worker then become a manager, there’s not a good reason why some managers should make 10x the money you do for the same amount of work. At the same time, if you work harder you can argue you deserve a promotion. You make more money by doing the thing you were hired to do.
In an MLM, you make money based on how much money the people you recruited are making. This is a very different kind of promotion scheme. Often to get promoted you don’t just have to sell the product, you ALSO have to recruit a certain number of people. After that promotion, the people you recruited have to get promoted before you can get promoted.
The first bad situation this creates is it means two people in different cities can have the same job title but be making dramatically different amounts of money. A “manager” in one city might only have 100 people to sell to and recruit, so they’ll NEVER make as much money as a “manager” in a city that has 1,000 people. This is NOT the same as “commissions” because you aren’t just paid based on your sales but on how many people you recruit. So even if you’re killing it in sales, if you have fewer recruits you make less money.
That leads another reason MLMs are considered unfair. If you need to sell to 10 people and recruit to 10 people for your first promotion level, you need at least 10 friends to get promoted. If you can’t get promoted until 5 of them are promoted, that means they each need to make 10 sales and 10 recruits. So for you to get promoted, you need a NEW 10 people to recruit and your old 10 recruits need to find 50 total people to recruit: 60 people. This is the “multi-level” part, watch how it works.
After that, you have to sell 10, recruit 10, and you need 5 people double-promoted under you. So:
* You need to find at least 10 people to recruit.
* Your first layer of 5 level 2 sales staff needs to find 50 people to recruit.
* Your second layer (the 50 people level 2 promoted last time) needs to find *500* people to recruit or they don’t get promoted so you don’t get promoted.
As you can see this snowballs fast, and by the time you get a few layers deep there need to be thousands of new recruits for you to get promoted. Since some of your recruits are likely to drop out, you’ve also got to frequently be recruiting *in addition to* the sales.
This is compounded by *another* shady tactic.
If I work for a company that sells shoes and I make commission, I’m paid based on how much I sell. If I have a “bad” month and my sales are low my check is small, but even if I make $0 in sales I’m not *in debt* to my company (and I probably have a small salary to compensate for this.)
MLMs almost always make you up-front BUY the product you are supposed to sell for the month, usually at least $10,000 or some other large sum. If you do not sell all of that, you make NO money AND you can’t get promoted. And when the next month comes along, you either buy a new $10k worth of stock or you are fired. So you can’t have a bad month then spend 2 months selling off the rest of your stock. If you have a bad month you LOST money and you’re going to have to find a way to make it back or quit.
So think about that combined with how quickly you might run out of customers because you’ve recruited too many of your friends. You can end up in a situation where you either go into debt and travel to a new city in the hopes you can drum up more business and recruits (or, you start social media campaigns) or you have to quit.
So in short, this is why MLMs are generally illegal and even the “good” ones are seen as shady:
* You are required to pay for your merchandise up-front and can go into debt if you don’t meet your goals.
* You are usually not allowed to skip a pay period without losing several “ranks” thus having to redo all of your work when you start over.
* You are often pressured more to recruit people than to sell merchandise.
* Since those people also have to recruit more people you very quickly get “stuck”.
The other name for these is “a pyramid scheme” and it’s because of how the network of recruits “fans out” when you draw it. The people at the top who got there first make TONS of money, at each layer beneath them people have to work harder to get promoted to the same level, and at some level it becomes mathematically impossible for a person to EVER be promoted.
*(There are a few MLMs that have lasted a long time because they try their best to stay on the legal end. While they may still require you to buy your merch before you sell it, the “good” ones don’t obligate you to buy more with a deadline. They still stipulate you can’t be “promoted” until you reach certain goals, but since you can take your time to do it they are not considered to be pressuring you to go into deeper debt.)*
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