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Multi Level Marketing, or MLM, is when you buy a product from the orginal company and then resell it to others at a slightly higher margin. You also earn a profit when others agree to join this company and resell their products. The more people who are recruited under you, the higher your level becomes. Some direct sales organizations are defined as MLMs. Take a look at the advantages and disadvantages of multi-level marketing.
Advantages of Multi-Level Marketing
Low cost to start up means that if the business fails you have not risked as much money as you would have had you invested in or bought a franchise or business opportunity.
High earning potential, though only relatively few people reach a six-figure income.
MLM distributorships are designed to be run from your home. Working at home and MLM are extremely compatible.
You can have a satisfactory MLM distributorship on a part-time basis.
You can successfully run a part-time MLM distributorship in addition to having a job or another business.
The MLM parent company generally provides the marketing and promotional materials you will need.
In many cases, the MLM company provides bookkeeping, sales tracking and other business-related services.
Your downline organization could eventually provide you with some "passive" income.
Reputable MLM companies stand by their products and assist with customer support and/or complaints.
MLM companies usually provide extensive low-cost training and motivational materials such as videotapes, audiotapes, books and special events like ralles, etc.
You can learn selling and people-management skills usable later in your career.
You may find a community of people in your MLM company that satisfies your social and business aspirations.
Disadvantages of Multi-Level Marketing
Desite the longevity of industry leaders such as Amway, Shaklee, Mary Kay Cosmetics and others, a great many MLM companies only stay in business for a few years.
MLMs reputation, justified or not, often makes it difficult to recruit people into your downline.
Keeping your downline motivated to stay active selling and recruiting is sometimes more difficult than recruiting them in the first place.
MLM companies do not offer exclusive territories. In fact, the very nature of MLM distribution is based on recruiting as many people as possible. Some people feel this can quickly lead to a saturated market for the products you offer.
The average gross income of an active Amway MLM distributor, based on Amway published figures, was $88 per month in 1995.
Despite the claims, actual average incomes derived from MLM distributorships are so low that for most people they are not viable as full time opportunities.
MLM contracts are not as formalized as those in franchising and therefore can lead to more disputes and other problems.
You may experience some unpleasant changes in your relationships with friends, family and associates. By attempting to sell and recruit those closet to you, you may be perceived as pesky, pushy or worse.
MLMs tend to market themselves with inflated offers and misleading promises. It is sometimes difficult to find out what you can realistically expect.
It is harder to research an MLM company before becoming involved, especially since some MLM companies even deny that are an MLM.
There is generally less support in terms of business planning, market analysis and other business-planning functions.
Many MLM companies use highly emotional appeals to address people's fears and dreams. Such approaches purposely obscure the company's actual structure.
Rules of termination are far less clear than in franchising.
The structure of MLM companies makes the industry hard for state and federal agencies to regulate.
The complex "matrixes" used to calculate the commissions you will earn from your downline are often complicated, convoluted and just plain hard to understand.
Most people will not get to the point of generating much "passive" income.
Not everyone can generate the "passion" MLM uniquely requires for successful sales and recruitment. As a result, the turnover rate of ditributors exceeds 100 percent a year.
You must feel comfortable knowing that the overwhelming number of people you recruit will end up spending more money than they earn.
Excerpt from Home Businesses You Can Buy: The Definitive Guide to Exploring Franchises, Multi-Level Marketing, and Business Opportunities Plus : How to Avoid Scams
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