MLM Speech

I’m doing a speech next week on MLM Structured Businesses. Yayz.

Today I’d like to talk about MLM structured companies. Who here knows what MLM stands for? *Picks on person to share with the class* Great!

So why does MLM matter? Well as it turns out we’re in the middle of this thing called a Recession. Because of the Recession, jobs are scarce and people are struggling to make ends meat. Yet while most businesses are letting people go, there is a surge in the number of MLM- structured companies employing people. It is actually recommended for people to start adding home-based businesses to whatever work they currently have.  

Now for those who don’t know what MLM really means, I’ll go over its brief history. MLM structuring really got started in the 80s. It was flourishing, until the 90s came along and some people took advantage of the system. This is where Pyramid Schemes came from and it finally got to the point where people started getting arrested for fraud. Then MLM companies decreased in popularity because of their negative association to pyramid schemes and also in necessity because “traditional business structures” were working just fine.

For the past 5-10 years MLM-structured companies have been making their way back on the scene and today they are flourishing. Why is that? Well, MLM –which is also known as Network Marketing or Home-based businesses- offer several things that traditional businesses do not. 1) Since most MLM businesses work on commission of sales or services and not a fixed schedule like the 9-5 routine in traditional companies, there is more time freedom for those who work in MLM companies. 2) They allow for growth. Most employees will never become CEOs in traditional business companies, but in MLM structure –you get paid what you put in, so if you work as hard as a CEO would, you will become one. 3) Most people like the tax-breaks that you can get from “owning your own business. Unlike Mom and Pop Shops you don’t necessarily have to pay for a physical building or even products, which allow you to deduct certain costs, but also not have to pay for those you would have if you had a building. 4) Lastly, one of my favorite things about the MLM-structure is the fact that anyone can join and they are usually invited into the business by friends. I have never seen as much diversity in a traditional office as I have seeing different MLM businesses. Some MLM businesses are now starting to become more selective with the people they let in, but in general –anyone can join regardless of their level of education, past work experience, and even their fluency in speaking English.

Now for the downsides. MLM is not for everyone. 1) It involves “being a salesperson” on some level because you are either trying to sell a product or a service. Mostly this entails Networking –which is why most MLM companies prefer to use the term Network Marketing. They go about making business transactions by word of mouth –the same way a Mom and Pop shop would. 2) This would be a lot easier if it weren’t for issue number two: People will assume you are in a Pyramid Scheme. Your friends will call you an idiot. Your parents won’t believe in you. Few will support you. You have to address and remove that stereotype from their mind as soon as you join if you want to have any sort of support from your friends and family. Here’s how you know if you’re in a Pyramid Scheme: If the company does not offer a Product or a Service and they ask you to pay money into the company itself with little or no explanation as to why –it’s probably a Pyramid scheme. 3) You don’t get paid regularly for doing little work. With a normal job if you slack off and nobody notices you get paid regardless. With MLM –you get paid on commission. You get paid directly for the amount of work you do. Some people who are not independent and self-motivated find this line of work to be very challenging. They make excuses and doubt themselves and ultimately let themselves fail at the business.

Now I’d like to go over types of MLM companies that are around. There are firstly Home-based businesses that sell products. My mom sold Mon Avi for a while. Avon make-up is another one. I’ve heard of people selling Tupperware, Cutco knives, vacuum cleaners, my sister and I joined a company that sold Nutritional Supplements. Then there are other MLM structured companies that offer services. I’m in a company that offers financial advice to people. I’ve heard of people who provide physical training services. Career coaches also fall into this category. I will say that although MLM and Network Marketing are similar in the way they practice their business; their internal structuring can be different.  For instance Real Estate would be better termed as Network Marketing while a Broker Firm would be called a MLM company if it had that internal business structure.

But who cares about the products, it’s all about the money right? Let’s go over the monetary compensation plans for these MLM businesses… 1) First thing to note is that most MLM companies pay on Commission. This commission tends to vary according to your position in the company –same as it would in a traditional business with the CEO making more than the Employee. They way you increase your position in the company is by either making more sales or building a team to work with you. 2) There is also something called Residual income. This is why, if you are going to have a home-based business selling specific products, you should make sure the products you sell will continuously need to be renewed by your clients. This is why people in my grandmother’s neighborhood avoid the Tupperware lady who tries to sell them plastic containers, but people don’t avoid Avon if they’ve tried it once because if they like the product some point soon they will need more. You have to find a need and cater to it. We’re in a recession. If your product is higher priced and only gets sold once –you will make a lot in one sale but in general you won’t sell a lot. So you have to decide if the Quality of your product is needed more than the cost of it. People don’t need to renew Tupperware and knife sets on a regular basis. Find something people do need regularly, then you will get residual income from your clients buying regularly from you without you having to resell them the same thing over and over. 3) Home-based businesses are intended to be on the side in support of your traditional job. Sometimes you have to buy and give out samples so it helps if you have more income coming in from a steady job to support your home-based business. But MLM companies that provide a service of some kind should probably be done full-time or with the intent of eventually going in full-time. Comparing the commissions earned between a Home-based business and a Service-based MLM business, what will happen is this: In your Home-based business your commission will usually tart out at 10% and reach its peak at 20%. Then when you move up in position within the company you will be given stocks of that company. The higher the position, the more company stock you get. People don’t usually reach the point of getting stocks in home-based businesses unless they’re going full-time in it. On the other hand, with Service-based businesses, you will usually start off with a commission of 25% and as you gain higher positions you will increase your commission from 35% to 61% to 82% -at least from what I’ve seen. Then when you hit the “CEO” position, you will also be given stock on top of that. You get more money with Service-based MLM companies because it’s easier for people to go full-time and commit to the business.

Lastly I’d like to go over the Internal Business Structure itself. Traditional companies have differing ranks called Employee, Manager, and CEO –with some job positions in between. The MLM structure is actually pretty similar. You have your Associate level –which is a new employee. Then you hit your “Manager level” –which is usually called something like Senior Associate or Director- which you will usually get after you’ve made a certain number of sales and have built a team. Then there’s the CEO level, which is when you are training multiple teams of people and are making lots of sales on your own. When you hit a position related to being a Manager or a Senior Manager –you can retire from the business, and often people do. You can only do that however if you have built up a team and have a certain amount of residual income from your services or sales.

I would now like to go more in detail over the Internal structuring itself because it bugs me when people say MLM is a Pyramid Scheme.

Well there it is in all its glory. The ameba-shaped pyramid of Giza.

As you can see, the higher the rank –the higher the commission. However, the higher the rank of those working under you, the less over-ride commission you get from them. You cannot “mooch off” your team. There is always a CAP preventing you from living off of the work of others.

And just as with traditional businesses, the CEO makes more than the manager makes more than the employee. Only with MLM, the employee can at any point they choose put in the work and promote themselves to a higher position.

I hope this overview of MLM structure was helpful either in giving you a better understanding of this new type of business that is reemerging or in helping you yourself decide if a MLM company is right for you.