Working with an MLM
What is an MLM
Multilevel marketing (MLM) refers to a strategy used by some direct sales companies to sell products and services. MLM encourages existing members to promote and sell their offerings to other individuals and bring new recruits into the business.
Distributors are paid a percentage of their recruits' sales. New recruits become the distributor's network or downline and are, in turn, encouraged to make sales to earn money.
Many MLM schemes are legal, but there also are illegal operations run as pyramid schemes. This has cast some negative light on legitimate MLM businesses.
KEY TAKEAWAYS
Multilevel marketing is a legitimate business strategy used by some direct sales companies to sell products and services.
Existing members are encouraged to promote and sell their offerings to other individuals and bring on new recruits into the business.
Participants are paid a percentage of their recruits' sales.
Members at all levels receive some form of commission, which means the more layers there are, the more money people can earn.
The FTC investigates MLM programs to ensure they don't operate as pyramid schemes, which are illegal.
Multilevel marketing is a legitimate business strategy commonly used by businesses that rely heavily on sales to generate revenue. Unlike traditional sales channels, multilevel marketing programs use of networks for sales and to recruit new participants. As such, they're often referred to as network marketing.
Here's how it works: Individuals are brought into the business as contractors, independent business owners, distributors, or direct salespeople. These people are then tasked with selling the company's products and/or services to others, including family and friends. Sales can be done in person or online. They are given a commission for every sale they make.
Participants also are encouraged to recruit others into the program as participants. While they may not be pressured to do so, signing up new contractors provides a financial incentive for participants, who receive a percentage of the sales of their recruits. and their recruits, and of their recruits, and so on.
There can be hundreds-even-thousands of participants, depending on the size of a company. Members at all levels receive some form of commission, as long as the chain keeps going. The more layers there are, the more money people can make.
Because multilevel marketing plans are commission-based, the participants do not receive salaries. This means that MLM businesses are often best-suited for people with an entrepreneurial spirit, who can set their own goals and schedules, who are good at sales, and who can effectively network with others not only to sell products but to recruit new marketers.
Distributors are paid a percentage of their recruits' sales. New recruits become the distributor's network or downline and are, in turn, encouraged to make sales to earn money.
Many MLM schemes are legal, but there also are illegal operations run as pyramid schemes. This has cast some negative light on legitimate MLM businesses.
KEY TAKEAWAYS
Understanding Multilevel Marketing (MLM)
Multilevel marketing is a legitimate business strategy commonly used by businesses that rely heavily on sales to generate revenue. Unlike traditional sales channels, multilevel marketing programs use of networks for sales and to recruit new participants. As such, they're often referred to as network marketing.
Here's how it works: Individuals are brought into the business as contractors, independent business owners, distributors, or direct salespeople. These people are then tasked with selling the company's products and/or services to others, including family and friends. Sales can be done in person or online. They are given a commission for every sale they make.
Participants also are encouraged to recruit others into the program as participants. While they may not be pressured to do so, signing up new contractors provides a financial incentive for participants, who receive a percentage of the sales of their recruits. and their recruits, and of their recruits, and so on.
There can be hundreds-even-thousands of participants, depending on the size of a company. Members at all levels receive some form of commission, as long as the chain keeps going. The more layers there are, the more money people can make.
Is MLM Right for You?
Because multilevel marketing plans are commission-based, the participants do not receive salaries. This means that MLM businesses are often best-suited for people with an entrepreneurial spirit, who can set their own goals and schedules, who are good at sales, and who can effectively network with others not only to sell products but to recruit new marketers.