It’s a common occurrence these days: a kind-of friend, mutual acquaintance, person you once had a class with in college, or cousin’s neighbor contacts you on Facebook and says they want to share a great opportunity to make money selling leggings, makeup, weight loss shakes, essential oils, you name it. You’re intrigued, so you scroll back through their profile for the past six months or so and see they have a ton of posts about how much they love these leggings, how much weight they’ve lost, or what a cash cow these essential oils are. You’re officially interested.
But what are all these companies, and why is every third person you know suddenly signed up to sell with them? Companies like Jamberry, Plexus, Rodan + Fields, and Young Living all fall under the category of direct sales, also called multi-level marketing (MLM), networking marketing, or pyramid selling. These companies, and hundreds like them, operate by encouraging their sellers to draw on their personal relationships with friends and family to buy their products. They also, and more importantly for the company’s longevity and overall business strategy, pressure sellers to recruit more people to start selling the product under them.
At this point, you might be tempted to slide into the comments and say “I started selling with one of these companies and it’s a great opportunity!” Maybe you’re right — maybe you are the one person in 10 who is not going to leave the company and stop selling the product within five years’ time. Maybe you won’t be one of the thousands of people, mostly women, who have lost money, gone into debt, or failed to make any profit at all from selling with these companies. But more likely, you’ve been hoodwinked just like almost everyone else who has jumped on the MLM bandwagon in the past decade.
Perhaps at you’re thinking “Pyramid schemes are illegal and this company is a legal business!” Well, just because a company is toeing the line of what’s legal or hasn’t been called out yet by the FTC doesn’t mean it’s a good organization to get involved with. Many payday loan companies are perfectly legal and also perfectly awful. “Not prosecuted yet” doesn’t equal “totally legit organization.” Here are the do’s and don’ts of the next great opportunity your boyfriend’s mom’s best friend wants to share:
1. Do not buy a starter package, product kit, or mounds of inventory.
Any company that requires you to spend your own money to sell their product should immediately raise a red flag, especially if the price tag seems high for what you’re getting. A $9,000 startup is far too much to pay for the privilege of selling crappy leggings. Yes, if you were to open a brick-and-mortar store you would stock it with inventory that you’d have to purchase, but you’d have control over that inventory. You could choose what to sell (from a wide variety of manufacturers and distributors instead of just one), how much inventory you wanted, and after purchasing the inventory at a significant discount, you would get to decide on the price of this merchandise to sell to your customers — most of whom would not be your family and friends. In an MLM, the company controls most, if not all, of these factors, and the sellers are at their mercy.
2. Do not hard sell or recruit your family, friends, coworkers, or random Facebook acquaintances.
If a company tells or shows you that the real way to be successful is to recruit other people to sell under you (your “downline” in MLM parlance) so that you get a percentage of their sales, this should set off alarm bells in your head. This structure, where you’d be far more successful recruiting others than selling products, is the pyramid-building part of “pyramid scheme.”
3. Do not pay for training, classes, and/or to attend an expensive convention or conference.
A company that wants its employees to cover the cost of their own training, especially if this training is deemed a requirement for making money, advancing in the company, or getting opportunities that others who don’t pay for training won’t have access to, is an MLM who makes its money off its sellers, not its buyers. Any legitimate company worth their salt will invest in all of their salespeople and the professional development of every employee, not just those who pay for the privilege of drinking the company Kool-Aid at “Reach for the Stars Convention 2019!”
4. Do make sure you know what you’re getting into.
If an ~opportunity~ seems too good to be true, it probably is. Dig into the fine print of anything that you’re signing and make sure you really understand what is required of you (especially if you’re expected to pony up your own cash for any part of it), what you’re committing to (for example, if you don’t reach a certain sales goal how will you be penalized?) and what, if any, recourse you have if the claims the company promises you don’t actually pan out.
If there is anything about the company, the person who recruited you, or the product you’re going to be selling that doesn’t sit right with you, don’t do it. If you’re in need of extra cash, there are many other more profitable side hustles out there, so investigate some of those options before you fork over $600 in fees to be a “consultant” in an MLM scheme. And whatever you do, stop trying to sell me ill-fitting, low quality, pizza-print leggings on Facebook.
A grant writer by day and personal finance fanatic by night, Marisa is an avid traveler who lives in Pittsburgh, PA. When she’s not reading or writing for work or play, she enjoys running, thrifting, and searching for the most authentic Mexican food in the city.
Image via Unsplash