New Multi-Level Marketing Survey Reveals Pros and Cons

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Many of you have considered multi-level marketing as a side hustle, and whether you’re still in consideration or you have already joined, I want you to have all the facts.


AARP Foundation released the results of a new survey this week—with 1,016 respondents, including 601 people who had participated directly in multi-level marketing—and it clarifies some of the challenges of participating in this type of marketing, and it turns out, it’s not for the faint of heart!


What is multi-level marketing?


You’ve probably heard of—or even participated in—multi-level marketing (MLM) even if you haven’t heard this specific term. It’s also called network marketing or referral marketing, because salespeople rely on the people in their network to make sales and earn money. Multi-level marketing is technically the sale of products or services where the earnings of the company come from a pyramid or binary commission system.


In simpler terms, it’s when you attended your neighbor’s jewelry party or when your cousin hosted that kitchen supplies party. More than 21 million Americans are or have been involved with MLM, and according to the survey, 90% of these participants joined as a way to make money.


Multi-level marketing can be lucrative—according to AARP’s report, it’s a $36 billion industry—but in order to make it work, you need to have serious expectations and prepare for a commitment.


What should I do before participating in multi-level marketing?

AARP has some solid advice from their research regarding multi-level marketing.  Before getting started with a company, they suggest:


  • Visit the Better Business Bureau and Federal Trade Commission websites to see if there are any complaints about the company.
  • Speak to your contact at the company, other recent participants, and current representatives to thoroughly assess the advantages and disadvantages.
  • Search online using terms such as “work hours” and “incentives” to see what kind of time participants are investing and what they are getting for their time.
  • Consider your “warm leads,” who are often the people closest to you, and whether or not you’d be comfortable selling to them.These are often the first people you will have to approach, and you’ll want to believe in your product or service.


What are some of the downsides to participating in multi-level marketing?


Though you likely joined multi-level marketing as a way to make money, that’s often not the case. 47% of the people surveyed by AARP lost money, and another quarter (27%, actually), made no money at all.


Of the remaining 25% of participants who made a profit, more than half of them made less than $5,000.


It can also be awkward to pitch to friends and family members, and 39% of those surveyed said they stopped participating in an MLM for this reason.


MLMs take a significant amount of time and energy before they pay, and you are never sure if you’ll benefit, says Amy Nofziger, the Director of Fraud Programs at the AARP Foundation. “Even with hard work and dedication, income or success is not guaranteed,” she says. So don’t expect an immediate payoff, or even a long-term one. Do your due diligence by researching the company and determining if it’s the right fit for you and your family.


Should I participate in multi-level marketing?


If you’re on a fixed income, as many seniors are, multi-level marketing can be especially appealing, but you should begin with the company with reasonable expectations and continue to assess if the opportunity is right for you. By doing your research, you’re already on the right path.


Approaching this endeavor like any entrepreneur, you’ll need grit and determination to make it successful. You’ll also have to invest the hours, have the awkward conversations, and probably suffer a few losses before you become one of the 12% of people who make more than $5,000 with your company.


There are certainly situations where multi-level marketing is a good option, and I admire those of you who are out there hustling and making it happen.

Have you participated in multi-level marketing? Was it a success?

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The Finance Bar is a personal finance suite helping women and couples achieve financial wellness through financial therapy, education, and an innovative learning hub on wheels. Creator Marsha Barnes is Certified in Financial Therapy, Financial Social Work, and serves as an Official FICO Brand Ambassador, and was named GOBankingRates’ Best Money Expert in the Net-Worth Category.

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