The Possibility of MLM Success

According to the AARP Foundation, one in every thirteen people (18+) has engaged in at least one multi-level marketing (MLM)—also known as direct sales or network marketing—organization throughout their lives.

But, do these individuals really earn money via multi-level marketing?

What are the real chances of MLM success?

The Consumer Awareness Institute's founder, Jon M. Taylor, Ph.D., set out to address those concerns by undertaking extensive study and analysis of the compensation schemes of over 400 MLM firms.

He published his conclusions in a 2011 booklet titled "The Case (For And) Against Multi-Level Marketing," which is available on the Federal Trade Commission's website.

More recently, the AARP Foundation sponsored a research that investigated the mentality, expectations, and experiences of MLM participants, and the findings were published in a paper titled "Multi-level Marketing: The Research, Risks, and Rewards."

Both findings indicate that although success with an MLM organization is conceivable, it is not typical.

Success and Dropout Rates in MLM

According to the AARP Foundation's research, 44 percent of members left their MLM within less than a year.

Taylor's study yields comparable results and delves a bit further into dropout rates:

In the first year, at least half of all MLM representatives quit.

Within five years, at least 90% of representatives depart.

Only those at or near the top had not dropped out by year 10, implying that at least 95 percent of representatives had dropped out.

When compared to the typical failure rate of small companies, these figures do not auger well.

According to the U.S. Small Business Administration, about 20% of small companies fail within a year, approximately 50% fail within five years, and approximately one-third fail within ten years.

After learning what they know today, almost two-thirds of the participants in The AARP Foundation's MLM research indicated they would not join the same MLM business.

MLM companies do not qualify for SBA loans or other small company financing and support programs because to their low success rates and other requirements.

Amounts Invested in an MLM

Taylor investigated the expenditure needed to start a successful business-building campaign for a recruitment-focused MLM, or a firm that pays for recruiting a "downline" team in addition to selling a product.

He believes that total costs will be at least $25,000, which includes incentives, goods, phone, internet, gifts, computer supplies, promotion, and travel.

He joined a recruitment-focused firm and worked full-time for the company for a year to get at this number.

He performed all that was required of him, including purchasing monthly training items and attending conferences.

If you decide to join an MLM, approach it like a real company, even if it's only a side income for you.

Many reps suffer as a result of not doing this.

Your company is likely to collapse if you do not consistently advertise, sell, and do the tasks that generate revenue.

These expenses have been substantially decreased in recent years.

The internet, online training, flat-rate long distance and/or mobile phone service, and free and cheap online marketing have made it much more economical to start any company, including MLM.

According to a more recent AARP Foundation study, 66 percent of MLM participants spent less than $1,000 on inventory, training, and materials while with an MLM organization, 24 percent spent between $1,000 and $4,999, and 11 percent paid $5,000 or more, with 23 percent unable to recall how much they spent.

Only four individuals said they spent more than $50,000.

7 How to Make Money in an MLM

Is it possible to earn money in an MLM?

The simple answer is yes, however only a small proportion of representatives achieve the huge profits promised in MLM advertising materials and during meetings.

Some individuals earn no money at all, while others actually lose money.

According to the AARP Foundation, just approximately 25% of individuals polled earned a profit through MLM, 27% broke even, and about half lost money.

Profitable quarters include:

14% earned less than $5,000.

6% earned between $5,000 and $9,999.

3% earned between $10,000 and $24,999.

3% earned more than $25,000 each year.

5% earned $100,000 or more.

According to the AARP Foundation, just 40% of MLM participants got a copy of the company's revenue disclosure statement.

16 percent of those who got it thought it was "extremely accurate," 50 percent thought it was "pretty accurate," and 24 percent thought it was "fairly accurate."

It was "inaccurate," according to 9 percent of those polled, and "not at all accurate" according to the other 9 percent.

Taylor's study yielded a more pessimistic conclusion: "On average, one in 545 is likely to have benefited after deducting costs, and 997 out of 1,000 people engaged with an MLM lose money (not counting time spent)."

10 Not All MLMs Are Created Equal

If you're still considering joining an MLM, it's critical that you carefully study and examine the business and goods to ensure that it's not a fraud.

You must also be certain that it is a product and system that you believe you can market.

There are numerous single-level marketing businesses that sell goods without a recruitment component and have a significantly greater chance of earning revenue than conventional MLM statistics.

This is due to the fact that income is earned exclusively via product sales—there are no downlines, minimums, or recruiting methods.

Furthermore, some MLM businesses are product-centric, with pay plans based on product sales.

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