The low-down on multi-level marketing

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It’s a pretty common scene these days: You log onto Facebook (or Instagram, Twitter, Pinterest, etc.) only to find friends from high school, college, or even the office touting the benefits of shampoo, essential oils, handbags, jewelry, workouts, and more. The companies and products have clever names and they promise to whip you into shape, or give you the best hair day of your life—or any other number of amazing things. They also promise to put a little extra money in your pocket if you’re willing to get involved and start selling products yourself.

Welcome to the world of direct sales. It’s not really a new thing (think Tupperware parties and your friendly neighbourhood Avon lady), but what is new is its surging popularity. According to Canada’s Direct Sellers Association (DSA), the number of “independent sales consultants” (in other words, all those Facebook friends) has almost doubled since 2012, from 700,000 to 1.3 million and counting.

Most direct sales companies today are structured as “multi-level marketing” organizations (MLMs). That’s when existing salespeople recruit new salespeople—often from within their own friends and family—to build a team of salespeople below them called their “downline”. A consultant makes commission off their downlines’ sales and if they were recruited by somebody else, their recruiter is part of their “upline”, which means they make commissions off their sales.

It’s a model that has caused many critics to compare MLMs to pyramid schemes. But MLMs position themselves as ways to earn extra cash, dip your toes into entrepreneurship, and—just maybe—strike it big. So, who’s right?

That depends on who you ask.

Diana, 35

Diana had a simple goal: “Stay home with my kids and not have to clean teeth for a living.”

So two years ago, when the former dental hygienist saw a friend pitching hair-care products on Facebook, she perked up immediately. “No one I knew had heard of it,” she says, “but I fell in love with the product, the community, the people, everything about it.”

Diana joined the company as a “market partner”, a move that required her to spend $249 on a starter kit with products, marketing materials, and a website. She started selling and recruiting and within six months, she’d replaced her salary as a dental hygienist.

But Diana acknowledges that her fast ascent wasn’t typical. “It happened really quickly for me,” she says, “and that might give people false expectations. I worked hard, but I was lucky, too.”

Very lucky in fact. The DSA reports that altogether, Canadian MLM consultants make about $924 million a year. Which might sound like a lot, until you divide that total income by the 1.3 million sales consultants across the country. The average take-home? About $710 a year.

Venus, 46

For Venus—who has tried several MLMs over the years—the opportunity to build relationships was one of the big draws.

Initially, the idea of making extra money while connecting with other women, and bringing something useful into their lives, was exciting. But time after time, she grew disillusioned. “The products are overpriced, surrounded by hype and emotional manipulation, and very misleading talk about the financial potential,” she says.

In fact, she found she ended up spending more money than she was making. But worse, the promised camaraderie never seemed to materialize. “You think corporate ladder climbing can be ruthless, but this is way worse,” she says. “Backstabbing, stealing clients, it was incredibly competitive. Even if you feel like maybe an MLM could work for you, ask if it’s distracting you from your own dreams and plans. I found I was putting so much into this instead of my own business or other things in my life.”

Lesley, 33

For Lesley, she turned a passion for fitness into an MLM side hustle—with mixed results.

She used her personal social feeds to tout exercise packages, fitness shakes, and meal plans. But her particular program was also focused on showing results in addition to selling products. That meant she was expected post images in workout gear and before-and-after shots of her pre- and post-fitness program body.

“I know I had friends rolling their eyes at me when I was posting sweaty selfies and flexing,” says Lesley. “But then other friends would say ‘You’re so inspiring. I’m going to take better care of myself.’ And again, there was the sense of camaraderie: If you get on a good team, where everyone is encouraging and supportive, you become a little tribe.”

But Lesley also came to find it time consuming and emotionally draining. She spent about 15 to 20 hours a week on her side hustle work and in her best month netted close to $2,000. But more typically she was earning less than $1,000 monthly—barely more than minimum wage when considering hours worked.

“The idea is to work your own hours, but because so much is social media, you can burn out really easily,” says Lesley.

Still, she considers it a good introduction to entrepreneurship. She stopped MLM work recently, but credits some of what she learned with helping her get her own marketing business off the ground.

Are MLMs right for you?

Ultimately, whether MLMs are right for you or not is a personal choice. Like anything, to be successful it takes time, dedication, and a solid understanding of the system—both how it works and how you can work it to your advantage.

MLMs can be really great if you’re looking for a flexible schedule or have a taste for entrepreneurship but aren’t quite ready to fully be your own boss. Most programs offer things like marketing packages, websites, and tips and tricks to help you sell your product, which can be really helpful.

If you have the time and energy to dedicate to your business, you can be successful—just ask those consultants who have earned big ticket things like trips, jewellery, and even cars. But MLMs shouldn’t be viewed as a way to get rich quick and any that promise that are probably too good to be true.