MLM as a retirement income

A quick editors note up front: I hope you guys will be patient with me when I write about topics outside of music. My strategy here has always been to write about things of interest to me and based on the feedback I get, a lot of you like it when I stray from music. The only topic I avoid as much as possible is politics.

If you are like me, you have a lot of Facebook friends in MLM (multi-level marketing or pyramid) companies. The hot things right now seem to be essential oils and various weight loss products. MLM was on the ropes there for a while but it seems to be having a resurgence. In fact, I just read this article today in Forbes that proposes MLM as a retirement income strategy. I would ignore such an article usually because 95% of the time, it would be written by a MLM spin doctor but Forbes is a credible publication and the article is apparently written from a neutral position. So I want to talk about it.

It would be very fair for you to ask me why I am qualified to talk about MLM. In fact, I would want you to ask me that because if I am not qualified, you should just ignore this post entirely. Here is why I am qualified though: though I do not talk about it hardly ever here, I have been involved in MLM for 15 years. For a short time back in the early 2000’s, it was my primary income. Even today, I get checks every month from at least four MLM companies. About eight years ago, I sold a large MLM distributorship for a large amount of money. Back in those days, I was considered a “hot” MLM marketing guy. Companies would actually fly me to their headquarters to try to recruit me. I sold training materials to MLM’ers because I was successful in internet retail and MLM was just learning how to deal with the internet.

Eventually as I became more involved in the building of Vitabase, I moved away from MLM as a primary income though as mentioned, I still have some business interests in MLM. I won’t name the companies and I am sure not going to try to sell you any products here. I suppose  that makes me a bad MLM’er but so be it…

So what is my opinion of the Forbes article? In general, it is naive and uninformed. And because it is Forbes, it is also dangerous because people are actually going to read it and act on it. Some of you might be considering MLM and it might be a great thing for you. I would not tell you not to do it, but on the other hand, you need to know the truth rather than the spin. So here are the three major weaknesses in that article.

1) MLM is not retirement income because MLM is hard work itself.

To his credit, the author actually does a good job emphasizing the fact that MLM’ers really do work (which makes the title of the article a bit perplexing). I am glad he wrote that way because the most laughable MLM spin of all is that MLM is residual income where people rake in large amounts of money without doing anything. Don’t get me wrong–that does happen occasionally just like people win lotteries and get struck by lighting. But don’t expect that to happen to you. I have never met a successful MLM distributor who did not work a lot. And even if distributors get to a point where they don’t have to work as much, rest assured that they worked extremely hard to get to that position.

In what way does that sound like retirement to you? Seriously… Who in their right mind would retire from a decent paying job just to become a distributor in a MLM company? If you had no retirement income, you would be crazy to do that. If you were fired or were just tired of your job, it might make sense to try MLM. But make no mistake about it. You are not retiring to MLM; you are just switching the type of work you do. That is not retirement.

2) In no way is MLM stable income.

Retirement is supposed to be about financial stability. MLM is anything but stable. Don’t get me wrong, it can be occasionally lucrative but it is not stable. Yes I know that no income is 100% stable but certainly we can agree that some income is more stable than others. MLM is probably on the low end of the list. There are many reasons why but here are the big three:

* The products tend to be faddish. All the major MLM hits we have seen in recent years such as noni juice, mangosteen juice, essential oils and about a gazillion weight loss products are all fads products. They are popular for a while and then either disappear or just see a dramatic decrease in sales. There are very very few MLM products that stand the test of time.

* Most MLM companies fail or shrink dramatically within a few years. Many of the companies that are hot today will be forgotten soon. Even if they survive, their revenue will be a fraction of what they are selling today with their fad products. The idea that a MLM distributor can have a long career with a company is usually a myth.

* MLM companies own their distributors. Distributors have no rights. Companies can change their compensation formulas on a whim, kick out distributors, and change their policies overnight. I personally have been on the receiving end of that treatment many times. I can’t count the number of times that I have seen MLM companies come out with “improvements” to their compensation plan. I have yet to see a time where those “improvements” did not reduce the overall payouts to distributors.

Once, I was kicked out of a company. I was at the second highest commission level in the company and had a seat on their advisory board and the president informed me of my termination by a cryptic email that appeared suddenly one day without warning. When I called him to ask why, his response was that if I wanted to know why, I would have to take them to court. (I actually know why I was terminated; I was selling products for other companies at the same time and they did not like that.)

Another time, we were selling a product online like crazy. It was nuts. And then one day, an email popped up from the federal government. It said that the MLM company had been seized by the government for deceptive health claims and I had one day to get the website off the internet. A substantial income went to $0 with that email. (By the way, the health claims I see being made on Facebook about essential oils are far worse than what that company was saying.)

I could tell stories for hours but just take it from me. MLM is not a stable “retirement” sort of income. It is anything but.

3) The odds are overwhelming against any income at all.

I don’t care what the MLM is–almost all of their distributors make no money to speak of. By the way, they are required to disclose that information to you and you can always get that data for any company you are interested in.

If you are being recruited by a MLM distributor, they will ignore that reality or gloss it over. They will tell you that most distributors do not make money only because they don’t work hard enough and don’t want it bad enough.

That is rubbish. Here is the real reason why most distributors do not make money: they are not good at selling and they don’t like selling. 

Make no mistake about it: MLM is about selling. Distributors will tell you it is about “sharing.” It isn’t; it is about selling. They will tell you that the products will sell themselves. They don’t; you have to sell them.

They will also tell you that they can teach you to sell. Most of the time, they can’t; selling is a personality thing. People that are good at selling are good at selling. They have a particular personality with certain strengths that make them good. Most people do not have those strengths. They have other strengths instead. They will never be good at selling and they will always hate selling.

So, unless you are good at selling and like to sell, the chances are very good that as a MLM distributor, you will end up like 99% of other MLM distributors: making no income, miserable, and eventually quitting. Regardless of what your MLM friends might tell you, that will not mean in any shape or form that you are a failure. It will simply mean you are not meant to be a salesperson. There is no shame in that.

So do I think that in light of these three problems that MLM is a good option for retirement income? Not usually. I actually think it is a horrible idea for most people, especially those who don’t have a lot of money saved and can do other work. People that can afford some risk at retirement time and are good at selling might want to take a shot at it. That is a small minority though. Everyone else should stay away. If you need money, there are easier, less risky ways to earn it.