Network marketing programs feature a low upfront investment--usually only a few hundred dollars for the purchase of a product sample kit--and the opportunity to sell a product line directly to friend, family and other personal contacts. Most network marketing programs also ask participants to recruit other sales representatives. The recruits constitute a rep's "downline," and their sales generate income for those above them in the program.
Fed the fantasy of achieving the all-elusive American dream, many of them are being wooed by multilevel-marketing companies. Known as MLMs (or “direct-sales”), the current US administration is stocked with their cheerleaders: Betsy DeVos, the secretary of education, is married to a cofounder of Amway; Ben Carson is a spokesperson for a vitamin MLM called Mannatech; and president Donald Trump used to have an MLM, Trump Network, and was a spokesperson for another.
Robert Fitzpatrick is the foremost expert in the analysis of MLM’s, both from an economic perspective and from a moral perspective and this slim work is a perfect distillation of his years of research in the industry. I spent a quarter of a century working at the corporate headquarters of a nearly 50 year old MLM and I can attest that Mr. Fitzpatrick’s take on the business model is spot on. MLM, direct sales, whatever you want to call it, it’s all a recruitment-based pyramid scheme where less than 1% even make a profit, let alone a living. And all the arguments that most people only sign up to do it part-time or to get discounts on products is in direct contradiction to how MLM’s market to prospective recruits. They promote a life-changing opportunity, a chance to win a car, buy a new dream house on an island somewhere, to build an organization of salespeople below you so that you can sit back and live off “passive income” while the people below you do all the work. I think that on some level, we all feel that there is something inherently wrong with MLM, this book puts words to those feelings. For anyone interested in being in a MLM, or who is already in one, ask them to send you an income disclosure showing what the typical salesperson earns in that business. If they stonewall your attempts to get the information, that is a dead giveaway and you need to get out. On the other hand, if they give you the info but ask you, “but you don’t want to just be average, do you? You want to do better than that, right?” be aware of this because you are dealing with someone who wants you to deny simple math. What they are asking you to do is to ignore the day-to-day reality that 99% of the industry fails and the only reason to ignore it is because they want to make sure that you give them your money in order to pad their commission check. Before you take part in any direct sales opportunity, look into Mr. Fitzpatrick work, this book and on his website. False Profits should be required reading for anyone interested in signing up in a MLM because it will arm you with the knowledge you need to be able to make an informed decision.
Something multi-level marketing as well as network marketing companies are poised to capitalize on. As a result, the industry could soon experience larger than life growth, spurred by baby boomers looking to adjust their retirement feelings and plans. Whether you're interested in starting your own business for retirement income or helping others explore this entrepreneurial path, download our free guide: How To Start a Business For Retirement Income here
It is almost impossible to stop the industry because of the amount of investors and lobbyists who are profiting from them. “During the Obama administration, the Federal Trade Commission made its biggest-ever effort to curb this industry when last summer it slapped nutritional supplement–seller Herbalife with a $200 million fine and, as part of a settlement with Herbalife, demanded it restructure its business so that it would “start operating legitimately,” as FTC Chairwoman Edith Ramirez put it.” (Slate) The current administration under President Donald Trump will be a completely different story and may very well be a boon for the MLM industry. Let’s start with Trump himself. In 2009, he licensed his name to an MLM, which eventually went bankrupt, along with many of his participants. Many in Trump’s cabinet have strong ties to MLMs as well: Betsey DeVos (whose husband is the president of Amway — by the way, DeVos family has donated $200 million to the Republican party over the years), Ben Carson, Carl Icahn (a billionaire who is also a major investor in Herbalife and holds five board seats at the company), and Charles Herbster.
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