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CandleFocus Glossary Editor
Multilevel marketing (MLM) is a legitimate business model that has been used for decades by direct sales companies to offer products and services, and to encourage members to bring on new recruits. MLM companies reward their members for making sales and for recruiting new members.
Members at every level get a percentage of the sales from the new recruits they bring into the program. For example, if a new recruit in the MLM makes a purchase from the direct sales company, the recruiter may receive a portion of that sale. The amount they receive will depend on the overall compensation system, which varies from one MLM company to another. In the same vein, when a recruit brings on more people, they and the seniors of the network (in the chain of recruitment) receive a share of the sales that this recruit makes. This continues until every person in the MLM chain is rewarded for the new recruit’s sale.
The more layers there are in the chain, the more money is earned. However, this doesn't mean an MLM program is a pyramid scheme. A pyramid scheme focuses on members recruiting new members, and the only way for members to make money is by having others join the program. In contrast, legitimate MLM companies focus on selling goods or services and provide payment for members based on their sales production.
The Federal Trade Commission (FTC) scrutinizes MLM companies to ensure they are legitimate businesses and to ensure there's no indication that they're operating as illegal pyramid schemes.
Although MLM is a legitimate business model, it is not for everyone. MLM requires a substantial commitment of time and resources and significant energy to be successful. Before jumping in, it's important to do your research, thoroughly assess the MLM company and think carefully about your interests and the commitments you'd be willing to make. With a thorough assessment and the right attitude, an MLM program could be an excellent opportunity to earn a living while both using and appreciated products and services, and introducing them to others.
Members at every level get a percentage of the sales from the new recruits they bring into the program. For example, if a new recruit in the MLM makes a purchase from the direct sales company, the recruiter may receive a portion of that sale. The amount they receive will depend on the overall compensation system, which varies from one MLM company to another. In the same vein, when a recruit brings on more people, they and the seniors of the network (in the chain of recruitment) receive a share of the sales that this recruit makes. This continues until every person in the MLM chain is rewarded for the new recruit’s sale.
The more layers there are in the chain, the more money is earned. However, this doesn't mean an MLM program is a pyramid scheme. A pyramid scheme focuses on members recruiting new members, and the only way for members to make money is by having others join the program. In contrast, legitimate MLM companies focus on selling goods or services and provide payment for members based on their sales production.
The Federal Trade Commission (FTC) scrutinizes MLM companies to ensure they are legitimate businesses and to ensure there's no indication that they're operating as illegal pyramid schemes.
Although MLM is a legitimate business model, it is not for everyone. MLM requires a substantial commitment of time and resources and significant energy to be successful. Before jumping in, it's important to do your research, thoroughly assess the MLM company and think carefully about your interests and the commitments you'd be willing to make. With a thorough assessment and the right attitude, an MLM program could be an excellent opportunity to earn a living while both using and appreciated products and services, and introducing them to others.