Multi-Level Marketing: Are The Risks Too Big?

I posted a similar question on my bulletin board and didn’t get a lot of answers but I got a lot of interest in the page.  I think people are wondering if multi-level marketing can make them big money and what the downside is.  And unfortunately, there are risks: legal, economic, and company-based risks that you should know about.  There are also upside risks like the ability to make a substancial amount of money from your own effort as your organization grows.  The upside risk is greater in newer companies, but the downside risk is also greater.

Legal risks to multi-level marketing include the possibility that your company’s marketing plan will be deemed illegal.  The main thing that you, as a distributor, want to make sure is that the company is paying on product sales rather than just signing up new distributors.  Other legal risks to a marketing plan pertain more to the MLM company than to the distributor.  The company’s method of marketing could also be deemed illegal and force changes to the selling and marketing methods the company encourages it’s distributors to use.  This usually would not shut a company down but force a change.  The last legal problem, at least that I can think of, is if the government decides that the star product the company sells is harmful and bans it’s ingredients from sale.

Economic risks usually involve a downturn the the general economy or the peak of a product’s life cycle.  A product will usually grow in sales until it’s market is saturated, then begin a decline in sales for the remainder of it’s life.  If a product has peaked and more distributors are signing up, that means that there are fewer sales per distributor.  When there are fewer sales, more distributors drop out until there is equilibrium between distributors and sales.  And although it will be tougher to sign new distributors up, good groups will push out less performing groups and there will be less risk to existing business.  If you’re on the upside slope, you can expect a correction at some time in the future.

Company risks involve the company going out of business or changing their marketing plan to push out distributors.  It could also involve making it very expensive for distributors to do business or taking business from distributors.  Company risks are extremely incidious for distributors because as an MLM distributor, you really have to put all your eggs in one basket.  You can’t be part of 5 different MLM programs and succeed at any of them.

Now still, there is a great upside risk of making a lot of money in commissions from MLM sales that cannot be overlooked.  You can start with less and make much more depending on your skills and how well you do.  So what do you think?  Is multi-level marketing worth the downside risks?

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