What is Multi-Level Marketing?

Multi-level marketing, better known as MLM, is a term that sometimes has a negative connotation. It refers to companies that hire you as a freelancer or an independent contractor. Instead of receiving a weekly paycheck, the company bases your earnings on the amount of items that you sell. Some think of this as a pyramid scheme, but a pyramid scheme is completely different. Depending on how many people you know, how well you market yourself and your sales ability, you can make a large amount of money in an MLM program.

What is MLM?

An MLM program typically consists of a head or parent company that hires individuals to work in the field. You receive a catalog of products that you can sell in various ways. You might host parties in the homes of friends and loved ones, go door to door, set up your online website or even sell at a flea market. The company pays you a percentage of the total amount that you sell. A pyramid scheme generally requires that you recruit people to work underneath you and bases your pay on the number of people you recruit.

How Much Can You Earn?

The amount that you can make really depends on your sales ability. There are some salespeople who try selling MLM products and wind up losing money because they buy products they use as samples, throw elaborate sales parties and spend a lot on gas. Other salespeople can make thousands of dollars a month and actually make more than they would in a more traditional job. Some companies offer bonuses and incentives for their top sellers. Mary Kay, which is a makeup and beauty company, provides its top sellers with a car painted in the company’s trademark pink color.

What Can You Sell?

There are literally thousands of multi-level marketing companies that offer tons of products. Mary Kay and Avon are two of the leading makeup companies. Avon also operates a smaller company called Mark that specializes in makeup, clothing and beauty products for teenagers and younger women. If you prefer selling customized bags, you might work for a company like 31 Gifts, which imports bags from overseas and does custom stitching on those bags in the United States. Other companies that you might work for let you sell health care supplements, home decor, clothing and even personal protection products like stun guns and pepper spray.

Signs of a Scam

The Federal Trade Commission warns consumers to look at the differences between MLM programs and pyramid schemes. According to the FTC, a pyramid scheme is a program that only pays you money when you recruit people to work underneath you. Instead of paying you for the products you sell, it pays you for the products that those under you sell. A small amount of every product sold goes to each person higher on the list. Those at the very top may earn thousands, but those at the bottom may not make any money.

While pyramid schemes are illegal in the United States, MLM programs are completely different and give you unlimited earnings potential. When choosing a multi-level marketing company to work with that sells clothing, makeup or other products, make sure the company pays you for each and every product that you sell to others.