Why I work with MLMs and how I help them with their business.

 

Some business coaches won't work with MLMs because they don’t consider them real businesses. MLMs have gotten a bad rap over the years due to bad actors. They are still out there, constantly coming up with new schemes. However, there are some very legitimate MLM businesses out there.

Back in the day, I joined an MLM that was very successfully founded in the 1960s and is still operating internationally today. Its founding model was solid and worked well for women who needed to raise kids and earn extra income.

Things you are most generally told when you join an MLM are: “You are in business for yourself but not by yourself.” “The product sells itself.” “You don’t need business experience; we will teach you!” “We are just getting started with the company. Get in on the ground floor and make some money.” “We have a back office that does all the work for you.” “Make a full-time income doing part-time work.”

Those last two always get me. Part-time, ain’t going to do it, especially starting out, and is that back office tracking your business expenses, like gas?

I worked with the MLM I was with for twelve years, and I learned a lot about how they operate. MLMs are great at teaching you about their products and providing extensive education in sales, sales techniques, and closing deals. And by the way, most MLM products are usually top-notch (not always snake oil), and people do love to use them! I was the top salesperson in my district during my first six months, and I continued to rank highly within the team, earning all kinds of prizes, diamonds, and accolades.

When I joined the company, I already had a solid business and sales background and immediately noticed some flaws in the system. Because of my background, I approached my role as if I meant business. I set up spreadsheets, customer tracking, P&Ls, call logs, and calendars. This was back in the day, so there were no computers or systems within the company to help with these items. They only tracked how much money you were spending with them and any commissions from building your team.

How much money you spent with them was how you became the queen of sales. Not by how much you were selling. They figured that if you are purchasing, then you must be selling. Not true.

What I observed was strong women taking advantage of women who didn’t know anything about business, how to run one, or how to get the contacts to start one. The entry fee was under two hundred dollars, but the stronger woman would talk women into purchasing LARGE amounts of inventory to start a business, even though they knew the women had no experience and only had time to work for a few hours a week. It was unconscionable. Boy, do I have stories.

I knew women who were left in tears, having to put a second mortgage on their homes, who couldn’t retire, who had to take out loans or file bankruptcy because they trusted the woman who recruited them as they purchased too deeply into the products. AND to top it all off, the products had a shelf life. So much of it had to be tossed when the sales didn’t come. When I asked one of the recruiters if she felt guilty for what she was doing to people, her answer was, "Nope, they are adults and can make their own decisions.” Wow.

Now, about consumable goods. If you are going to sell something, consumables are a great choice. If clients love the product, repeat sales are great! All you have to do is follow up and get immediate sales. It is easier to keep a client than to find new ones.

So, about those profit margins. Sometimes, the profit margins are very low, depending on how much you purchased. The more you buy, the higher the margins. However, even at their highest, the margins are still low for a reseller.

I have an extensive background in retail sales. Trust me, stores cannot make a profit on the margins they offer to MLM sales reps. When I owned or ran stores, I always looked for products that I could get a 200% or more profit margin on! Trust me, you won’t find that in an MLM. Yes, overhead is much higher for brick-and-mortar, but there is also overhead for those who work in MLMs that must be accounted for.

I sold a ton of products, but the margins were too low to make a substantial profit. Why? The cost of goods sold PLUS the cost of doing business. When you add in the cost of doing business, like supplies, catalogs, business cards, gas, sacks, and other business-related items, the profit was slim to none.

So, how do you make real money in an MLM? The answer is to strategically plan. The answer is who you know and how many contacts you have in your little black book to get started with. The answer is building a team.

Building a team. First and foremost, only the top people in the MLM make all the money. Usually, they were there at the start of the company. They profit from all their recruits and the teams their recruits build, and so on down the chain. They profit from your purchases.

When I built my team, I always told them to listen only to me when it came to buying their products. I trained them like business owners. Yes, we learned from the company as well, but I felt responsible for these women and was not going to set them up to fail, go bankrupt, or anything like that. I treated them not as a number or as a way to make money off of them, but with respect for their talents, income levels, and knowledge, and I worked from there. If they wanted it badly enough and were able to put in the work and the hours, then I would teach them how. I was honest with them about the real investment!

So, how do I help MLMs? I start with a simple business plan. I get a lot of arguments over this; no one wants to write one. But we don’t move from that point. If they won’t write a business plan, and I teach them how to do it, then I won’t move forward with helping them. A business plan keeps you on track, on mission, and out of hot water when you have planned out the finances and planned for the what-ifs.

I teach inventory control, open-to-buy, team building, and how to create a basic P&L that tracks income, commissions, cost of goods sold, and outgoing expenses. You have to work with real numbers! Otherwise, you might as well throw spaghetti at the walls.

Case in point. Someone I knew who was in an MLM was so excited about the sales she made at an event she had a booth at. “Debra! I made $300 dollars at that event.” Here’s the deal: Sales do not equal income. She was so confused by this.

I asked her what the cost of goods was for the items she sold. She couldn’t tell me. I asked her if she added up her expenses for being there, like the cost of the booth, gas, flyers, business cards, etc. She hadn’t. She did not make $300 or even close. She didn’t know how to figure it out either.

I know that when I was in the MLM, the higher-ups were not happy with the training I provided to my team, and they even asked me to stop training women on how businesses really work.  Why? Mostly because my team was educated and wouldn’t fall for the tricks. And there were some shenanigans going on for sure.

I provide the education you need if you are going to be in an MLM. Why do I work with MLMs? Education is empowerment. You will know how they work, what they don’t teach you, and how to keep everyone out of hot water and still be successful.

 

Debra Lee | Biz & Life Coach | Author & Keynote Speaker | DLBizServices.com