MLM (Multi-level Marketing)

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How Do MLM (Multi-level Marketing)

  • The Structure:

    • Independent Distributors: These are the salespeople for the MLM company. They’re not employees but rather independent contractors who buy products from the company at wholesale and then resell them at retail prices.
    • Downline: Each distributor builds a team by recruiting new distributors under them. This network of distributors they recruit is called their downline.
    • Focus on Recruitment: A key aspect of MLM is building your downline. Distributors earn commissions not just from their own sales but also from the sales of their entire downline.

    Making Money:

    • Commissions: Distributors make money through commissions on product sales. There are typically two ways to earn commissions:
      • Retail Profits: The difference between the wholesale price they pay the company and the retail price they sell it to customers.
      • Downline Commissions: A percentage of the sales made by their downline distributors.
    • The Promise: MLM companies often promote the idea that anyone can achieve financial success by building a large and productive downline.


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For the Company:

      • Low Overhead Costs: MLMs rely on independent distributors to sell their products, which cuts down on the need for a large sales force or retail stores.
      • Viral Marketing Potential: By incentivizing distributors to recruit others, MLMs can create a network effect, spreading brand awareness and sales opportunities quickly.
    • For the Individual (Theoretically):

      • Be Your Own Boss: MLMs often appeal to people who want to be their own boss and set their own hours.
      • Uncapped Income Potential: The promise of high earnings and financial freedom is a major lure for MLM participants. However, it’s important to remember that success rates are generally low.

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  • Structure:

    • Independent Distributors: People sell the company’s products rather than being salaried employees. They are often referred to as distributors or business owners by the MLM company.
    • Downline Teams: Distributors build teams of new recruits under them, creating a pyramid-like structure. Distributors earn commissions on their own sales and a percentage of sales made by their downline.
    • Focus on Recruitment: A significant aspect of MLM involves recruiting new distributors to expand your downline. This is where the pyramid structure becomes most evident.

    Earning Potential:

    • Commission-Based Income: Distributors earn money through commissions on product sales they make personally and sales made by their downline teams.
    • Income Disparity: The potential for high income is often promoted, but the majority of MLM participants make little to no money. Success in MLM often relies heavily on being able to recruit a large and productive downline, which can be challenging.

    Products & Sales:

    • Direct Selling: MLM companies rely on distributors to sell products directly to consumers, often through social networks, presentations, or online platforms.
    • Product Focus vs. Recruitment Focus: There’s a spectrum within MLM. Some companies emphasize selling quality products, while others prioritize recruitment of new distributors. The legality can sometimes hinge on this balance.


Q: What does MLM stand for?

A: Multi-Level Marketing, also called network marketing or pyramid selling.

Q: How does MLM work?

A: People sell products as independent distributors and earn commissions on their own sales, plus commissions on sales made by distributors they recruit (their downline).

Making Money in MLM

Q: How much money can you make in MLM?

A: MLM companies often promote the idea of financial independence, but success rates are low. Research the company’s income disclosure statement for realistic figures.

Q: How do you earn money in MLM?

A: Distributors earn commissions from product sales by themselves and their downline.

Is MLM Right for Me?

Q: Is MLM a pyramid scheme?

A: MLMs are legal, but some resemble pyramid schemes, which focus on recruitment over selling products.

Q: Should I join an MLM?

A: Consider the risks: low success rates, time commitment, and potential financial loss from startup costs.

Q: What are the downsides of MLM?

A: Difficulty making money, high upfront costs (starter kits, products), and a focus on recruitment over product sales.

Getting Started with MLM

Q: What’s involved in joining an MLM?

A: You’ll likely pay a signup fee and purchase products upfront. Then you’ll focus on selling products and recruiting new distributors.

Q: What should I know before joining an MLM?

A: Research the company’s income disclosure statement, understand the time commitment, and be aware of the financial risks.

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Last Update
16 May 2024
14 April 2024

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