can mlm make you rich?

If you're thinking of getting into the MLM world, you may be wondering if it can really be as lucrative as some people claim it is. And the answer is yes, you can make legitimate money with an MLM. But there's more to the story than that.

At a basic level, with an MLM, you sign up to sell a specific product line directly to consumers. You can do so by hosting in-person or Facebook parties, or attending local fairs and festivals and setting up a booth. Each time you sell a product, you get a commission. Sell more products, and your commissions grow -- it's that simple.

But the real way to make money with MLMs isn't to stop at selling products yourself. Rather, it's to recruit a sales team to work under you. That way, you get a cut of each commission your salespeople collect. Assemble a team of, say, 20 or 30 people, and you may indeed manage to pad your bank account with thousands of dollars each month.

But recruiting salespeople and getting them to stick with the program is easier said than done. It'll require you to train people, hold team meetings and events, and do a very good job of tracking and managing inventory (your own and that of your salespeople). As such, if your goal is to make a lot of money with an MLM, then you'll need to be willing to put in the time and effort.

If you're only looking to dedicate a few hours a week to an MLM, then don't expect to get rich from it. Sure, you might earn a few hundred dollars a month, which is a nice amount of extra spending money, but you probably won't earn enough to pay your mortgage.

In fact, I have one friend who spends roughly three hours a week posting specials on Facebook and hosting the occasional online or in-person party. She earns about $300 a month. When you break that down into an hourly rate, that's $25 an hour (assuming 12 hours per month), which isn't bad. That $3,600 a year is generally enough to pay for a modest family vacation. This friend also doesn't have a sales team under her -- she simply sells her own inventory.

Another friend who used to work for an MLM (but eventually got tired of it) was once making in the ballpark of $40,000 a year. She also had a whole bunch of people working under her and worked the equivalent of 30 to 35 hours a week. She, too, earned about $25 an hour, but only because she put in so much time. And given that she had earned about $65,000 a year at her previous job, which she left to free up time to raise her kids, the MLM situation stopped being worth it.

This was my first time getting a sales pitch for a multilevel marketing company, but it wasn’t the first time I had heard about this kind of recruitment tactic. I had seen her posts on Facebook, where she bragged about the flexibility and financial freedom her burgeoning business venture had allowed her. I had seen other Facebook friends hawking leggings, lipsticks, and the opportunity to hawk leggings and lipsticks under them. According to the Direct Selling Association, the multilevel marketing (MLM) industry’s lobbying arm, one in six American households is involved in the industry.

Most MLM salespeople don’t make a ton of money — a 2017 report by the Consumer Awareness Institute found that 99 percent of MLM sellers actually lose money. The website Magnifymoney recently polled 1,049 MLM sellers across various companies and found that most sellers make less than the equivalent of 70 cents an hour. Nearly 20 percent of those polled never made a sale, and nearly 60 percent earned less than $500 in sales over the past five years.

This is a far cry from the success stories promoted by most multilevel marketing companies. To see how accurate the survey was, I talked to seven current and former MLM sellers about their experiences. They worked for 10 companies in total, including LuLaRoe, Amway, and Mary Kay. Some made thousands of dollars a month, a few managed to break even, and some ended up losing money. Some gave up on MLMs entirely after one experience; others hopped from one company to the next.

Signed up by: A friend

What she put into her business: 25 to 30 hours of work each week; $5,000 on clothing, approximately $2,000 on clothing racks, promotional materials, and packaging

What she got out of it: Nothing

It was easy when I first started. That summer, I had really high hopes that it was going to be really successful, because a lot of stuff I had was selling right away. Every sale I had, I was selling between 20 and 50 pieces. As the fall started to come around, there started to be a lot of quality issues with the clothes. Customers didn’t seem to be buying anything anymore — it was a lot harder, and you had to work a lot more for those sales.

I never actually took a paycheck, because one of LuLaRoe’s philosophies is that to be able to sell a lot of clothes, you have to have a lot of inventory. They really push new consultants to put everything they make back into the business right away. I didn’t actually make any money doing it because I just reordered with all the profits I made.

Signed up by: The woman who does her nails

What she put into her business: 30 to 40 hours per week; $700 on an initial inventory order

What she got out of it: 42 women on her downline; an undisclosed amount of money she reports is on par with what she made at her full-time job

It’s actually my third multilevel marketing endeavor. I had previously worked with Monavie, which is a nutritional beverage, as well as Beach Body, which is a fitness program. I spent a significant amount of time, money, investment into those businesses with no luck. I had a real bad taste in my mouth about multilevel marketing in general, and I had kind of sworn it off forever. But once I looked into SeneGence, which is LipSense’s main company, it was very different than what I was used to, and I decided to give it a go.

We’re legally not allowed to disclose specific numbers about our income — it’s part of our compliance. It’s just been a very positive experience for me.

Signed up by: Her father’s co-worker

What she put into her business: Approximately 11 hours per week; $99 initial inventory purchase

What she got out of it: $30 to $40 per month

was like, “Hey look, this is what so-and-so is doing, and she said it’s out-earning her paycheck.” Knowing what this lady does and her educational background, she was probably pulling in $50,000 to $60,000 a year through her regular job. So I was like, “Whoa, holy crap, she’s earning $6,000 a month off ItWorks!”

They tell you things like, “If your business isn’t succeeding, it’s because you aren’t working hard enough,” and, “You have to be a product of the product.”

They encouraged us to demonstrate the wraps on people, or on ourselves. They give you tricks that make the product sound like it works, but when you do research on how your stomach and digestive system work, that science doesn’t work at all.

Signed up by: A friend (LipSense); that same friend (Maskcara)

What she put into her businesses: 20 hours per week with SeneGence, LipSense’s parent company; 10 hours per week with Maskcara

What she got out of them: $3,000 per month from downlines’ commissions with LipSense; $1,700 in September with Maskcara

I didn’t like the way things were run. It was very cutthroat. The biggest thing I had an issue with is that they made you purchase your products upfront. You had to check a box saying you have sold your previous inventory nobody has done that.

I had a great team, and I didn’t spend a crap-ton of time doing it, but I know women that are just making nothing — and they spend hours and hours and hours. But then you find women that are making, like, 100 grand a month and maybe spend the same amount of time I was. It’s a game of luck — it’s when you get into it.

When I was with SeneGence, there were about 80,000 distributors. When I joined Maskcara, I was one of the first 2,000.

Signed up by: A friend (Arbonne); through the website (Avon); a friend (Young Living)

What she put into her businesses: $750 on inventory with Arbonne; $10 to sign up for Avon, plus expenses; $450 with American Income Life Insurance Company; $150 for the Young Living premium starter kit

What she got out of them: Nothing; she lost money with Arbonne and went into debt with Avon

I’ve actually been involved with a few MLMs. I got involved with Arbonne because I posted on my Facebook page that I needed to work from home because I couldn’t afford child care. So naturally, my friend who was involved with Arbonne messaged me like, “Oh, I have this opportunity.” I met her for coffee with her upline. At the time, I didn’t really understand MLMs or most of what they were — I thought it was legit.

When I went to interview with the American Income Life Insurance Company, I was like, “This kind of reminds me a little bit of the Arbonne meetings,” but it didn’t hit me that that was what it was. It wasn’t until Young Living essential oils that I really understood. In the business-building classes, I asked them, “What’s the best way to get long-term retail customers?” I was doing research with the and found out that we need to have retail customers if we want to be legitimate.

My upline said she doesn’t worry about retail customers; she just worries about getting wholesale customers — i.e., distributors — and selling to them. That’s when I really began to understand what an MLM was.

Signed up by: Her boss at her full-time job

What she put into her business: 10 to 20 hours per week; a $3,000 initial inventory purchase, plus additional orders since then

What she got out of it: Nothing; she lost money

When you’re getting started, everyone encourages you to invest everything back into it and buy more product. So instead of keeping that , you just keep buying more and more, because there are constantly new things coming out.

One of the options they tell you you could pursue is to get a loan. I’m glad that when I signed up, I had money saved away that I used. Not that I’m happy about having thousands of dollars’ worth of makeup sitting in my house that I can’t seem to get rid of, but there are actually people out there who are getting loans to start selling.

makes 13 percent of Mary Kay’s portion of every consultant underneath her that places an order. I think our group has 110 people in it. And she did over $120,000 in sales just by herself this past year — she has about 400 different customers. The town she lives in has 75 people, so it’s like, oh she’s from this itty-bitty town and she’s doing great. She’s driving this brand new pink Cadillac. If she can do it, why can’t I? But it does not work that way.

You’re not allowed to sell stuff to other people’s customers. We lived in this small area of North Dakota, and she had 400 customers. She had a monopoly on the area.

Signed up by: A personal training client at the gym

What he put into his business: 10 to 15 hours per week; $885.79 in initial registration fees

What he got out of it: $2,500 to $3,500 CAD per month; more than 100 people on his downline

I was 20 years old . I was working as a personal trainer, and I had recently dropped out of school because my dad was a gambling addict and my family had declared bankruptcy at the time. I was in a vulnerable state, just wanting to make more money.

The way we were taught was just to hit whatever threshold in terms of client sales that allowed us to make commission off of our downline. In terms of sales, we didn’t do a lot — we had one or two clients that just liked our products, and they would buy a couple hundred dollars of product every month. That really only translated to $100, $200 of profit, which is not a lot. The majority of the income came from making commissions off your downline.

After a while, I started to realize that a lot of the things I was doing were very unethical. Not necessarily illegal, because a lot of these MLM companies have certain loopholes in terms of legal stuff that allows them to be in business. But a lot of the stuff that we were doing just didn’t sit right with me. I bought up a lot of issues that should be changed — for things to be run a little bit better, for us not to screw people over or lie to people or mislead people. That didn’t really sit well with the leaders.

Want more stories from The Goods by Vox? Sign up for our newsletter here.

MLM companies sell their products or services through person-to-person sales. That means you’re selling directly to other people, maybe from your home, a customer’s home, or online.

If you join an MLM program, the company may refer to you as an independent “distributor,” “participant,” or “contractor.” Most MLMs say you can make money two ways:

Your recruits, the people they recruit, and so on, become your sales network, or “downline.” If the MLM is not a pyramid scheme, it will pay you based on your sales to retail customers, without having to recruit new distributors.

Most people who join legitimate MLMs make little or no money. Some of them lose money. In some cases, people believe they’ve joined a legitimate MLM, but it turns out to be an illegal pyramid scheme that steals everything they invest and leaves them deeply in debt.

Pyramid schemes are scams. They can look remarkably like legitimate MLM business opportunities and often sell actual products, maybe even ones you've heard of. But if you become a distributor for a pyramid scheme, it can cost you and your recruits — often your family and friends — a lot of time and money that you won’t get back.

The promoters of a pyramid scheme may try to recruit you with pitches about what you’ll earn. They may say you can change your life — quit your job and even get rich — by selling the company’s products. That’s a lie. Your income would be based mostly on how many people you recruit, not how much product you sell. Pyramid schemes are set up to encourage everyone to keep recruiting people to keep a constant stream of new distributors — and their money — flowing into the business.

Often in a pyramid scheme, you’ll be encouraged or even required to buy a certain amount of product at regular intervals, even if you already have more inventory than you can use or sell.

You may even have to buy products before you’re eligible to be paid or get certain bonuses. You also may have to pay repeated fees for other items, like training sessions or expensive marketing materials. In addition, the company may say you can earn lavish rewards, like prizes, bonuses, exotic vacations, and luxury cars. However, it often turns out that you have to meet certain product purchase, recruitment, training, or other goals to qualify for the rewards, and only a handful of distributors ever qualify.

Eventually, most distributors find that no matter how hard they work, they can’t sell enough inventory or recruit enough people to make money. They also can’t keep up with required fees or the inventory purchases they need to make to qualify for rewards, and they can’t earn enough money to cover their expenses. In the end, most people run out of money, have to quit, and lose everything they invested.

Here are some warning signs of a pyramid scheme:

If you’re considering joining an MLM, know that some MLMs — even ones that aren’t pyramid schemes — may not be a wise investment. Other MLMs may not be a good fit for your interests and lifestyle. Here are some ways to help protect yourself against a bad MLM experience.

Getting rich, attending a certain lifestyle that comes with the amassing of wealth, is everyone's dream.

Some try to amass wealth on their own, by getting a good job, investing in financial and real estate assets, and by pursuing their own business.

Others try to amass wealth collectively, by joining franchise organizations and multilevel marketing networks.

While the second way to the riches is faster and less risky than the first, it isn't for everyone.

Joining a franchise organization usually requires a considerable upfront investment and monthly fixed expenses very few people can afford.

Joining a multilevel network requires the mastery of relations to recruit and retain the right people, which very few posses. And the commitment of time to train and monitor the members in their downline, and build and manage a business.

That's why very few people get rich in multilevel marketing networks, with the majority ending up being customers rather than business owners.

Herbalife is a case in point. An estimated 2% of those individuals eligible for performance (underlining) payments with one or more Members in their downline earned at least $50,000.

That’s according to a company report that released the findings from research and analysis conducted by Walter H. A. Vandaele, Ph.D. of Navigant Economics, LLC regarding Herbalife’s U.S. business operations.

Is this figure higher or lower than an average business venture?

Its’ hard to say.

Herbalife’s Key Financial Metrics

What it isn’t hard to say is that only those who are highly committed to this business model and stay around make it to the top. “Of the three highest level Members, 64% were only in this position 10 years or less and 26% were Members for 5 years or less,” according to the same report.

Can you really make money in an MLM? The short answer is yes, but in reality, only a tiny percentage of representatives actually realize the high earnings advertised in MLM promotional materials and at meetings. Some people don't make any money at all, and some people actually lose money.