Create Your Own MLM in Ten Easy Steps

Hundreds of thousands of Americans get sucked into Multi-Level Marketing (MLM) companies each year. From Mary Kay to Amway to Herbalife to PrePaid Legal (now Legal Shield), the list is seemingly endless. Each offers its own special spin on the products it sells, but the main focus of an MLM is on recruiting new members.

MLMs live and die by the recruitment of new members, who make the bulk of the product purchases from the company. Little of the product is resold to an actual end user, but the MLM company doesn’t care. The sale has been made to the distributor (or associate or representative or member or consultant or whatever term you like).

It’s widely knows that those in MLMs make little money. In fact, almost everyone in the pyramid loses money. The real money makers in the scheme are those who own the MLM company. So in the spirit of giving, I’m offering you ten simple steps toward creating your very own MLM. Start yours now and cash in on all those people who are dying to hear about your “opportunity”!

1. Come up with a product or service that you can make sound revolutionary. Funky berry juice, groundbreaking face cream, or unusual financial services will be fine. The only caveat is that you must be able to make it sound like something that’s never been done quite this way before. This adds to the mystique.

2. Create a commission structure (also called pay plan, incentives, or rebates) that is difficult to understand, and that pays about 8 to 10 people in an upline as soon as an associate buys something from the company. Ultimately, those in higher levels in the company reap all the rewards, and this is ideal, because it gets everyone on the bottom excited about the “possibilities” and they will recruit their little hearts out.3. Commissions must be paid as soon as the associate makes a purchase from the company. You don’t care if the associate ever resells your product or not. Whether they sell it is their problem… you already have your money.

4. Avoid any talk of being a pyramid scheme or multi-level marketing company. Although those terms are accurate, they carry negative connotations and should be avoided at all costs. You could use some other term like network marketing, dual marketing, or binary compensation. If you’re really clever, you’ll come up with a brand new name for your “system.” That way you can’t be associated with any other MLM that might have a poor reputation. You’ll always be different.

5. Create credibility for your business. This means getting endorsements from people who sound important. Get a business publication to write about your company and promote that article everywhere you go. Join the Direct Selling Organization… it’s nothing but a bunch of MLMs who started a club, but it sounds good to consumers who don’t know better.

6. Give your product or service a high price. This is important for two reasons. First, it is necessary in order to be able to pay the 8 to 10 levels of commissions that you have established. Second, it allows distributors to pretend that your product is “high quality.”

7. Set up strict requirements for “moving up” in your company. The requirements must include a certain number of new recruits plus a minimum amount of product purchases by the distributors in a downline. This ensures that you will have “production” rolling in, even if people aren’t selling your products or services. Associates will most likely have to bring in friends and family who buy products simply so the recruiter can move up. This happens over and over and the production numbers are looking good for the company.

8. Find “early adopters” who will recruit like crazy so you will have some “success stories” to promote to potential distributors. Most people are recruited by playing on their dreams of financial success. Those pyramid-toppers will be necessary to show new recruits that it can be done and they can have it all too.

9. Create “tools” to help distributors become successful. Almost everyone fails in MLMs, but the longer you can keep them believing that they could succeed, the more money you can get out of them. One way to keep them interested and engaged is through tools and training materials. They’re little more than cheerleading sessions to tell distributors that they could someday be successful. But the distributors will pay good money to hear this.

10. Hold periodic events that get people excited and recommitted to the MLM. Since almost everyone fails, this could begin to be somewhat of a downer. These events are needed to parade around those few success stories and to pump everyone up about the company.

Above all else, make sure that those who join your MLM are always dreaming of financial freedom. That hope of one day making the big money will be your key to success as the owner of the MLM. Dreamers will keep putting money into your company and that means success for you!

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Comments (12)

  • Karen

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    II. MULTI-LEVEL AND PYRAMID SALES ORGANIZATIONS
    Confusingly similar terminology is being used by some multi-level, “network marketing” or pyramid companies, who sell
    directly to consumers in the home. In the course of your Mary Kay business, you will no doubt be confronted with
    questions from customers or potential recruits concerning the Mary Kay marketing plan. It is important to clarify that
    Mary Kay is not a multi-level or “pyramid” company. The following points concerning the Mary Kay marketing plan are
    of particular importance in distinguishing it from these other organizations:
    A. There is one wholesale sale (Company to Independent Beauty Consultant) and one retail sale (from Beauty
    Consultant to customer) of Mary Kay® products. There are no levels of wholesalers between the Company
    and the consumer through which products pass at varying discounts before sales. Thus everyone, whether
    Independent Beauty Consultant or Independent Sales Director (unit Director of Beauty Consultants), purchases
    all cosmetic products directly from the Company at the same published wholesale prices for resale to
    consumers of their choice. Everyone has the opportunity to buy at the same discount irrespective of their level
    within the independent sales force career path.
    B. Everyone recruited as an Independent Beauty Consultant is recruited to sell products at retail. Independent
    Beauty Consultants do not recruit others to buy products from them. All Independent Beauty Consultants are
    thus aware that all products purchased by them are for sale at retail to ultimate consumers (or may be returned
    to the Company for repurchase).
    C. Everyone begins as an Independent Beauty Consultant with the purchase of a starter kit. No compensation is
    earned by anyone on this starter kit purchase, i.e., “for introducing” a new Independent Beauty Consultant. No
    “investment” is required and no level within the independent sales force career path may be purchased by the
    payment of fees or by the purchase of a given quantity of products from the Company or anyone else. There are
    thus no “sales” of “levels,” “positions,” “distributorships,” or “franchises” by the Company or any of its’
    Independent Beauty Consultants.
    D. Elevation from Independent Beauty Consultant to Independent Sales Director does not involve the payment of
    any fee, rebate, premium or hidden discount of any kind to either the Company or anyone else. Elevation, at the
    election of any Independent Beauty Consultant, is based strictly upon proven recruiting and sales ability.
    E. Any Independent Mary Kay Beauty Consultant who terminates her contractual relationship with the Company
    may return unsold products in resalable condition, and these will be repurchased by the Company per the terms
    of the Independent Beauty Consultant Agreement at 90 percent of her original net cost.
    F. The Company pays all commissions directly to Independent Beauty Consultants and Independent Sales
    Directors. The commissions are paid based upon monthly purchases and recorded on computer reports
    furnished with the commission payments. The entire marketing structure is based on and intended to foster
    retail sales to ultimate consumers. Commissions paid on any products returned by a terminating Independent
    Beauty Consultant for repurchase by the Company, pursuant to Item E above (i.e., products not sold at retail),
    are charged back to the commission recipient

    Reply

  • Tracy Coenen

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    Hi Karen – This is propaganda from Mary Kay Inc. to try to “prove” that they’re not an MLM and a pyramid scheme. But they are. They don’t stop being a pyramid scheme just because they say they aren’t. The company relies on recruiting and frontloading, and very little actual selling of product occurs. That’s a pyramid scheme, like it or not.

    Reply

  • Pedro Menard

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    “F. The Company pays all commissions directly to Independent Beauty Consultants and independent Sales Directors. The commissions are paid based upon monthly purchases and recorded on computer reports furnished with the commission payments.”

    Well, I think this ONE sentence says it all!

    Pyramid scam “à la carte” :-)

    Commissions based on PURCHASES, nor actual SALES. No computer records on the Sales. No way to know if there are ANY sales. Complete disregard to the model and values of “DIRECT SELLING”.

    Nice Going, Karen! Keep’em coming!

    —-

    Briliant Post, Tracy, and funny as well.

    Regards from Portugal,

    Pedro

    Reply

  • Bob Hart

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    What I notice about the many varied but similar schemes masquerading as legitimate business opportunities is that they basically survive like a parasite feeding upon the body of their supposed business partner host. What really allows this host/parasite relationship to happen is that the host doesn’t accurately perceive what is really going on. The host’s first mistake is forming a relationship with the parasite, and the second most tragic mistake is allowing the parasite to “teach” the host how the relationship should work. The host may become very uncomfortable with the parasite, but the parasite keeps the host dreaming about the glorious days when the parasite is going to be so grateful for the host’s blood sacrifice that the parasite is going to pay the host back handsomely and they will live happily ever after as in a fairy tale.

    We know that parasite/host relationships do not work this way in the physical real world, and neither does it work that way in the real world of these scam business “opportunities!” (Which are truly never an opportunity.)

    What allows parasitic relationships to exist under this guise of a business relationship is that the host is not truly knowledgeable in the way and means of business, and this ignorance allows the parasite to take control of the host partner. The host could easily break the relationship by casting the parasite off, but the parasite convinces (cons) the host into a false belief set. As long as the host remains deceived and deluded, the parasite succeeds, suckles and grows fat. At some time into the future, the host–badly weak from being sucked dry–casts the parasite off. The parasite then goes off fat and happy looking for another “business challenged” person (host) to suck up to.

    The best and only real defense against MLM pyramid scams and schemes is true business knowledge, common sense and wisdom. These “dream merchants” prey upon people who do not understand core fundamental business concepts necessary to avoid the pitfalls and deceit of the hard sell. They are taken in by imperfections of their own character and lack of knowledge.

    Reply

  • Carlos

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    Tracy,

    The way you describe MLM companies, makes the readers to believe that all MLM companies operate like this. And if they do, it seems that you’re telling the readers to start their own to steal from people. What am i missing here?

    Reply

  • Tracy Coenen

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    I believe you are missing the sarcasm with which this was written.

    Reply

  • Meg

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    Great post. Recently found your site and love your articles.

    Another warning of MLM’s is when the numbers just don’t add up. Family members years ago joined Amway oh, sorry, ‘Network 21′. In turn they tried to recruit me, ostensibly by asking if they could practice their pitch with me.

    During the pitch, the numbers just didn’t add up. When I mentioned this, they tried to convince me I was mistaken, or it would be covered ‘later’. When I insisted, they looked guilty, then crestfallen. They finally admitted it DIDN’T add up and that they had been told not to worry about it because nobody would realise it. I had already made it clear I had no interested in joining Amway/Network 21, but what I wondered was how THEY could have joined, especially considering what they’d been told. I don’t understand how people can be so greedy that 1) they know the numbers don’t add up but try to pull the wool over other people’s eyes, and 2) most importantly, why would THEY go into business with the people upline who were telling them to do it?

    Greed makes people happy to try to dupe others ‘downline’, and blind enough not to realise that they are ‘downline’ from the ones who recruited them. I think it’s sad what people do to each other, and themselves, for the love of money.

    btw your article gave me the idea to start a business, oops, RELIGION where people have to pay to ascend levels to unlock further knowledge …oh, wait, that’s already been done? oh well.

    Reply

  • watermelonpunch

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    I think the issue with Mary Kay is that many years ago, the business model actually made sense… In the days even before the Rite Aid money-back-no-questions-asked guarantee on make-up you don’t like. They offered the opportunity to try on make up in privacy at home before buying, rather than at a public make-up counter in a department store.
    I don’t know how relevant this is today though.
    Sort of like the “Fuller Brush Man”, or Tupperware, or Avon.. where back in the days of 1-car households where women stayed at home, a door to door salesman made sense.
    Some of these companies had products that were comparable to in value to normal products.

    I have no doubt that back in the 70s, there was more money to be made from sales in those companies by sales level reps.

    I think even those companies have shifted even more toward recruiting because simply, the business model of door to door direct sales just doesn’t make sense in today’s society.

    When you take a company like Fortune Hi-Tech Marketing on the other hand – there was NEVER any product of their own, and absolutely zero reason to buy any products through them as a middle man.

    Or the Herbalife vitamins & such – which can be purchased better quality & cheaper just about anywhere else.

    At any rate, the comment about “never mention pyramid” was certainly not one made by FHTM.
    They even had it on a slide – showing what a pyramid is “under the law” and showing how FHTM’s structure was successful in side-stepping those laws, so you could be confident about THEIR pyramid, because of their set-up.

    Reply

  • Sharai

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    I was involved with Mary Kay and it IS a MLM. They will tell you it’s not and give you all kinds of reasons it’s not and blah blah blah blah. They couldn’t convince me it wasn’t. Why is it then that the real money makers are the directors who drive cars? Only a Director can drive a Pink Cadillac and they call it a “Cadillac Unit”.

    I still use MK products but I just purchase retail. Selling is not my thing but I will not try to sell or become something I don’t want to be. I know using the products sounds hypocritical but it really did change my skin.

    Reply

  • Tracy Coenen

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    Sharai – Don’t be fooled. Most of the directors are making very little money. Often less than minimum wage.

    Reply

  • watermelonpunch

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    @ Sharai – I too have used Mary Kay products over the years, and have to give credit where credit is due, some of the cosmetics were long-lasting, kind to skin, and more cost efficient than some of the department store pricey make-up products.
    I will even say I once bought a lipstick I think from some cosmetic direct seller MLM type rep of some sort, that was possibly my favourite lipstick I’d ever found up until that point.

    But the fact is that they are often over-priced for what they are, and still the sales reps, even the “directors”, when all their time is accounted for, are not making much money per hour, despite this.

    And a smart shopper can now find comparable quality cosmetic products in drug stores these days.

    The deception is a perception problem caused by the natural human tendencies that lead people to believe things long after they make sense, or fail to take the time to critically examine a situation logically.

    Naturally you’re going to get a better product if you buy the product that’s the low-end of the pricey stuff rather than the low end of the cheap stuff.

    The comparison is not fair.

    If you go into the drug store you think – wow, this nail polish is $8 – that’s expensive compared to this other that’s 99 cents.
    Then you buy the 99 cent nail polish and think – wow this is crap compared to Este Lauder’s $15 bottle, and crap compared to Mary Kay’s $12 bottle…
    Well, you very well might be right.
    Well but that’s not taking into account the $8 nail polish that you didn’t buy at the drug store.

    It is a lot easier to apply, dries faster, and is more chip resistant than the 99 cent one, and moreover, it might be equal in quality to the $15 bottle of nail polish at Macy’s, or the $12 bottle from Mary Kay.

    But that gets lost with the idea that “what I bought at the drug store was junk”. Well of course it was junky, it was 99 cents.

    And not to even knock the 99 cent stuff, because clearly there’s a market for it. If you’re a fashion die-hard on a tight budget who likes to change your nail polish colour ever few days – there’s really no reason to buy anything more chip resistant or fancy.

    Almost all products are subject to the possibility that “you will get what you pay for” to some degree – and you have to be a smart shopper in order to make sure you are getting what you’re paying for.

    Whether it be vitamins, cosmetics, or power tools, there’s going to be people who are looking for a cheap alternative they’re willing to settle for.

    Though I’m not sure I see the need for low-end vitamins. Cheap nail polish is one thing. A cheap power tool for someone who’s only going to use it once or twice, or very infrequently & lightly might make sense.
    Not sure of the need or possible use for shoddy vitamins!

    Reply

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