Multi-level marketing companies are quick to tout the success of their “million dollar earners.” Sounds impressive, doesn’t it? Who doesn’t want to make a million dollars?
Except that phrase “million dollar earner” hides the truth:
- What they don’t clearly mention is that this is cumulative earnings over a number of years, typically between 5 and 20 years.
- They also fail to mention that this is gross income, prior to any business expenses. The business expenses in multi-level marketing can get very high, and will include product purchases (in order to stay active and/or meet requirements for certain commission levels), travel, office expenses, training costs, business insurance, supplies, prizes for customers and downlines, venue rental for events, food for events, etc. The expenses can easily equal 40% to 60% of gross income.
- The companies don’t usually tell you that the $1 million is NOT cash income. This “income” includes the value of prizes that are received.
- The most typical prizes received from multi-level marketing companies include trips, jewelry, and cars. Sounds great to get free trips, jewelry, and cars, doesn’t it? Except they forget to tell you that you will be taxed on the value of those prizes, and the value assigned to those prizes is often well above what you would pay if you bought the trip or car on your own. Inflated values on prizes mean you pay inflated taxes.
- Self-employment taxes are never mentioned. With traditional employment, you pay about 7.65% of your wages in Social Security and Medicare taxes. When you are self employed, you pay double, or about 15.3% in Social Security and Medicare taxes.
- Also not mentioned are the benefits, or lack thereof. When you are self-employed, there is no such thing as paid time off (vacation, sick leave, or other PTO). There is no company contribution to a retirement plan. There is no company provided health insurance or disability insurance. You are on your own to cover all of those.
Suddenly, the “million dollar earner” status doesn’t sound so good, does it? Even if you get to one million quickly (let’s assume you do it in 5 years), you have $200,000 in gross income. Plan on business expenses of at least 40%, or $80,000. Plan on health insurance of $4,000 to $10,000 per year, depending on the size of your family. Plan on the extra Social Security and Medicare taxes to take another $9,000. And no benefits.
And please don’t believe the hype that these multi-level marketing shills “retired” from their jobs and are “at home with their kids.” In order to make this kind of money, these people are working 40 to 60 hours a week. They are definitely not retired, and they probably have less quality time with their kids than most of us.
AND… they make their living dishonestly. Multi-level marketing is not a business, and you must lie and deceive if you want any chance of recruiting new people into the scam. And the only way you make the big bucks, is through recruiting. Because there is almost NO retail market for MLM products.