Are MLM Companies a Scam?

Multi-level Marketing (MLM) has been seen as a controversial way of making an income. Many refer to them as “pyramid schemes” since they often involve recruiting team members who sell under you, from which you profit. However, despite the criticisms, millions of people use direct selling as a source of income. In fact, in 2015, more than 20 million people were involved in the industry, according to the Direct Selling Association’s (DSA) fact sheet. So, are MLM companies a scam? Or are they just misunderstood?

Every industry has its faults, and when it comes to direct selling, it all depends on the company. They can be a great way to work from home, which is what makes them so attractive to so many people. But, there are signs to seek to determine whether an MLM is truly an opportunity or a scam.

Are MLM companies a scam?

What characteristics determine whether or not a Multi-level Marketing company is actually just a scam? For starters, if the company pushes you to build more team members than it does to sell products, take warning. While having people under you generally gives you an opportunity to make more money, it should not be the main focus. A great MLM will be OK if you only want to sell products and have no interest in managing a team. It would also be a bad sign if the team your recruit are the customers. There are a few other signs to look for to determine whether or not MLM companies are a scam or legitimate. Based on network marketing guru Jason Lee‘s tips, they include:

It sounds too good to be true. Usually, if something sounds too good to be true, it is. If the opportunity is promising you a lot of money with little information to back it up, run and don’t look back. You might have a problem instead of a job on your hands.
There is a lack of leadership or training. A direct sales company should possess substantial experience running a network marketing company prior to launching. If there is a lack of leadership or no training methods, you may be putting yourself in a money-sucking situation instead of a money-making one.
Are the products unique and competitively priced? An issue that can (and does) occur with any business, especially MLMs, is that their product can’t stand the test of time. Thus, they go bankrupt or are forced to shut down, and your home-based income stops dead in its tracks. Research the company’s growth, market and the industry to compare pricing, its track record and the like. In his tips, Lee even recommends speaking with an accountant.

Ultimately, if you feel like your questions are being dodged, practices seem shady and you are constantly being sold to, you should most likely turn down the “opportunity.” Even though you wouldn’t have ownership in the company, MLMs could potentially still leave you in debt.

The top MLM companies

Of course, not all MLM companies are bad. If you’ve been curious about trying out an MLM as your source of income, you should go for one of the top-rated companies. Here are the top 10 ranked in 2017, according to BestCompany.com:

Forever Living:
- Aloe vera drinks and cosmetics
- Global revenue: $2.5 billion
Melaleuca:
- Health and wellness industry
- Global revenue: $1.2 billion
Amway:
- Health and beauty industry
- Global revenue: $47 billion
Shaklee:
- Health and wellness industry
- Global revenue: $844 million
Arbonne:
- Health and beauty industry
- Global revenue: $486 million
Avon:
- Beauty and cosmetics
- Global revenue: N/A
Usborne Books and More:
- Books
- Global revenue: N/A (25-30% commission)
Young Living Essential Oils:
- Health and wellness industry
- Global revenue: N/A
Herbalife International:
- Health and nutrition industry
- Global revenue: $3.8 billion
Nature’s Sunshine:
- Health and wellness industry
- Global revenue: $366.4 million