I came cross this post on Instagram and it made me think about the validity of MLM as an actual income producing activity, like a real job or business…
source: https://www.instagram.com/p/CU34-I1MVq4/?utm_medium=copy_link A post shared by We’re Not Your Hun (@not_your_hun)
The truth of the matter is that 99% of Distributors Lose Money in Multi-Level Marketing.
Multi-level marketing companies will never tell you the truth about how many people lose money in their schemes. Some provide “income disclosure statements,” but those nu are massively deceptive and not mandatory in most countries, including the UK. They omit important information such as the churn rate of distributors and the definition of an “active” distributor. Even more deceptive is they purposely omit data on thousands of distributors who earn zero commissions, which makes the earnings numbers look better than they really are.
Two in-depth studies were done by academics who wanted to know the true failure rate of distributors involved in MLM. Robert FitzPatrick and Jon Taylor did separate studies using different methodologies, and both concluded that over 99% of distributors lose money. The MLM companies try to explain this statistic away, saying most people don’t really want to make money anyway. They say things like ‘the majority of people sign up to get their own product discount, they don’t really want to earn an extra income’.
However, at the same time, the most common tool used to recruit people into multi-level marketing is the income claims. Recruiters defend their schemes by saying that there is an extremely high rate of failure across all small businesses. That’s not true. Depending on who you believe, probably 50% of small businesses fail within 2 to 4 years. But that’s a far cry from the 99% failure rate in MLM in the first year!
Dr Jon Taylor’s report ‘Multi-Level Marketing Unmasked’, is a comprehensive dismantling of the MLM business model and why it’s doomed to fail for the majority of its members.
He analysed over 600 MLM companies and found that over 99% of MLM distributors make a loss and less than 1% make the “lifestyle changing” money they all advertise with.
Most people who have invested in MLM turned out to be at loss financially. This is totally contradicting what most MLM recruiters tell you; that MLM provides an opportunity for making large amounts of money compared to other businesses.
For example Herbalife:
This is part of their income disclosure statement for 2020.
This tells us that in 2020 out of 191,000 reps, only 90,000 make a monthly income on average, that’s only 47% making any monthly income, that’s 53% who earn no monthly income.
Assume that minimum hourly wages are on average $11.80 across the USA as per 2019, in 2020-2021 it is/was £8.91 in the U.K.
in the USA a full time job is 40 hours a week, 48 weeks a year so weekly minimum wages are $472, monthly that would equate to $1,888 and annually $22,656
in the U.K. going with the same 40 hours a week, 48 weeks a year, the weekly minimum wages are £356.40, monthly £1,425.60, annually £17,107.20
Out of those 90,000 Herbalife reps that do earn money on an average week, there were 45,000 who only made between $201 and $264 in an average month, that’s before expenses and taxes, in a month! If you worked in a supermarket for minimum wages, 5 days a week, 6 hours a day, you would earn more than that in a week! More often than not, MLM reps put in work 7 days a week and often a minimum of 8 hours a day, 5 hours between school runs and at least 3 hours in the evening.
It’s less than minimum wages!
We’re now at 146,000 or 76.4% of the 191,000 who are either earning nothing or less than minimum wages.
The next section is about the Top 10% of the 90,000 that get monthly earnings, only 9,000 out of 191,000, only 4.7% of all reps, get paid between $1,246 and $3,305, a median of $2,275.50 per month BEFORE expenses and taxes… 3,000 out of 90,000, that’s another 3.33% are still earning less than minimum wages.
Only 6,000, a mere 3.1% of the entire sales rep force, earn more than minimum wages before expended and taxes The Top 1% are obviously part of the Top 10% so they’re kind of irrelevant, just a higher paycheque.
78% of their distributors earn nothing on a monthly basis and 97% of all reps make less than the minimum wage!
We haven’t even calculated expenses or taxes, when we deduct those from the gross earnings above, then it’s very unlikely that any of them made a profit.
Sources:
https://www.sequenceinc.com/fraudfiles/2019/11/mlm-income-disclosure-statements/