Direct sales is a great career choice. You can work from home, set your own hours and earn high commissions. You’re likely wondering if it’s worth your while to listen to family members, friends, or social media influencers sing about their direct sales careers.
However, there seems to be a news story every few years about MLM scams (multilevel marketing) and the unwitting victims, who think they are embarking on a new career.
What’s the difference between an MLM or a pyramid scheme, and how can you tell?
The United States does not consider multilevel marketing companies illegal. However, pyramid schemes are illegal. Many pyramid schemes are MLMs. MLM companies are often called affiliate marketing, direct sale, network marketing and independent sales.
Independent salespeople can receive stock from legal MLM companies and then sell it directly to customers without the need for a storefront. Legal MLM salespeople make the majority of their income from commissions. This includes sales of downline associates or associates that they recruit to join the company. An illegal pyramid-scheme MLM makes its money by recruiting new salespeople and not selling products or services.
Is it a scam to join MLMs?
Many MLMs are found to be illegal pyramid schemes because it is difficult to prove intent within a business’s operations. Independent sales representatives who are unable to sell enough merchandise to make a profit is not illegal. It is illegal to create a business with the knowledge that the revenue source for the business will not be from selling merchandise. Instead, the business must rely on hard-hitting recruitment and the investment money of new sellers to keep it going.
Multilevel marketing is controversial because it allows upper-level recruits to take advantage of their downlines and promise unrealistic sales commissions in return for an initial investment in good (and a boost in their own salaries). The Direct Selling Association was created to help distinguish legitimate direct sales companies and those that use sales associates. The DSA allows legitimate companies to join the organization. It also provides public guidance on ethics in the industry and consumer protection resources. The DSA also allows employees and consumers to file code complaints.
It seems that so many people make a living in MLM jobs.
Direct sales jobs can be a scam or just not worth it. So why is there so much talk about people making huge amounts of money selling everything, from boldly printed leggings to cleaners and household soaps? This is a valid question. There are two main reasons.
One, there are people who make money even in a pyramid scheme. By recruiting many downline sales associates, the most successful and prolific salespeople can make some money (before the scam collapses). This is because they are very good at it. They tend to jump ship when things get bad. It’s a red flag if you’re being recruited by someone who’s worked in MLM-type businesses before. If the money is being made through recruitment, and not sales, the associate you are talking to will tell you that they make a lot of cash even though it may not be true.
How do I find a job as a direct sales representative at a legit company?
For assessing direct sales opportunities, the Federal Trade Commission provides valuable information. The FTC has guidelines that you can follow if you are serious about a sales job. These include checking the company’s past (such as lawsuits), getting written information on compensation structure, and staying away from companies that offer higher sales compensation.
How can I tell if I will be a good salesperson?
It is a common saying that sales is sales. This means that you can sell any product if you sell it. This is usually true, except for highly technical or special goods that require advanced knowledge. Past success in selling is the best indicator of your ability to succeed in sales. An employer should be suspicious if you are offered a job in high-commission sales and you have no sales experience.
People who want to build a career in sales and are serious about it will do better if they become in-house sales reps than independent contractors.
What makes a job in direct sales different from other sales positions?
Direct sales is a lot like being a franchisee but without the support system. You are responsible for purchasing merchandise, and in some MLMs you may not have much control over what merchandise you receive. Direct sales associates use social media and IRL friends and family to increase sales. You can make a lot of money if you sell enough. But if not, you will be stuck with the merchandise you already paid for. MLMs don’t offer full compensation, benefits, or base salaries. Many MLM participants end up in debt after their sales experience. Are you interested in CRM software? Take a look at our top picks.