Money Rehab with Nicole Lapin - WTF are MLMs?!

Episode Date: June 22, 2021

MLMs, or multi-level-marketing (companies) are businesses that rely on consumer representatives to sell products (think LuLaRoe, Herbalife, Arbonne, Mary Kay, Avon). But can you actually make bank with MLMs? Listen to find out! Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. The cold lappin'. All right, so picture this.

It's a typical Tuesday, and you're checking back into the Facebook account you've neglected for the last couple of weeks. You see some cute baby pics. Your grandma seems to have done a deep dive on the photos from your college drinking days. Thanks so much. And one inevitable thing winds up in your inbox, a message from that one girl in high school who never said two words to you, but is now reaching out because she's started her own business and thinks you have that boss bitch energy to do what she does and make money from your cell phone in just a few hours a week, she says. If you're like me, you've gotten a ton of these emails over the years, sometimes multiple different ones from the very same person running

different businesses. But every time you Google that nutritional shake or makeup thing, candle or plastic food container company that they're promoting, you see those three little letters. MLM. So WTF are MLMs. Well, MLM stands for multi-level marketing. The concept is that you sell a product to people you're already connected with, like your family or friends. You get a cut of every sale you make. And that's how a lot of women have made a ton of money while staying at home with the kiddos. Some examples of popular MLMs include Amway, Mary Kay, Avon, Herbalife, and even back in the day, your mom's Tupperware. A lot of entrepreneurs actually got

their start in MLMs. It's an easy business gateway drug. You see some successful people doing well in the company. The whole thing gives you a simple way to get started in supposedly running your business. And that's how a lot of people get hooked. But for as many successful entrepreneurs who got their start in MLMs, almost as many swear them off entirely. And there's a big difference between pseudo boss bitch energy and actually turning an entrepreneurial dream into cold hard cash. As your mama told you, if it seems too good to be true, it probably is. Some people call MLMs pyramid schemes, but they're not exactly the same thing. Pyramid schemes are, after all, illegal. However, you might find a graphic in many MLM training materials that shows you one person, which is supposed to be you, with two people below them, and then four people below those people, and then 16 people below them. Those are the levels in the multi-level marketing scheme. The thing is, when you take a step back, the whole thing looks pretty triangular.

But with an industry that's worth a couple hundred billion with a B dollars, someone's got to be making money, right? The answer to that is a resounding yes. The CEOs of these companies often have whopping salaries. But beyond that, most people who work for the company don't have guaranteed salaries. In fact, you'll likely need to pay into the company for setup fees for a while. And many people find that they can't keep up with the costs before their new business turns a profit and they wind up out thousands of dollars. But we've all seen a pink Cadillac driving around town, so it's worked before for someone. Could you, dipping your toe in the MLM water, actually make real money? Well, actually, yes. In fact, I was doing a speech in Cincinnati a few years ago to 5,000 women who all worked for Pure

Romance, which is a sex toy MLM, seriously. And they all wanted boss bitch business advice because they were all running their own little business. And in fact, some of them were making 100 grand a month. I mean, I was shook. Honestly, I was like, maybe I'm in the wrong business. But how the average gal or guy usually makes money with an MLM might surprise you. Most people who make really good money in MLMs outside of the top tier brass at the company aren't making it by selling nutritional shakes or a lip liner. They make bank through what are called downlines. The idea behind this is that each business owner recruits their friends and family to start their own business. And when that person starts a new business, you get a cut of not

only the products you sell, but anything they may sell as well. The theory behind this concept works really well, but the problem is it's technically impossible for everyone at the company to make the kind of money that really successful people make. Remember that graphic of the ever-expanding amount of people? The one that's shaped like a triangle? The sad fact is that we all eventually run out of friends and family to recruit. Another complication is the fact that when you're convincing your local friends and neighbors to sign up for a specific MLM and they're convincing their friends and neighbors to sign up for the same MLM, you wind up with a community of people trying to sell the exact same

products. But the worst case scenario is when someone you've recruited fails at their business, a business you convinced them could be successful, and they're more likely to turn their anger on you than the parent company. Burnt bridges, broken relationships, and empty bank accounts all too often abound in the aftermath of an MLM saga. Today's tip you can take straight to the bank. While I won't explicitly tell you to run for the hills from MLMs, I will strongly suggest you do your research. Google people's experiences with the company and know that you'll probably have to sell pretty hard to the people around you in order to make a start. to sell pretty hard to the people around you in order to make a start. And if that's something you're comfortable with or are great at and you're this outgoing salesperson, then joining an MLM

could potentially turn you a profit down the road. But never invest more than you have to lose. No matter how many times you hear success stories about people who were down to their last 40 bucks in the bank and then took these risky moves to start their MLM businesses and made millions. Or think about starting your own business without the help of an MLM in thousands of other ways. Sell your wares on Etsy. Work remotely for a standalone company. Become an Amazon partner.

Bake bread and sell it to your neighbors every week. You might find that that actually gives you the extra spending cash you were looking for, has a lot lower startup cost, satisfies your entrepreneurial drive, and doesn't burn a single bridge. Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikader and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lanz, for her pre-production and development work.

And as always, thanks to you for finally investing in yourself so that you can get it together and get it all. You spend my money, money, money. You spend my money, money. You spend my money, money, money. You spend my money, money, money.