MLMs and Stepping on Toes

I’ve been spending my December baking lots of cookies and listening to The Dream. The Dream is a podcast that looks at pyramid schemes, multi-level marketing (MLM) and some of the history behind the direct sales business model. The Dream is fascinating and addictive and left me with a lot of opinions about the MLM business model, despite never having been involved in one myself.

In addition to making a lot of cookies, I spend a lot of my time stepping on toes. I am both a military spouse and a financial educator, and I see a lot more MLM marketing among my military friends than I do among my non-military friends. This is partially because MLMs provide a lot of flexibility for a lifestyle that doesn’t have a lot of stability.

I jumped onto the internet (as you do) and started telling my military spouse financial educator group (yes, there are groups for everyone) all about The Dream and my new opinions about MLMs. I forgot that this group is full of people who are just as smart about personal finance as I am and also that many of them are probably involved in MLM— and it’s not all bad. I stepped on a lot of toes and ate some humble pie.

After apologizing to my colleagues for my not-so-open-minded language, I asked if we could work together to come up with a set of questions for people to ask before they get involved with an MLM. This is what we came up with! Thanks so much to the Military Spouse Financial Counselors group for both helping with this project and being forgiving of my gaffe. I’m a work in progress.

Resource guide for assessing MLM (multi-level marketing) or direct sales business opportunities for military members and their families

Compiled for the Military Spouse Financial Counselors group, with content created by Katrina L. Alexander and others

Multi-level marketing or direct sales can be an appealing source of supplemental income for military members and their spouses. The industry includes some businesses that can help support military families’ unique requirements, but also includes some business models that take advantage of its distributors and can leave them in debt. Here is a list of questions that should be considered before signing up for an MLM or direct sales business.

Please note:if you have trouble finding the answers to these questions, that is a red flag that the business may not be operating in a way that will serve your best interests. If you have additional questions, please reach out to the financial counselor on your installation.

Questions to ask before joining:

  1. Are you required to buy inventory for resale, or can you buy a few items initially to sample and let customers purchase directly from the company’s website?
  2. What percentage of sales are to customers who are not consultants? Ideally less than 10% of sales are within the company.
  3. Will you be paid a sales commission even if you never recruit? This should be separate from and not dependent on downline commissions.
  4. Are you encouraged to “give away your discount” as a marketing tactic? If so, this may be a sign that the company will not be profitable for you. The companies set up fairly provide loyalty programs for those who remain as customers only, and these rewards do not come out of consultants’ profits.
  5. Are there recurring costs and/or mandated personal purchases? If so, will you earn more as a result of these investments? What is the expected return on investment based on historic data or other salespeople’s experience? Try to get specific numbers.
  6. Does the company have solid mentorship above and beside you to help you succeed?
  7. Do you have the personal finances to support any sort of business investment, large or small? Can your family afford the loss if the business doesn’t pan out?
  8. Does the company let anyone sell regardless of proximity to another seller?
  9. How much do you need to sell the first year to offset start-up costs?
  10. Are there minimal sales requirement? How much do you need to sell to reach it?
  11. If you don’t sign up anybody else under you, will you be removed from your business?
  12. Do you have to stay under the person you signed up with?
  13. Why is this a good opportunity for me?
  14. What sort of support does the company provide?
  15. What are the requirements to maintain each level, and what happens if I need to step back?
  16. If I need to step back, will you or your up-line, work with or “pressure” my team in order to achieve your goals?
  17. How does one end membership?
  18. How does customer service work with unhappy customers and consultants?
  19. What is the return policy? (read the fine print)
  20. Will the products you are selling be things you use often?

Questions to ask if you are already involved:

  • If you are already involved in an MLM/direct sales business but are not yet profitable, why? Did you really not do any work, or is there another factor like a saturated market or poor support?
  • If you have invested time and money but are not turning a profit, consider stepping away. If you can’t identify the problem, investing more money will not guarantee future success.

Military-specific advice and questions:

  • If I PCS [move], how do I keep up with my sales?
  • What if I PCS into a saturated market? Will I have support or a way to get out of the business?
  • Joint ethics regulations require that if you are the spouse of a service member, you cannot sell or solicit servicemembers or spouses of those who are junior in rank to you or your spouse.
  • Do not solicit on military installations.

Additional advice:

  • Read the fine print yourself.
  • If you’re signing customers up for recurring payments, you need to be up front about it.
  • Are there other ways you can make money?
  • Keeping track of paperwork, accounting, hours worked and sales will all help you determine if you are making an appropriate amount of income for the amount of time and money you are investing.



Twenties in Your Pocket is now a book! Check it out here!



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