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Gramps,

A lot of those companies are based out of Utah. My question is are those considered to be get rich quick schemes? I have been approached on a few different occasions by members of the church and I just don’t know what to think. Sometimes I will have people tell me it was an answer to their prayers. Also, do you know why there are so many MLM’s in Utah?

Anonymous

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Answer

 

Anonymous,

MLM, or ‘multi level marketing’ can be a viable way to earn a part-time income through a distributorship and take advantage of various tax deductions for a very low start-up cost.

One of the problems I’ve seen in ‘network marketing’ is in how the business opportunity is promoted to bring in others within a down-line organization. Some love to just talk about how much money you ‘could’ make once you’ve reached the “Star Trek Commander” level in their company’s compensation plan. However, only a few will earn that income, because it takes discipline and consistent hard work to make such a sales organization move enough product to make that kind of income.

I’ll speak based on my own impressions.  Avon and Mary Kay are more about the independent representative making retail sales and holding ‘parties’, etc. They offer legitimate products that people would buy for their own merits, not just to help the consultant with ‘pity sales’. I believe their focus is on helping reps to build a retail customer base, then discussing how much you can earn helping others to establish their retail customer base. In my opinion, the most ethical way to build a distributorship is to focus on ones own efforts and then to expand those efforts.

Sometimes company reps will showcase someone who got off to a fast start and started making a great deal of money very quickly. There’s always a story behind such success. Either it’s a distributorship built on rock…or sand. Maybe someone was sponsored and brought an established network with them to the new organization? Maybe they were in sales before and simply kept in touch with their entire network, and many of them decided to ‘jump on board’? There’s always a story and a reason behind seemingly ‘fast’ success.

Having been exposed to so many of these companies myself, my criteria for determining if it’s a “get rich quick” scheme is based on the product and the company’s attitude towards retail sales to end customers. If the company is only about building an organization for its own personal consumption habits, then it’s more of a pyramid scheme…to see how many customers you can sponsor, and earn overrides on their purchases. Would customers buy the product for the retail price on its own merits? If so, then it’s a viable concept that can be done ethically with sound ambition.

Personally, the main problem I have with such MLM organizations, is that they can develop a ‘cultish’ persona, where they are so ‘in love’ with the company. While being around positive people is a good thing, being around people who seem to exhibit ‘brainwashed’ behavior, makes me wonder what’s ‘really’ the secret ingredient in their products.

The State of Utah, from everything I have read, has developed a wonderful business environment. I have little doubt that plays into why network marketing companies decide to be headquartered there. In addition, network marketing is often best done by families, and working with more families to sponsor and retail product. Utah’s family culture may also play a role in why these companies are based there.

In short, do your due diligence, and ask yourself if you would buy the products on their own at their listed price – regardless of any distributor discount? Can you see yourself doing the necessary tasks to retail the product on a consistent basis? Can you see yourself associating with and becoming more like the reps with the company in question? Once you consider the hard work involved, you will see that legitimate opportunities are not a “get rich quick” scheme.

 

Gramps

 

 

 

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