Multi-level marketing: Questions to ask

Earlier today, we announced a settlement with Herbalife which gets $200 million back to consumers, prohibits the company from misleading people about how much money they can expect to make, and requires Herbalife to restructure its business practices so that rewards are based on actual sales of Herbalife’s products to real customers.

Each year, many people join multi-level marketing plans – and many also leave. Because your time and money are valuable, it pays to do some research in advance. If you’re thinking about joining any multi-level marketing company, here are a few things to consider:

  • Can you realistically see yourself selling to your friends and family, and other people you know?
  • If you’re born to sell, then ask yourself – what about this product? Will the people I know buy it once as a favor to me? Would they buy it repeatedly and consistently? For how long, and at what price?

Okay, that’s the income side.  But what about the expense side of this business? What will it cost you to make those sales? Of course, there’s the cost of the product, but consider other stuff like gas, shipping and packaging costs, sales aids, trainings, your time, and so on. If the math doesn’t add up, you know what to do. 

And if your sponsor tells you not to worry so much about selling because you can duplicate your efforts by recruiting others – walk away. Fast. In a legitimate multi-level marketing program, you make money by selling the product, not by recruiting others to join and buy product. That’s a near-guarantee that you’ll lose money. Remember: if you don’t think you can make money selling the product, others probably can’t either. 

If you spot a business “opportunity” that you think crosses the line, report it to the FTC.

This article by the FTC was distributed by the Personal Finance Syndication Network.