Is it REALLY possible to make money in an MLM? We do the sums

Business

Find out why, according to official industry statistics, we don’t believe it’s possible to make money in an MLM – despite the lies recruits are told. 

We’ve been investigating MLM companies for over a year now. And it doesn’t matter what products they sell, the results always seem to be the same: most participants appear to earn very little, if not lose money.

This concurs with thorough research into the industry published by the Federal Trade Commission (FTC) which concluded that, on average, 99.6% of participants in an MLM will lose money once their business expenses are taken into account.

More recent research by MagnifyMoney also discovered that the average salary in an MLM was just 70 cents an hour. Again, this is before subtracting business expenses.

But how can this be true? Surely no one would join such a poor business ‘opportunity’?

And, if you can’t earn money with an MLM, why are so many people boasting about their amazing lifestyles (apparently paid for by their MLM earnings) on social media?

‘20% of all millionaires made their money in MLMs’

And why do we see claims like this:

“Did you Know that 82% of Women Who Make Over 100K a Year, Did it Through Direct Sales?”

And this:

“20% of all millionaires in the world made their fortune through the Network Marketing system”

As we’ll discover later on, not only do these statements appear to be blatant lies (these statistics are not backed up in the LinkedIn post) but, according to our sums, it’s actually impossible for them to be true.

Here are some MLM stats of our own

Before we get into our calculations, let’s look at some of the facts and calculations we’ve uncovered in our investigations into MLMs:

(These statistics and conclusions come from, and are based on, the companies’ own income disclosure statements, and other documents.)

How much can you earn in an MLM in the US?

So, what’s the real truth about the business opportunity in MLM? To find out, we went straight to the most official source we could find: The Direct Selling Association (DSA) in the US and UK.

Here’s what the DSA say about the size of the direct selling (MLM) business in the US:

The most important facts for us here are the amount of sales made by the industry as a whole ($34.9billion) and the number of reps (18.6million).

However, we know that not all reps are making money in their MLM business. So, for the purposes of this calculation we’ll only include those reps who are building their MLM business full time (900,000, according to the DSA).

Let’s assume that those 900,000 reps made all the $34.9billion sales. This equates to $38,777.77 of annual sales each. Doesn’t sound too bad, right? But don’t forget, these are sales, not commission.

Let’s also assume these 900,000 reps are all on 30% commission. This means they’ll earn $11,633 a year (or $969.44 a month) in commission. This is before taking off business expenses and, of course, any tax they may have to pay.

To contrast, the average salary for a waitress in the US is $24,410.

So, according to the DSA’s own figures, the maximum a “Full-time Business Builder” can earn in an MLM on average is $969.44 a month before expenses.

Of course, we know from our own income disclosure investigations that the earnings table of MLMs is distinctly pyramid-shaped. So the vast majority of that money will probably go to the reps at the top – leaving the bulk of MLM recruits earning little to nothing.

It’s easy to see now why MLMs like Herbalife have such a high turnover of reps. Who can afford to work full time for such little (or even no) money?

Which MLMs are members of the DSA?

These are just some of the companies that are members of the Us DSA:

How much can you earn in an MLM in the UK?

So, what’s the picture like in the UK? Is it vastly different? Again, we looked at stats from the UK DSA’s website:

These stats don’t tell us how many reps are working on their MLM ‘business’ full time. But we do have some statistics that were emailed to us by the DSA. They told us that “For the majority (62%) of those involved in direct selling, it is not their sole income.”

So, for the remainder of people involved in direct selling (38%), their MLM business is their sole income.

The DSA tell us that the industry is worth £2billion in the UK. They also have 425,000 direct sellers, 38% of which would be 161,500. So let’s assume that there are 161,500 people working on their MLM business full time in the UK.

This means that, according to the DSA’s figures, each person working full time in an MLM in the UK sold, on average, £12,383.90. Again, if they are on 30% commission, they would have earned £3,715.17 for the year (or £309.59 a month). And as before, this is before paying for business expenses.

And remember, these are people relying on MLM as their sole income, according to the DSA.

Which MLMs are members of the DSA UK?

These are just some of the companies that are members of the DSA UK:

There isn’t enough money in direct sales to support the number of people

To demonstrate further how little earning potential there appears to be in direct selling, let’s do another calculation. For this one we’ll assume that every single one of the DSA’s reps who rely on their MLM for their sole income is a top ranking rep at Younique.

The maximum commission the highest ranking rep at Younique can make is 48% (yes we know this is a simplistic sum, but it’s the easiest way we could break it down).

So we have 161,500 reps sharing retail sales of £2billion a year, which gives them £12,383.90 of sales each. 48% of that is just £5,944.27. This means that, even if every single rep had achieved the highest rank of Younique, they’d still make just £495.35 a month.

But let’s go one step further and assumed that these 161,500 full time reps kept ALL the retail sales for themselves; that they were on 100% commission (which, of course, they’re not). That would still only give them £12,383.90 each a year.

As you can see, there just isn’t the business in direct sales to support the number of people working – despite the income potential reps promise when they recruit.

UK MLM reps earn less than minimum wage on average

The DSA also told us that “More than half of direct sellers work less than 10 hours per week on their business (51%)”. This means that 49% are working more than 10 hours a week.

Using this number, let’s break down the potential earnings again.

This time, rather than looking at people relying on one source of income, we’ll try to work out their hourly commission from MLMs.

So, 49% of people work over 10 hours. (As we don’t know exactly how many hours over this they worked, we’ll base our calculations on the minimum of 10 hours, though we know from the former reps we have spoken to, it’s usually much, much higher.)

This means that a total of 208,250 of all 425,000 people working in MLMs in the UK spend 10 hours a week on their ‘business’.

So, if these 208,250 people alone made all the £2billion sales, each one is responsible for £9,603.84 of annual sales. 30% commission on this is £2,881.15, or £240.09 a month.

If these people work 10 hours a week, that’s 520 hours a year. £2,881.15 divided by 520 hours is just £5.54. This means that the maximum potential income, on average, from retail sales for UK reps working more than 10 hours a week is just £5.54.

To contrast, the current minimum wage in the UK for someone over 25 is £7.83 an hour.

The top 1% of US MLM reps earn less than a foreign language tutor

We know from their pyramid-shaped income disclosure statements that most MLM reps earn almost nothing. It’s only the top few MLM reps that appear to make much money from the business model. So, let’s look at the official DSA figures from this angle.

In the US, MLM retail sales are worth $34.9billion a year and there are 18.6million reps. Let’s assume only the top 1% of reps made any of these sales – that’s 186,000 reps. This means that each rep sold $187,634 in one year. On 30% commission that’s worth $56,290 each, before expenses.

That’s not much more than the average salary of a nursing assistant ($35,476) and less than a foreign language tutor ($63,997). And remember, this is assuming that only the top 1% of all MLM reps in the US made any sales.

The UK looks a bit better. Again, let’s assume that only the top 1% of the 425,000 UK MLM reps made the £2billion in sales – this equates to 4,250 reps. Individually it means that each rep sold £470,588. At 30% commission this is worth £141,176.47 before expenses.

So, better than the US, but far from millionaire territory.

What expenses does an MLM rep need to pay?

In all our calculations, we stress that any commission earned by MLM reps is ‘before expenses are deducted’. So what are these expenses?

Like any business, you would have your general running costs. These may be laptop, internet, phone and heating (if you’re working from home in winter rather than in an office). You may also have shipping, workwear (looking nice to promote the idea you’re doing well), the cost of travelling to meet prospects and buying them a coffee. You may also give away samples.

Then you might have the cost of promotional and administration materials (leaflets, brochures, business cards, bags, order pads, etc). You may well attend success days, mindset seminars or training events for your MLM business. Or invest in coaching to improve your MLM skills. (Many new recruits are encouraged to ‘invest in their success’ in this way.)

And finally, you have your own costs of acquiring and maintaining your rank, as one former senior MLM rep reveals:

“99.999% of Leaders bought product to hit promotions. Buying fake spots and filling them. Buying our max volume and moving it around etc. Pushing your team to sell more! Buy more! So that everyone could hit bullshit ranks that they’d lose the next month if they didn’t maintain their volume.”

Indeed, every successful former MLM rep we have personally spoken to, or heard about, admits to buying product to climb the ranks – and stay there.

And even if you’re not buying products to reach or retain a rank, you’re usually encouraged to consume or use the products you sell by the MLM, with expressions like “be your own best customer” or, as Isagenix tell their reps:

“Build a business with integrity by enjoying the products in your everyday life.”

(For the record, the cheapest Isagenix ‘system’ is the Bedtime Belly Buster Bundle at $114.54, which would cost you $1,374.48 a year. According to Isagenix’s income disclosure statement you’d need to be in the top 4% of reps to earn that back in commission.)

So when we talk about deducting expenses in an MLM, we also mean the cost of YOU buying the products yourself to stay in the game. Which means that some, if not much, of the commission you earn is actually on the products you bought yourself.

Stop wasting money you’re not earning on mindset training

Successful MLM reps are fond of boasting how their mindset helped them climb the ranks, and earn their ‘free’ MLM car (which, as we explain here, is just another MLM trap). They’ll claim they simply visualised success: the dream house, the designer handbag etc, and they were able to manifest it.

But as you can see from our sums here, you can manifest all you like, but the money isn’t there to ‘flow effortlessly’ to you. From our sums it also looks like it’s not flowing effortlessly to the upline that’s hawking this rubbish to you either.

So, if you’re an MLM rep, before you spend a penny you’re not earning from your MLM ‘business’ on some mindset training or guru in an attempt to make it big in direct sales, just be aware that you’re throwing good money after bad.

And that what you really need to be manifesting is more money flowing into the industry as a whole, and for the billionaire who owns the MLM you’re selling for to make their compensation plan fair.

Maybe stick that on your dream board?

It’s impossible for 82% of women who make over 100k a year to do so in MLM

Now we’ve got that off our chest, let’s look again at the unsubstantiated claim we started with:

“82% of Women Who Make Over 100K a Year, Did it Through Direct Sales.”

Assuming all of the 1% of top UK MLM reps are women, this means 4,250 women from the industry earn over £100,000. If this is 82% of all female high earners, it means the total number of women in the UK earning over £100,000 is just 5,183.

However, the real number of UK women earning over £100,000 is apparently 155,100.

If 82% of these women worked in MLMs, this would equate to 127,182 women. And in order for all these women to earn exactly £100,000 in commission (before expenses) at 30% commission in an MLM, each would have to sell £333,333.33 a year.

However, if 127,182 women each sold £333,333.33 a year, the UK MLM industry would be worth £42,394,000,000 (just over £42billion). That’s 21 times what it’s actually worth.

So, to conclude, to us it looks completely impossible for 82% of women who make over 100k a year to do it through direct sales, according to the UK DSA’s own statistics.

And as to the (also unsubstantiated) statistic that “20% of all millionaires in the world made their fortune through the Network Marketing system”, we just can’t see how this is possible. In fact, we’d guess that the only people making millions out of MLMs are the people who started them.

How much do reps at the top of MLMs REALLY earn? Find out what a former Younique Black Presenter revealed to us

Tesco sells 22 times more than the entire UK MLM industry

To put the size of the MLM industry in the UK into context, Tesco’s UK sales are 22 times higher a year than the entire UK MLM industry.

How is that possible? As we know from the DSA, the entire direct selling industry in the UK is worth £2billion a year. Tesco’s UK sales, meanwhile, were worth £45billion a year in 2017-18.

And how much are people earning in Tesco? At the very top, the CEO of Tesco was apparently paid a base salary of £1,250,000 in 2016. A Tesco manager earns £40,000 a year. A cashier earns £14,000 a year.

If we take the CEO of Tesco’s salary, and divide it by 22 to make it proportional to the sales of both Tesco and the MLM industry, the equivalent top person in the entire MLM industry would be paid just £56,818.18.

If we take a Tesco manager’s salary and divide by 22 to make it proportional to the sales of both Tesco and the MLM industry, we get an annual income of £1,818.18.

And if we look at one of the lowest earners in Tesco, a cashier, and divide their salary by 22 to make it proportional to the sales of both Tesco and the MLM industry, we get an annual income of £636.36.

Of course, we know from investigating many MLM income disclosure statements, that the people on the bottom of MLMs don’t earn anything like £636.36 a year. Indeed, the bottom 89% of people in Herbalife in the UK earned nothing from the company in 2017.

As a side note, despite bringing in 22 times more sales than MLMs, Tesco employs just 324,117 people, compared to the MLM industry’s 425,000 reps. Tesco also pays all their workers, while we know from their income disclosure statements that most people selling MLM products earn nothing.

To any MLM rep who claims that every company is a pyramid scheme, the sums in this article prove that this is a blatant lie. Every employee in a company earns a salary, but as we can see, not only do the majority of MLM reps earn nothing, but there is no potential for them all to earn money.

MLM recruits are being sold a disgusting lie

So what’s our point? We’ve made all these calculations to try to demonstrate that, however you do the sums, people in MLMs can’t be earning the sums they boast about. Indeed, we can’t see how many people are earning very much at all.

The people who are making money in MLMs are the tiny 0.0something% at the very top of their pyramid-shaped earnings tables. And their wealth is made off the many, many tens (or hundreds) of thousands of people toiling away at the bottom of the pyramid.

Because the simple truth is that – based on the US and UK DSAs’ own figures – there just isn’t the money in the industry to support it any other way.

And to us, that’s disgusting. These companies know the odds of new recruits earning money with them – they know exactly how much they’re paying out in commissions and bonuses to reps. And they know how much product these people are buying from them.

They also create and maintain compensation plans that pressure reps into maintaining their ranks with minimum sales quotas.

The high up reps too, the ones making inspirational mindset videos from their rented castles and mansions, know that the poor fools who join having been seduced by the (often fake) lifestyles they flaunt, will never make money from the business.

They know because they see disillusioned people leave the business every day. People who have burned through their savings and alienated their family and friends. And people who have gone into debt trying to make the opportunity work for them. (Remember, 90% of all Herbalife distributors who weren’t supervisors left in 2005.)

But, in order for the company to maintain their sales, and the high up reps to continue to secure their commission and bonuses, they need a fresh influx of gullible hopefuls every day.

And, as we can see from our calculations, these poor people are sold a lie.

MLM reps are known to lie

On a final note, if you’re still doubtful that MLM reps would be as cold-hearted and lacking in morals as to lie, to make up their wealth, their expensive homes, and their luxury, designer clothes and handbags, we suggest you read this.

We reveal how MLM reps have been caught out lying (and being told to lie by their upline). 22% of MLM reps also admitted in this research that they had lied about their earnings.

MLM companies “peddle false and unsubstantiated earnings claims”

It’s not just MLM reps who are telling lies. According to a 2017 survey by Truth in Advertising, more than 97% of USA DSA member companies “engaged in misleading marketing schemes that peddle false and unsubstantiated earnings claims trying to convince prospective distributors to join their MLM network”.

The survey discovered that “137 out of 140 misrepresented the amount of money participants are likely to earn — misrepresentations that cause real and substantial harm to consumers”.

They were also shocked to discover that, based on 2016 sales, 100% of the DSA’s 20 top-selling members (including Arbonne, Herbalife and Nu Skin) are “employing false and unsubstantiated income claims to market their companies”.

So really, who can blame any MLM rep for lying to and deceiving new recruits to the business? The rot and lies obviously start at the top, and the culture drips down through the ranks, right to the bottom.

What ethical person would honestly want to have any part of that industry?

You can read more of our articles on MLM here. If you love our articles on MLMs, we also recommend you listen to the brilliant podcast The Dream on Stitcher. 

As always we take every care to ensure our sources and calculations are as accurate as possible. If we have made any mistake, or used an incorrect source, please contact us and we will happily correct it.

Photo by xing cheng