Multilevel marketing (MLM) is a SCAM

MLM is an acronym for Multi-Level Marketing, sometimes called Network Marketing.

As the name suggests, multiple levels of people are marketing a product to consumers. A sales representative (also referred to as a distributor, member, affiliate, partner or associate) gets customers and recruits and trains another sales rep to get customers. If you’ve ever heard a traditional company announce, “Refer a friend and you’ll receive a discount on your next purchase,” this is multi-level marketing. Health clubs, real estate, telecommunications, insurances and countless other industries use this technique. All these businesses are simply trying to get current customers to advertise and market their product or service to potential customers.

Some obvious things to avoid,

• Join up fee, with bonuses for recruiting members. What kind of job actually costs you money? You’re better off betting on a horse race, because in a horse race, someone has to win. Your odds of even making minimum wage in an MLM are slim to none — and you could even lose money.
• Low commission but promise that bonuses and return of commissions from recruited members. Some MLM’s don’t make much money from actual product sales to end users — many “sales” come from distributors selling to themselves and their families. Some rather thrive by selling expensive sales kits and lots of inventory to their own distributors.
• Any one who says MLM works. You’ll also sometimes hear oxymorons claim that they made, say, $20,000 from a certain MLM company. Note that they’re not saying that they made the money from actual sales. Their income likely came from motivational speaking fees and how-to kits that they themselves assembled and sold to other would-be zombies. Or, more nefariously, the company paid them $20,000 as a promotional fee so they could say it.

Finally, read this, the most successful MLM scheme is Amway. It has millions of distributors worldwide with sales in the billions. At the turn of the century, the average Amway distributor earned about $700 a year in sales, but spent about $1,000 a year on Amway products (Ha Ha Ha what an irony). Distributors also have other expenses related to the business, e.g., telephone, gas, motivational meetings, and publicity material (Amway.com; Klebniov 1991).

Dear John

Dear John,

I have been working on an idea I had for a website application. My end goal is to sell the idea to an established company in the industry, either in its current form or after I've developed the idea as a complete website. At this point, I have determined the features I want for the application, outlined a business model, and created some rough wire frames.

The questions are: Should I first try to sell the idea to an established company? or Should I first have a team design and develop the site and manage it as a personal business?

Thank you in advance for your feedback!

Sincerely,
Janet

Dear Janet,

I find it unlikely any company would buy (or at least pay much) for an idea. Ideas are free. A more customary approach would be to find investors for the business plan (which is itself very very difficult) and then sell to a company. Don't worry too much of technical integration at this point as code can be re-written and you don't even know what hypothetical technical architecture of a hypothetical acquirer looks like.

Best,
John