MLM: A Warning to College Students

William W. Keep, Ph.D.

Someday someone will offer you an opportunity to make some extra money and possibly change your life. This person will be excited about his or her own involvement and want you to join. You will be told that people have achieved great success, allowing them to drive expensive cars, live in expensive houses, and take expensive vacations. In other words, they are living the life many people only dream about. The alleged opportunity is multilevel marketing (MLM), a common form of direct selling.

To have any chance of success as an MLM distributor, it is necessary to commit your time and hard-earned money. You will need to decide if the risk is worth the reward. Each person's situation is different, but everyone has limited time and limited money—so use your resources wisely.

MLM distributors buy products for their own use, at what the company calls a discounted price, and also try to sell products for a profit. To make enough money to change your life, however, you will need to build a business "downline" by recruiting people to be distributors. Selling products for a profit and getting people to become distributors can be difficult.

Most MLM distributors will make little or no money. Worse, many lose money by buying more products to maintain eligibility and paying for business support training, leads, success seminars, coaching and other services. If the person recruiting you keeps pointing to the same few examples of success, perhaps the number of people who have succeeded is very low.

You may hear that success is obtainable to everyone who really tries. Let's think about that. If ten people you know become distributors for an MLM and each tries hard, can they all succeed? What if fifty people you know become distributors? Or one hundred? Unlike a franchise with an exclusive selling area, MLM distributors can typically market to anyone. That means they compete against each other, and more competition makes it more difficult to succeed.

Some MLM companies have lasted for many years, but this form of selling has not changed the way most people buy products. Companies say many things. I advise students to always look for independent information.

If you have gotten the impression that changing your life by becoming an MLM distributor can be extremely difficult, then you are correct. Do not let the hope of becoming wealthy cloud your thinking.

Dr. Keep is Dean of the College of New Jersey School of Business.

This article was posted on July 18, 2013.

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