Are MLMs Crooked and Why Do People Fail at Them?

Today, I’m speaking to you about MLMs because something very important is happening here in America in regards to them.  A very big MLM, Herbalife, who did $4.4 Billion in sales in 2017, is under fire…again.  This time, they are being sued by some distributors because those distributors feel that they have been misled by the company.  They were told that they could become millionaires if they followed the paths of their upline.  They did and they fell short so they’re suing. 

I’ve added some reasons why most distributors fail below…but first, I want to say that this case may actually set some important precedents and I think it’s something we should watch.  Why?  Because I believe that MLMs are important to America, just like franchises.  They give people a place to begin growing and cultivate a business mindset.  Plus, small businesses are the backbone of this country.  Businesses should be privately held and left to prosper or fail without government interference as long as they are legitimate businesses with lawful systems and processes that do no harm to others.  Thinking that MLMs are crooked because of the way they are constructed is simply being uneducated or uninformed about them.  Fears that they are just "pyramid schemes" are quite silly.  The majority of all businesses are pyramid-shaped with the CEO at the top, the directors just below, even more managers beneath them, and the employees at the bottom.  There are more good MLMs out there than bad.  The same is true of all businesses.

Here are two reasons why I like MLMs:

Reason #1 – MLMs are a unique form of Capitalism allowing people to have their own business and make their own money without going through the entire creative process, very much like a franchise.  Think Tupperware and Mary Kay: these businesses have helped stay-at-home mothers for generations make enough money to make ends meet.

They are a legitimate way of getting started in your own home business. They literally create entrepreneurs in many ways. Traditional schools educate you to become an employee.  MLMs give you the opportunity to open your mind for opportunities beyond that traditional scope.  You are given the power to earn beyond the typical "trading time for money."  Becoming a small business owner gives birth to new thoughts and potential that is literally what I believe makes America great.  

Reason #2 - MLMs, legitimate ones, fill a huge educational gap and create great entrepreneurs.  This is the most important reason I believe they should remain legal.  People need their personal development education because it is not taught in school.  There are thousands of millionaires out there who got their start in an MLM business.  NOT that they were all successful in an MLM but they all learned how to "sell themselves" within an MLM.

When people get serious about advancing or rising through the MLM levels, they attend events where they are given some important education and advice from those who have "made it." These rock stars of the MLM world usually teach them how to set milestones or goals, visualize, read self-help and business books, and stay away from the naysayers.  All of these are practical and extremely useful steps in getting out of the rut and addiction of poor money mentality or mindset.  I can see why this feels cult-ish to some but, in most cases, it is not.  It is literally exactly what they need to move them into becoming a version of themselves they never thought possible.  It ignites potential like nothing else I’ve seen.  I've been in a couple of MLMs, although not Herbalife.  I’m still in an oil MLM because I love the products and remain a distributor for the discounts but do not actively build a business there.  Although I am not an active business building member of any MLM, I would not be where I am today if it weren’t for the training and the people who have mentored me while I was there.  They changed my life and helped me challenge those old belief systems.  Many of us remain friends today.

Okay, here are a couple of ideas about why those “other” distributors may have failed:

Wrong Audience – You can’t sell ice to an Eskimo and you can’t sell an expensive product to those who just cannot afford it.  Many distributors, especially those just starting out, begin by first trying to sell their product to family and friends.  However, when they run out of known associates, or people on their “list,” they have to step out of their comfort zone into the realm of cold calling and that is NOT a comfortable place to be.  Striking up a conversation with a stranger is difficult for some and becomes even more difficult with an agenda of selling behind it.  Most people, believe it or not, either stop at their initial list, never getting through it, or they stop when they have to approach new people. 

If you get someone willing to push out of their own comfort zone, they are most likely to begin by talking to people in the same social status that they believe they are in.  Let me explain.  We all have an internal measuring stick that we use, whether or not you would like to believe it is irrelevant.  It is there.  When you meet someone, you judge them against yourself or others.  Women may judge if another woman is prettier than they are.  Where do they measure up on my stick?  Men may wonder if they have a better job and make more money than they do.  There are many measurements and many varieties of sticks.  I’m sure even movie stars have them.  Has this person been in better films than I have?  Are they a better actor than me?  The point is, when anyone begins selling, stepping out, and talking to strangers is hard but talking to anyone above you in terms of your ruler is extremely difficult but completely necessary. 

Most people in any MLM aren’t making any money at all.  It’s just a fact.  They can’t break through their fears enough to get to the level where they can attract people who can afford their product.  They attract nice people who are more like them.  Their hearts are in the right place but their credit cards won’t process, as one of my mentors once said.  If you are going to be successful in ANY business, you have to get your product in front of the right people and that’s people who can use it and can afford it.  It’s that simple and that hard.

They Can’t Sell – You have to learn to sell.  If you have someone who is willing to put themselves out there and find the people who want and can afford their product, they have to be able to close.  The simple fact is everyone is selling something.  Teachers are selling education and knowledge to their students.  Doctors are selling health (hopefully) to their patients.  Parents are selling good behavior and life experiences to their children.  You are already a salesperson in some way or another.  Everyone is.  However, some people are just sucky salesmen.  Those parents whose kids are spoiled or throwing fits were obviously unable to sell those children on the belief that they should behave a certain way in public or appreciate the things that are given to them.  They just aren’t selling it and the kids aren’t buying.

When you become good at selling, you become an excellent communicator.  You can sell, not just products, but ideas and philosophies.  Church leaders sell beliefs.  Are you beginning to understand?  Bad salespeople can’t get their message across, sometimes because of the audience and sometimes just because they suck at selling. 

They may even tell someone about their product and get them all excited about the concept and never close them.  Closing means asking for the sale.  Imagine a girl scout telling you all about a new cookie that melts in your mouth, the flavor is amazing, and she may even have a sample for you to try out.  You taste it and it’s delicious.  Then she tells you it’s gluten-free and is sweetened with a natural Stevia and has no sugar!  Wow!  You are on board now.  I mean, this is flipping amazing.  You’ve got to have one.  Then, she walks away pulling her wagon behind her while a more bold friend of hers steps forward and asks, “do you want to buy a box of our newest girl scout cookies?”  Heck, yeah, you do!  Who gets the sale?  The one who asks.  The one who closes.  You have to ask for the sale.

The Only Way to Fail is to Quit

Also, let me just say that those distributors really haven’t failed until they quit.  When you quit, you fail.  You’re done.  It’s like digging for treasure you know is buried on a specific beach and digging a thousand holes only to quit right before you find the right spot.  You can’t help but get better the more “fails” or “noes” you get.  Every time they went out and spoke to someone new, those distributors were getting closer and closer to the people who could make all the difference in their business but they quit.  That’s sad.

Do you know what’s even sadder?  The fact that they whine about it and say they did everything they were supposed to and it didn’t work.  Well, here is a fact.  If it doesn’t work, then how are there any successful distributors in that company at all?  It obviously worked for them.  What’s the difference?  They were the difference.  The winners, those who achieved their ranking, chose the right people.  They went through the million noes to get to those people, too.  They got it wrong until they got it right.  They were willing to fail more and fail forward.  That’s the difference.  You have to be willing to fail as many times as it takes. 

Failing is the Wrong Word

It helps when you stop thinking of getting a no as failing, though.  Burt Goldman is one of my mentors and he had a profound technique that anyone can apply to sales.  First, find your average of sales to noes.  Let's say you have to talk to 10 “qualified” people to get one to buy and you need 20 sales to hit $5,000 a month.  That means you have to get in front of 200 people a month for that $5,000 paycheck.  Begin to look at each of those noes as $25 paychecks that you can cash at the end of the month when you get all 200 of them.  When you think of every no as a winner, your mindset begins to shift.  You start to play little achievement games with yourself.  You may challenge yourself to speak to more successful people.  You begin to hang out where successful people hang out.  Keep pushing yourself to be better and better and do it faster and faster.  If you talked to only one person last week, push yourself to do five people this week.  If you only hit three, it’s still 3X better than you did the week before.  Don’t be hard on yourself.  You never really fail unless you quit.  Each week, each day begins a new challenge for yourself and, eventually, you will win.

Should You Do an MLM?

Obviously, if you are passionate about a product and it has a great business plan behind it, I wouldn’t see why you should not try it.  Especially if you have never had your own business, don’t be afraid to jump into an MLM.  It may be a huge opportunity for growth and positive changes in your life.  Just make certain you have a strong and close upline mentor who is willing to allow you to personally tag-a-long through the entire mentoring process.  Don’t just follow another distributor.  You want personal and frequent contact with an upline mentor who is making what you aspire to make within that company.  That’s crucial, I think.  Otherwise, you’re just learning from another person who is floundering about looking for the way themselves.

I wish you great success in every business you commit yourself to.  Be consistent and persistent and you will find success.

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Michelle R Russell

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