Many MLMers bring up the idea that small businesses fail too. The implication is that because both MLMs and small businesses fail they are the same.

Unfortunately this is another HUGE MLM myth.

The U.S. Small Business Administration has this handy PDF of information of small businesses in general. It quotes:

“7 of 10 survive the first two years, half at least 5 years, a third at least 10 years, a quarter stay in business 15 years or more.”

We can easily flip this around to show that 30% fail in the first two years, 50% in 5 years, 70% in 10 years, and 75% in 15 years.

We also have extensive proof that failure rate in MLM is 99.5% or worse each year.

Let’s imagine that a million people start small businesses. After the first two years, 700,000 are still in business. After 5 years, we have 500,000 in business. After 10 years, we have 300,000 still in business. Finally after 15 years, we still have 250,000 successful small business owners.

Now let’s see what happens with a million people who start MLM businesses. Assuming a generous 90% failure rate (again it is typically much higher) after two years, we are left with only a thousand people. After 5 years, we are left with 10 people. We can’t go any further on, because then we’d be looking at fractions of a person.

It’s not even a close competition.

With small businesses you have 500,000 successful businesses. With MLMs you have 10.

It’s like comparing the failure rate of running a 5k with running 3000 miles across country. They may both be able to point to success and failures, but the scale is so very different that anyone who attempts to make such a comparison looks ridiculous.

This post involves:

Bad MLM Arguments

... and focuses on:


Before we get to the discussion of the product, let’s have a quick review of the FTC’s guidelines on pyramid schemes:

Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.

So to paraphrase, if you sell product to people outside the business it may be legit. However, if your money is made from your recruited downline, it is a pyramid scheme.

The problem with actually selling product is that you can’t really make a business of it. Specifically there are at least three problems:

1) Every product I’ve seen is ridiculously expensive… usually overpriced by around 5x-10x. They can get away with this, because they are really selling product to distributors. Distributors think they are saving 20%, but they are really overpaying by 300% or 400% in an effort to sell it at 500%. Distributors are also buying the product because they need to fulfill a Personal Volume (PV) requirement to earn commissions from the pyramid/team/recruitment hierarchy.

This was quite obvious when MonaVie sold $45 bottles of juice. They were only 25 ounces. Even PomWonderful’s juice isn’t close to that price.

2) The next issue is that you can usually find the product for the discount price on Ebay. Why would anyone pay the suggested retail price, when you can get it cheaper very easily? You simply can’t make a living selling a month of protein shakes at $120 when anyone can buy them at $100 elsewhere.

3) Finally, if people really like the product, they may become a distributor themselves to buy the product at the distributor rate instead of the retail price. It’s usually very easy to become a distributor (a one-time $25 fee, sometimes even free), so almost anyone interested would be wise to join to get the discount price.

In this last scenario, you are back to recruiting instead of selling product, which according to the FTC’s guidelines makes it an illegal pyramid scheme.

I like to say that MLM has a selling component and a pyramid scheme component. You can’t know how much is which without full transparency into the MLM. I believe that a responsible company would stick to a simple affiliate sale model rather than risk running a pyramid scheme. It accomplishes the same thing of letting people promote product sales.

When a company sticks with a pyramid scheme model, it tells me it shouldn’t be considered reputable.

This post involves:

MLMs vs. Pyramid Schemes

... and focuses on:

I was reading an article about an MLM that claimed not to be a scam… and it linked to this video by Eric Nelson:

It starts out with a funny joke about how the MLM representative who sells a product to a customer does not actual give customer service. It’s funny, because it tells you how ridiculous MLM is, not funny to the people who have to figure out how to get customer service. It gets less funny when they have to call a corporate line and navigate a phone tree instead of simply calling their representative.

That’s not the point of the video though.

One character says to another that he read that MLM is a scam. He did a Google search for the product and scam and of course it came up, so it must be a scam. The person who introduced him invites him to look up other things such Microsoft, Wal-Mart, Make-A-Wish, even paper towels, with “scam” and concludes that everything is a scam.

Of course we know that everything isn’t a scam. Thus one is left to conclude that MLM is not a scam… except it is.

What Eric Nelson doesn’t tell you is that you should read the actual articles to determine if it is a scam. For example, when you search for “Make-A-Wish scam” you’ll find this report by ABC News of scammers that don’t have anything to do with the Make-A-Wish foundation itself. You’ll also find this CNN report where bad charities try to confuse people to donate to them with names that sound like Make-A-Wish.

The point? If you read the details nothing implies that Make-A-Wish is a scam in any way. Make-A-Wish should probably sue Eric Nelson for defamation.

What’s not mentioned is that the person isn’t asked to search “Enron scam”, “Bernie Madoff scam”, or “Zeek Rewards Scam.” There are plenty of things that are scams that come up for the search too.

Thus the search itself is stupid. Either Eric Nelson needs some critical thinking help for suggesting that is a good test or he is trying to scam you. I’m guessing the later, as it is a lot of work to go through to create a video like this… you’d have to think he put in 30 seconds of thinking about the logical points he was making.

Finally, the FTC says to do the searches because some MLMs are scam:

“Find — and study — the company’s track record. Do an internet search with the name of the company and words like review, scam, or complaint. Look through several pages of search results. You also may want to look for articles about the company in newspapers, magazines, or online. Find out:
– how long the company has been in business
– whether it has a positive reputation for customer satisfaction
– what the buzz is about the company and its product on blogs and websites
– whether the company has been sued for deceptive business practices
– Check with your state Attorney General for complaints about any company you’re considering, although a lack of complaints doesn’t guarantee that a company is legitimate.”

Also keep in mind that many online marketers target searches like this. They use this bring someone in and then make a case for it not to be a scam, and then suggest that the person go sign up. It’s a good idea to not trust any online marketer who tries to say it’s not a scam and then sign you up.

This post involves:

Bad MLM Arguments, MLM Video Scams

... and focuses on:


In the past we’ve covered how Donald Trump is paid to support MLM. Robert Kiyosaki has exposed for having false logic when it comes to his support of MLM.

It’s time to bring some good news. There are some level-headed people who aren’t simply trying to sell you their brand and/or their book to make a quick buck for themselves. There are people like Mark Cuban who will tell you the way it is:

“With all of this craziness in the stock and financial markets, there will be scams popping up left and right. The less money you have, the more likely someone will come at you with some scheme . The schemes will guarantee returns, use multi level marketing, or be something crazy that is now ‘backed by the US Government.’ Please ignore them. Always remember this. If a deal is a great deal, they aren’t going to share it with you.

I don’t broadcast my great deals. I keep them all to myself. The 2nd thing to remember is that if the person selling the deal was so smart, they would be rich beyond rich rather than trolling the streets looking to turn you into a sucker. There are no shortcuts.”

This is exactly why you don’t see Kiyosaki and Trump wasting their time recruiting people into MLM businesses. They’d rather spend a dozen hours working with ghostwriters (I’m assuming, most celebrities do) to put together a book that they can market to a dozen million people. It’s easy money and almost no work if you already have the brand.

Once again Mark Cuban is dead on. Ignore his advice at your own peril.

This post involves:

MLM Business Opportunity

... and focuses on:

It’s no doubt that MLM products are expensive. Even MLMs like Lou Abbott agree saying:

“The problem so many have is their prices aren’t competitive in the real world.

Many MLMs simply brush it off by saying that the quality of the products are superior to other non-MLM products. Of course it wouldn’t make sense that the distribution method is related to the quality of the product, but I’ve learned to never credit the MLMers with an over-abundance of smarts.

What if the experts actually said that the MLM products quality was WORSE than their non-MLM equivalaents?

That’s what Alan Aragon said in a Facebook Post:

I regularly get questions about this or that MLM product, whether it be Advocare, Herbalife, Visalus, Isagenix, or Whateverthehell. I am yet to come across a health/nutrition-related MLM company that doesn’t economize production costs with sub-par nutritional formulations, especially the protein-containing products (for example, MLMs love to use soy as the first ingredient or fructose as the second ingredient). Adding insult to injury, these protein-based products cost at least double that of the leading non-MLM brands that actually use higher-quality protein formulations. To top it all off, these mediocre MLM products are hyped as the best things on the market, and of course they rely on the emotional triggers of zealous testimonials rather than the weight of the scientific evidence. So yeah, my opinion of MLM-based nutritional products is LOL (yes, let the hurt flow through your butt over that). As for the MLM business model, here’s a fun read:

When someone asks what’s wrong with MLM, there’s three things right there. The product quality is low, the price is high, and they rely on zealous testimonials instead of scientific evidence. Of course we know that MLM testimonials are pointless, but the MLMers still push it.

You can read more about Alan Aragon on his website.

This post involves:

Bad MLM Arguments

... and focuses on:

If you are not familiar with Troy Dooly, you are on the right track in life. Congrats! Go be productive and move on with your life.

For the rest of you who have had the misfortune of listening to his MLM rants with backwards logic promoting MLM, I’m sorry. Troy’s business is essentially promoting MLM, in just about any way he can. He’s paid by MLM companies as a consultant. He sells membership to his MLM Help Desk website.

However, most of what I’ve seen are videos that are eye-poppingly biased overlooking basic facts about the company to come up with some kind of thing that he can promote in a positive light. To make an extreme example, it’s a little like someone focusing on the money that hospitals make money from domestic violence and pitching the economic benefits of that. If you try to question them on it, they’ll just say that they are trying to look at the positive side of life.

Recently Troy Dooly was caught by the SEC for promoting Zeek Rewards, which the SEC shut down for being a Ponzi scheme. In my mind, that was a minimal part of what came out about him. In fact, you can watch his video here where he admits the bad things:

When he was asked point blank if he was getting paid by Zeek Rewards to promote it, he said no. In the video he explains that he was paid by the parent company of Zeek Rewards, Rex Venture Group and that his response was “splitting hairs.” While it isn’t technically a lie, it would be husband saying that he didn’t sleep with another woman, because he didn’t actually fall asleep with her. It’s misrepresenting yourself to your audience.

At another point in the video he points out that he claimed that Zeek Rewards was “covering his expenses”, but now discloses that one of his expenses is his “monthly retainer.” He says this is “splitting hairs” as well, but it is an outright lie. A person’s “monthly retainer” is not their expense, it is the expense of the company paying it. If I hire a lawyer and he requires a monthly retainer, he doesn’t get to deduct that as a business expense from his taxes like he would a transportation expense. Troy Dooly is outright lying to his audience.

In the video, he says he’s going to try to do better and disclose such relationships. My interpretation of that is: The SEC is watching me and I have to be clear with these disclosures now.

Of course, none of this will stop him from “splitting hairs” in the future and it doesn’t begin to show how much he’s “split hairs” in the past. It’s clear that Troy Dooly has no credibility and one can never be certain if he’s telling the true.

We can put him in the same category as Tim Sales: MLM Scammers

This post involves:

MLM Scammers

... and focuses on:

There’s a great illustration at American Express’ Open Forum for Small Businesses. I’ll let you click over to see it. As you can see someone who is all talk and no work is very much a charlatan (in the author’s view).

I know that some MLMers believe that “building a team” is actual work, but it’s all talk. In reality the sales can be done by an inanimate shelf at Wal-Mart or via a website like Amazon. In many cases it can do it better because it doesn’t illegally market the product through illegal health claims.

This is yet another reminder of why MLM is a terrible business.

This post involves:

MLM Scam

... and focuses on:

I get a lot of comments from MLMers trying to defend their company or even the industry. One of the common comments is “All MLMs are NOT scams.” Sometimes this is posed as a trap such as question, “Do you think all MLMs are scams?” Often it’s just an erroneous supposition that the commenter assumes such as, “You just think all MLMs are scams.”

In all cases, the goal seems to be to try take the focus off of the MLM that is the topic of the discussion.

The problem with these arguments is that they focus on absolutes, and presume it is an all-or-nothing situation. Not every person in prison committed a crime, but it isn’t necessarily wrong to refer to them as criminals. It was long believed that swans were all white, until people found rare black swans. The few exceptions, less than 1%, does not detract from the vast majority.

There is no possible to ensure that there isn’t an innocent prisoner out there, but it seems possible. As we found with swans, they are not always white. It is quite possible that not “ALL” MLM are scams.

However, just like when looks at 100 people in prison and presumes they are appear to be exclusively criminals or sees 100 swans and presumes that they appear to be exclusively white… any unbiased, intelligent person can look at 100 MLMs and presume that they appear to be exclusively scams.

This post involves:

Bad MLM Arguments

... and focuses on:

If you read about MonaVie or Protandim, you’ll quickly learn in the comments that Dr. Bowden was correct about MLM distributors claiming their products are a cure for anything. In fact, I modestly claim that one of the best articles on the subject is No, Your MLM Health Product Doesn’t Work!

I saw this comment by Anonymous Aussie and I think it hit home the point that many logical people are making when they point out that clearly Health MLM testimonies are pointless:

Anna Ruiz says ”i couldn’t pull a shirt over my head, open a car door from the inside, i couldn’t do any kind of pulling or pushing and the most painful part of my life was sleeping! “SLEEPING” imagine that!! no one new what was wrong with me, i tried Dr’s, Narcotics, Advil, deep tissue massage, acupuncture and nothing worked. I lost my job due to my situation and i began to become depressed….i woke up at 7:30am to the kisses of my grand son asking me to wake up. i couldn’t believed i had slept the entire night and woke up to at least 70% of my pain gone.”

Wow. I’m truly errr… amazed. I’ve taken a look at a few other distributor testimonials which are certainly not unlike Anna’s…

“I was on Morphine injections ( 30 mgs 5 a day) and oxycontin 40 mgs (3 a day). I noticed within a week that my pain level had reduced by 80% and I was using hardly any Morphine and had reduced the oxycontin to only 1 a day. I felt much better in myself and the depression was lifting, I was also sleeping like a baby.”

“Within three days I noticed I was sleeping better, and within 2 weeks I noticed I had more energy. I am thrilled. It is now 5 months later and I have been able to cut my medications for Restless Leg Syndrome in half.”

“I had terrible PMS and menstrual problems. I had insomnia and leg cramps nightly… The tiredness began to lift and after only a few weeks I was sleeping through the night. By the 3rd month the PMS and related distress was greatly reduced… Today I can say with confidence that I have a healthy immune system which means no more antibiotics. I no longer get depressed and ultra sensitive before my menstrual cycle.”

“I am elated to report that I never needed to resume my Paxil tapering schedule. I’m Paxil free. AND – I have tons more energy, my anxiety level is normal (I was diagnosed with General Anxiety Disorder, Social Anxiety Disorder and Post Traumatic Stress Disorder) so I think this is fabulous. I’ve also begun to loose weight. I cannot recommend this product enough.”

“This lead to other physical problems: shortness of breath,major hypertension, a dragging of her leg,a general weakness and fatigue, restless leg syndrome,which leads to difficulty sleeping, much frustration, anxiety and depression…Within 3 months her restless leg syndrome was gone, she was sleeping better, her blood pressure had stabilized with medication reduction and she was able to take off on visiting vacations(driving 400 miles alone).”

The most amazing thing though, aside from the fact that each distributor is reporting similar health benefits, is that NONE of the above testimonials relate to the same MLM… these claims have been made by distributors of Monavie,
, Herbalife and Melaleuca (and Malaleuca again):

It would almost seem that distributors are virtually taught from the same textbook when it comes to promoting MLM products – they’re taught to concoct their own testimonial (my friend was given a list of “common ailments” by Monavie to assist him with this) and like Anna’s, these always end up being such that they depict the products as having some ability to treat, cure or improve the symptoms of a disease or condition. It’s no accident that it’s the distributors, who have a vested financial interest in believing, are touting extraordinary health benefits rather than the bona-fide customers they don’t have.

Anna, Protandim isn’t intended to do any of the things you’ve stated and Lifevantage’s own website states it. Clearly you were deceived when you were sold on Protandim with claims outside of company policy and in breach of the law however, you’re no longer the victim… you’re the perpetrator.

Anonymous Aussie was going easy on picking only four companies to pick on here. She could have included many others such as Xango, Xowii, Nopalea, Zrii, Vemma, and many, many others.

This post involves:

MLM Scammers

... and focuses on:

I came across a great post on Fat Wallet warning people about Lyoness and thought it illustrated a great point about MLMs and pyramid schemes:

“Say Mr Pyramid buys pens in bulk from Staples and sells them for $100 each. Who’s gonna pay $100 for a pen? But tell them that they can also sell pens for $100, and we’ll pay you $30 for every pen you sell, plus you can recruit people to sell pens as well, and you’ll get $10 for every pen they sell, and $5 for every pen their recruits sell. Three levels, $45 commissions total on a $100 sale. Everyone has to buy 10 pens a month for personal use to participate in the program. Just find three people who find three people who find three people…. In the end, yeah, you are buying 10 pens a month for $1000, but you are getting $3150 in commissions, so don’t sweat it. Why wouldn’t you join?

Product is moving. The pens get used. No recruitment revenue, only product commissions. Absolutely 100% a pyramid scheme. The only real reason people are paying $100 for a pen is for the opportunity to make money off the sale of pens. Completely unsustainable as eventually, you run out of people to sell to and those at the bottom get hosed buying $1000 pens but not being able to sell them. This is an extreme example, but if you look at the world of MLM, there are some pretty big name companies out there that somewhat fit this mold on a less cut and dry basis.”

I loved how quickly and easily he described the scheme. So when a company like MonaVie sells a 25 ounce bottle juice at $40 or a shake company wants to sell you on 90 calories for $1.50, you’ve got a pretty good idea that they are pretty much a pyramid scheme. The companies and their distributors like to say that their product is a higher quality. The quality of the products, such as a juice, shake, or vitamin are often impossible to judge.

What is clear is that MLMs all seem to charge high prices. Are we to assume that each one has supreme quality or is there a fee being tacked onto the product due to the “business opportunity” where the people at the bottom get screwed? I’ll go with the later.

This post involves:

MLMs vs. Pyramid Schemes

... and focuses on: