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.

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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.

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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.

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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.

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