Blog   MLM Business Model is Flawed, Here’s The Fix


There is a big flaw in the MLM model, sorry, that is just they way it is.

Now, don’t get your undies in a bunch, every business has challenges, flaws and problems.  Construction, hair salons, fast food joints…..and MLM.

I’ve been, with Success Coach Kathy Zimmer’s permission, on a 3 blog rant.  Took companies to task in yesterday’s blog…..and lot’s of comments followed……and a lot of direct emails asking for more specifics.

So it’s only fair I get specific about how both us reps and companies are making it worse…..and making it tougher to succeed.


Let’s say you have 100 Auto-ship, [let’s call it SDP], and you have 100 reps in your group.

So their ADP comes out, generating $10,000 paid to the company and the product gets shipped.

End of month company pays out commissions.  Let’s say they company is actually paying out 50%

How much income is coming back to your group?


What does your group pay?



Less Money Paid To Your Team Than Your Team Pays In.

If there is less money coming back to your team than your team is paying in…..that means people must lose money for others to make money.

And more people doesn’t make a difference.

1000 reps in your group

$100 ADP

$100,000 paid to company.

$50,000 paid back to your team.

The dirty little secret of MLM companies?

The distributors are the customers.

Imagine you owned a hair salon…..and had 10 people working there.  How long would you be in business if all the revenue came from your employees cutting each other’s hair and had NO REAL CUSTOMERS?

Companies fault?

In the last 15 years or so?

You bet.

And we as reps are responsible too.


Companies cannot be ‘self-consumption’ – the law, only 30% self consumption…..but because of slick programming…..reps who haven’t sponsored anyone show a preferred customers……so show in the reps back office are reps…..but not in the companies back offices…..the reports that really matter show non-sponsoring positions AND people off ADP as customers.

Companies 'Cheat' The 70-30 Rule, We Make it Worse

They ‘cheat’ so they don’t have to tell you that you need to sell stuff.


If you talk to Mary Kay ladies…..they tell you they are not in MLM.  And we think they are nuts.

Maybe it’s the other way around.

Mary Kay gals say they have a ‘direct sales’ business.

They teach the girls to sell, and do it well.

As your pin level goes up, so do your personal volume requirements.  Into the 1000s.

What do most MLMer’s say?  “use the product, share the opportunity.

Companies have made the flaw bad……we’e made it worse.

Honestly… many people in your group are ordering a few 1000 a month in volume?

Look at this again.

There is no debate: Look at your group volume per rep and commissions paid.

ADP is $100 and you have 100 reps in your group.

So their ADP comes out, generating $10,000 paid to the company and the product gets shipped.

End of month company pays out commissions.  Let’s say they company is actually paying out 50%

How much income is coming back to your group?


And folks, we’re not talking about a lot of selling.

Everyone in your group is 3-4 customers triples or quadruples your income.

Now there is more money flowing through your organization for real customers than from your reps.

If our products are so good, why wouldn’t we want to develop 3-4 ….or more, customers.


On a Facebook page there was a nice curt exchange…….sparked by this same stupid [I did it to, don’t feel bad], statement….’just use the product and share the opportunity with this system so you don’t have to recruit [I never said that’.

Guy named Roger is actually posting that MLM is not a “selling or recruiting business.”

Tony Rush had a great response…..let me quote him: if it’s not a “sales” business or a “recruiting” business….what is it?  I don’t know what kind of business you’re working but the only things I get paid for in my company are A.) selling products and B.) enrolling people who are going to buy products and/or sell products.  Selling and recruiting to sell are the life-blood of the industry.


Obviously Tony ‘gets it’ and has a vital group……Roger, if he has a group……believes that number of people on ADP is success.

Which means……if there is less money coming back to the group [like Roger’s, it’s what he & his auto-responder series promotes], better than 80% of the people are losing money.

Look, companies use computers to ‘cheat’ around the rules…..but we don’t have to.

We've Got to Get Out Of Denial, Fix The Flaw

Recruit reps and develop 3-4 customers ……and teach your new reps how to do the same thing….. you’ll offset the business model flaw.

There are only 2 types of companies…….those that have increasing personal volume requirements/retail requirements and those who don’t.

And, there are only 2 types of reps with companies that don’t have big retail requirements……

The reps who do something about it and the ones who don’t….happy to run a business model that will fail.


No authentic customers…..with a Direct Sales company, [ your company is a member of the DSA, yes?], then what do you have?

A group with 80+% losing money and not for long… will get worse.  Flawed businesses have a tendency to fail.

The fix?

It’s so easy it’s a joke.

When people decide not to join as a rep use ‘fusion’.  Fusion is fusing together recruiting-retailing.


“Hank, I can see the business is not for you and appreciate you looking.  Is there any reason you wouldn’t want to try the product and be a customer?”

1 out of 3 will say yes.  Some are ‘pity’ sales…….so what.

About 1 out of 5 that gets on the your product will stay on your product.

You make more money, your team makes more money, there is more volume flowing through your group ……and you’ve got paid to fixed the flaw.


mark januszewski

world’s laziest networker

Share This:

Get your 12 Free Video Skills ~ Today!

Opt into my list to start getting your free video skills today! We’ll be sending you a new skill every few days.

Your privacy is of great value to us. We will never resell your data to any third party.

Don't forget to follow us!