How the MLM Business Model Makes Money

You’ve probably heard of MLM business models, but do you know how one works and how people make money? Many people avoid MLMs, or multi-level marketing businesses, because they assume that all MLMs are pyramid schemes. But pyramid schemes are illegal, and most MLMs are registered and regulated corporations that can provide opportunities for individuals to earn some money by selling products.  

What is a Pyramid Scheme?

One of the most common accusations made against the MLM business model is that it is a pyramid scheme. The primary characteristic of a pyramid scheme is that participants make money only through recruiting other people to join, rather than making money through selling products. A classic pyramid scheme may ask one person to recruit three people, and each of those people recruit three more, and so on. Eventually, the pyramid will run out of people to support it, and crumble, leaving the people at the bottom out of an investment. In a pyramid scheme, there is usually no product, or the end consumers of the product are only members of the organization.

How Do People Make Money in an MLM Business Model?

In the MLM business model, distributors or consultants make money by selling products to people outside the organization who are interested in using them, but not in selling them. This is the main difference between an MLM and a pyramid scheme—the focus is on selling products to the public. MLM consultants make money by marketing their business and reaching out in their network to introduce people to the products they sell. When customers make a purchase, MLM distributors make a commission.

 

People can also make money through an MLM business model by recruiting others to sell the products. They can build a team of distributors to train and motivate, and they make money by receiving a commission from their recruits.

 

Some MLMs fall into the category of pyramid scheme by putting all the emphasis on recruitment, making it difficult if not impossible to make money off selling products. Others, such as Xyngular, offer hardworking distributors a worthwhile business opportunity.

What Types of MLMs Are There?

The MLM business model isn’t an industry, it is a business model and structure. MLMs span a variety of industries. You can find MLMs that sell makeup, cleaning products, household products, skin care, and health and weight loss supplements. Unlike pyramid schemes, many of these businesses offer both a chance for individuals to make money by becoming distributors, and offer quality and competitive products.

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