MLM vs Traditional Business Model
The rise of entrepreneurism is a driving force in today’s economy. Many people aspire to run and own a business however there are many challenges to start a business from scratch. Yet there is a business model that has evolved called Multi-Level-Marketing (MLM) or Network Marketing that is gaining respect as a viable option. Originally MLM’s were under a lot of scrutiny and had to overcome some questionable business practices or were actually being confused with another illegal practice called Pyramids ‘Schemes’. I emphasize the word scheme because that is exactly what it was – there were no products or services attached to a system of calculated exchange of funds. Both a traditional business and the MLM model have legitimate products or services being offered.
Based on a total misunderstanding of MLM business practices people confuse MLM’s with the aforementioned schemes. I also believed the stigma until I did the research to learn the core concept of the MLM model. MLM’s are actually quite close to a traditional business in that there is an owner that builds a team of employees. They all work toward the success of the company at different levels. The difference in MLM’s the ‘employees’ have a bigger role in their own success, autonomy, and the ability to ‘be’ the leader. Another key factor is an individual’s ability to step out of the ‘employee’ role and mindset.
So when I hear someone state, “Your business is a Pyramid Scheme”, I know immediately they have absolutely no understanding of the business model. The real case might also be they like working a ‘job’ that brings a certain level of security. The definition of entrepreneur is ‘the taker of risk’ and the safe path might work better for them. I understand MLM’s are not for everyone especially if the concept of ‘selling’ is problematic, being accountable for personal progress, and being ‘teachable’. It’s a person’s mindset, not the model that is the barrier.
| TRADITIONAL | MLM (Network Marketing/Direct Sales) |
| Big startup cost ($10K – $100K+) | Low startup cost as low as $100 |
| Takes months/years to develop | Up and running immediately |
| Need inventory | Inventory provided/optional |
| Train yourself | Training support provided |
| High financial risk | Low financial risk |
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