Home-Based Multi-Level Marketing
Volume 12, Number 6
Issue 554
Avon, Mary Kay, PartyLite, Amway--they and dozens of others are all alike. The typical scenario is that a friend asks if you will throw a party in your home and offers to give you a commission on the sales that are made there. That commission is usually generous in either money or product. An invitation to become a “consultant” of your own follows shortly and a request for your check for a few hundred dollars for a “starter kit” to become an enrolled “downlink” is not too far away. Soon, the invitations to the “happy clap” seminars will be in the mail!
Every now and then a client of mine starts a home-based business that is “multi-level marketing.” I usually find out about it a year later when it’s time to do the taxes. This is an organized form of entrepreneurship that preys on mostly stay-at-home spouses or on persons who wish they could make more money without leaving their existing employment. It actually is more of a pyramid where the person that brings you in receives an over-ride on your orders and all persons above them receive over-rides, too, in a sort of father, grandfather, great-grandfather (and so on) scheme.
Usually, there is quick success in your own circle of friends. This is because what great friend of yours (or your spouse’s or close relative) will say “no” to your first few requests to order things from your sample kit or your catalogs? Sadly, however, it never fails that shortly after making enough to get back the money for your sample kit (and even sometimes the enrollment fee), the sales quickly dry-up. Why? Well, it’s almost impossible to penetrate the third-party market of strangers. Welcome to the real world--sales aren’t made to strangers on the basis of love and affection.
When these home-based multi-level marketing companies pop-up, know that they are based on people‘s emotion--the need to succeed in business combined with the emotional need of your friends to keep being your friend by ordering and to enjoy helping you start your “business.” But to take a business to any level of real success, you cannot have customers whose continued “orders” are placed based on love and emotion. Soon, those friends are exhausted from hearing about your business and from being pressured to “help“ you. A second or third “party” simply won’t happen at their home. You become discouraged after working hard to try to penetrate the market of strangers but you can’t and then you are mad at your friends for no longer supporting you when you should be mad only at yourself.
The market of strangers (the general public) can’t be penetrated because the general public really doesn’t want to order from catalogs published by a multi-level marketing company. That’s because we have stores and malls that are a LOT more fun to deal with. The general public goes to Bed, Bath & Beyond, WalMart, and fun retail stores. Shopping at malls is fun. Dealing with a little salesperson who sells over-priced things with a limited selection isn’t. You become discouraged, your friends are disappointed, and you wish you hadn’t started a “business.” At least, though, you may have some losses that can be deducted on your tax return. But to do this, you will have to face your tax preparer when you explain that you have $2,000 in income from sales and $3,000 in expenses--and this is before we even consider the investment of your time, your vehicle mileage and your reputation.
Don’t worry, I’ll give you the team cheer to explain what’s happened to you and how you can turn it around--BRING IN OTHERS TO SELL WITH YOU!
Multi-level marketing’s true product is hype and promise, not cosmetics or imported trinkets. The only clients that I have ever had that made any money at multi-level marketing were those that quickly realized that the actual product (cosmetics, water filters, detergent, or--whatever) is absolutely, completely unimportant. What makes money is the selling of selling, not the selling of the product. SO GET TO IT! SNOOKER YOUR FRIENDS INTO SELLING TO THEIR FRIENDS! After all, that’s what happened to you. “Isn’t that what friends are for? Friends are supposed to help friends.“ Bring them in! If you want to get involved with multi-level marketing, you must remember that the serious profit is to be made not on the selling of the product but on the bringing in of new people to be “under” you. HOP TO IT!
The over-rides are what makes serious money and the rewards come from bringing in new people to move you higher on the pyramid--er, actually, in the pyramid scheme. If you sell very little product, you will have enough to mis-represent, er… represent, to the friends that you want to bring in to this idea that you are selling right and left, upwards and downwards. You’ll get their over-ride until they become disenchanted and you will get to keep the bonus that you were paid for recruiting. You won’t have any friends left and you will be forever known as Mr./Ms. Pushy, but you will have been more successful than just selling product.
Memorize this one sentence: the fastest way to lose your friends is to FORCE them to become your customers, and this is basic cornerstone of multi-level marketing’s sucker sales pitch.
If you get involved in these little home-based business ideas that are pre-programmed and pre-packaged, you will not make any money, you will spend what money you do have and you will turn your friends off in more ways than one.
David B. Robinson, CPA
Index of Previous Issues of Tax Fax
