MLMs, Small Businesses, Pyramid Schemes, and Me

A few days ago, my blogger friend V wrote up her opinions of multi-level marketing companies (MLMs). I thought she made some great points, and her viewpoint helped me solidify my own thinking about these businesses. I also read the many comments on her post (how do you get people to comment? I have no clue!) and learned a lot from them.

These are “the” pyramids, and have nothing to do with any marketing scheme other than their shape. Photo by @HazemElEtre via Twenty20.

Definitions

First, since I posted something about this on Facebook recently, I know some of you want to know what an MLM is.

My Facebook post, which is still getting comments after two weeks.

So, here’s what the US government says:

MLM companies sell their products or services through person-to-person sales. That means you’re selling directly to other people, maybe from your home, a customer’s home, or online.

If you join an MLM program, the company may refer to you as an independent “distributor,” “participant,” or “contractor.” Most MLMs say you can make money two ways:

  • by selling the MLM’s products yourself to “retail” customers who are not involved in the MLM, and
  • by recruiting new distributors and earning commissions based on what they buy and their sales to retail customers.

Your recruits, the people they recruit, and so on, become your sales network, or “downline.” If the MLM is not a pyramid scheme, it will pay you based on your sales to retail customers, without having to recruit new distributors.

A pyramid scheme is an illegal and really bad version of an MLM.

Examples

You have heard of many MLMs, though you may not know it, since most people who participate call them small businesses. They started out a LONG time ago, too. I remember our 1960s “Avon Lady” very well (she gave me tiny lipsticks, which made me feel grown up). And my grandmother had a friend who pushed Amway detergent at her.

MLM examples you may know of include: Amway, Avon, Color Street, doTerra,* LuLaRoe, Mary Kay, Nu Skin, Onehope Wine, Pampered Chef, PartyLite, Perfectly Posh, Rodan + Fields, Scentsy, Tastefully Simple, Thirty-One, and Young Living. Who hasn’t bought some of these products? And many of them are pretty good quality, fun, and only a bit over-priced.

A product sold through an MLM (one I have never bought from). Photo by @jeswfromtexas via Twenty20.

My History with MLMs

I cannot come across Holier Than Thou and say that I’ve never been involved in MLMs because I have so many ethics and know how much money they take away from friends, etc. I’ve bought a LOT. I also can’t say I don’t know people who have made a reasonable supplemental income off them, because I DO.

To be honest, I always felt good about helping friends out with making a little extra money on good quality items that I can actually use. I even had a few “parties” back in the good old days. We used to have a blast with PartyLite, quickly getting past ordering some candles and into chatting, eating, and drinking. When my friend Gina was doing Tastefully Simple, too, there was a lot of fun to be had.

I just LOVE these products, though. Sniff.

The online events they have now aren’t as much fun for me, but I appreciate how much work people go to so that their events are engaging and fun for people who like guessing games and the community-building questions.

Most of the people I know who’ve done MLMs have been sincere people who needed to make some money from home. The sales pitches from consultants who recruit new ones are also very good. It’s easy to see how the prospect of recruiting someone else and making money from that would be enticing, especially if you have few other options. Building up a “team” is the “multi-level” part and what makes me uncomfortable.

Random sampling of MLM lotions I happen to have within arms’ reach.

That’s where I always drew the line. I don’t care HOW much I liked something, I was NOT going to sell it to others or recruit friends. I didn’t mind spending my own money on something “frivolous,” but didn’t like trying to get my friends to spend their money. I can’t tell you how many times I’ve been begged to sell products I like and use myself.

*One Time I Did Join Something

Confession time. I like essential oils. The chemistry is really interesting to me. I like diffusing them, smelling them, and in some cases, ingesting them (I am also familiar with caveats about them, so no need for lectures). When I started buying lots of them from my friend Sara, who also really likes them, she said I really needed to become a consultant, or whatever they call them, so I can get the products at the lower cost. As I tend to go through them pretty fast, that made sense.

I’ve got hundreds of these kinds of things. Oops.

I’ve been a doTerra consultant for at least 4 years now. I have sold two items at retail. I have recruited no one. I get stuff for me, my family, and my friends. And, I guess I will have to stop soon, for reasons I’ll eventually get to, as I ramble along.

I Gotta Live My Principles

Back to the beginning, reading what V was saying about her friends going into deep debt, and knowing the debt some of my own friends have gotten into, it became clear that when I was “helping” friends by buying things, I really wasn’t helping, just encouraging them to get deeper into the MLM world, getting them more and more pushy, insistent about you buying their wares, and becoming “assholes,” as V put it. I’d say acting like assholes, since these are people I like.

The online MLM pressure is really getting out of hand, and I don’t think it’s healthy at this point, if it ever was. These are NOT small businesses, they are people making money for other people, up and up a pyramid. I can’t do it anymore, so I will have to go cold turkey on some things I really like (I don’t know if I can give up my R+F skin care stuff though; it really works).

So, friends, if you really start up a new business, I’ll buy something. And if you are one of my few friends who does really well with MLM, I salute you. I just know how hard it is when you are stuck with hundreds or thousands of dollars of inventory with no one to sell it to, because you’ve alienated everyone you know. I don’t want to encourage that to happen to more people I care about.

If you’re thinking about going into one of these things to pay for gifts, or whatever, remember what V says in her blog post:

If a business exists solely on social media, that is a red flag.

If a business relies on your initial investment to be a legitimate ‘boss’ that is a red flag.

If a business is teaching you how to get rich quick on social media, that is a red flag.

If a business relies on teaching someone how to teach someone how to teach someone, that’s a pyramid scheme.

https://millenniallifecrisis.org/2020/12/11/blogmas-day-11/

(True story, while typing this I got a message from someone trying to sell off their inventory to cut their losses.)

End of an Era

Today we said a fond farewell to one of our favorite buildings in Cameron, the old Trubee house. It’s where we first had our offices for our real estate business, and there were lots of good times in that place. I loved my little area, which had windows I could look out of, and I liked the beautiful dining room where our conference table was.

Back when we decorated a LOT for holidays. I guess this was for our big open house in 2017.

Mandi and I enjoyed having coffee on the porch and playing with the feral cats outside. And we got a lot of work done!

This sign always embarrassed me.

My dear friends from my old church, Mike and Martha, have been living there since we moved our office to the Hermit Haus/former church building. They finally decided to bite the bullet and buy the place. It has plenty of room for all the things they like to do, but is also cozy! The pecan trees are another big plus, too. Yum.

They’re very happy. You just can’t tell.

We’re very happy for them. I look forward to visiting the house often, soon as we are allowed to visit anyone again. It will be fun to see all the projects Mike comes up with now that there’s nothing stopping him.

It’s a little easier to tell Lee and I are happy.

We had a nice, simple closing over at our lawyer’s office, which meant a chance to see friends! Luckily, we recognized Liz and Hollis with their masks on, and we could even tell when we were smiling. We did the closing in the biggest room in the office, too, so we had as much space as possible.

This is our post-signing hug.

I’ll miss the old house, but am very happy for my friends. And, hey, the income is nice, too, right?

It’s Closing Time

One of the first houses Lee and I bought when we started investing in real estate was a cute little house in Pflugerville. That’s a town near Austin (now a suburb) founded by a family called the Pflugers. There are still people in town by that name. Anything that starts with an “f” sound in that town tends to be renamed to have a “Pf” at the beginning. Hilarious, right?

A perfectly reasonable house

Anyway, we didn’t talk about it much back in the Hermit Haus Redevelopment days, since we already had it. But, we spent a lot of time there at first, since young friends rented the house for a few years. After that, we had a series of really good renters.

It really has a cute floor plan and is in a nice neighborhood.

After these renters left, we decided to sell the Columbine house, and our friend Carol did a great job of marketing it. We got a cash offer immediately, but they backed out. Not a problem, our backup offer was a really nice family who did that thing where they wrote a letter and thanked us, and all those sweet things people do to try to get a house. I really enjoyed seeing how thankful they are to get it.

Part of real estate investing involves knowing when to hold on to an income property and when to let it go, so it took a lot of thought on Lee’s part to determine that this is when we can best realize the profit from letting this little house grow in value. I’m glad we took so many classes and know all the processes for figuring this stuff out!

Yesterday, Lee did his part of the closing, and today is my turn. It’s nice to be able to use a mobile notary and meet outdoors, where we can sanitize away and still get business done.

We’ll miss owning this house, but selling it will free up some capital and enable us to move forward with the exciting future projects we have lined up for Hearts Homes and Hands.

I hope you’re having a good day and getting the things done you need to do in your world.