What’s a Pyramid Scheme? [V1-N2]


What defines an illegal pyramid scheme and how to differentiate between an illegal pyramid and a legitimate MLM opportunity.

MLM Failures: Who’s Really Responsible?

By Len Clements © 1993

I was recently asked at one of my Inside Network Marketing seminars what I thought the top five reasons were for people failing in MLM. When I opened that question up to the group, I heard, again and again, stories of those they’ve heard about who were front-end loaded, had to stockpile tons of product to meet quotas, were misled or deceived into believing in a worthless product or opportunity, or duped into believing there was little or no work involved, or simply got involved with a failed company.

Not one time during this rather lengthy exchange did anyone suggest that perhaps the individual distributor was at fault. More importantly, in any discussion in the media as to why ex-MLM distributors fail, does anyone ever put the responsibility on thedistributor. It was always the company, or the MLM concept, that was to blame.

In no particular order, here is a list of what we’ve found to be the top five reasons for distributor failures. Take note, as you make your way through each point, who is really responsible.

Lack Of Knowledge.

Many people just don’t seem to take their business seriously. Heck, many won’t even acknowledge it as a business. It’s just this play-thing they take out once in a while to try to get rich with. Then, of course, toss it in the dump when it doesn’t perform.

Any legitimate MLM opportunity is a serious business, no less genuine than any other. But they don’t teach this type of free-enterprise in school. No, not in Harvard, or Stanford, or anywhere else. You have to learn how to do it, and this education process is worthy of much more than a quick flip through your distributor manual.

If you want to make a comfortable living out of MLM, you must go to school. Read MLM books (there are many good, generic ones out there), listen to tapes, go to training meetings, read as many of the MLM publications as you can, learn everything there is to know about your product line or service, and learn about your main competitors and how to contrast and compare with them. Call up your upline and ask questions. Do your homework!

I’m not saying this has to be drudgery, or you have to be an MLM expert. But folks, it doesn’t take much to be “expert” in this business – compared to everyone else. With even a little expertise you’ll launch yourself into the upper 5% (as far as MLM knowledge) and gain a great competitive advantage.
Aren’t you joining an MLM program to be successful? A question with an almost absurdly obvious answer. Okay, so this might, assuming you are successful, be the way you earn your living someday, right? If all goes as planned, this will be your livelihood for the rest of your life. People study for many years, and spend tens of thousands of dollars preparing for this. Yet, most MLMers won’t spend ten bucks for a training manual or even ten minutes reading it!

The Junkie Syndrome.

There is no basis for this figure, but I would guess that less than 10% of all MLM distributors who have been actively pursuing this business for more than one year are still with their first company. Most probably have been with several. Of course, this is not always the sign of a junkie. I, personally, have been involved with five, but they kept going out of business (this was years ago, when I didn’t do my homework).

I believe MLM Junkies fall into two categories. First, there are those that believe, If I can make $1,000 doing one program, I can make $10,000 doing ten! These are the folks who are distributors in ten programs simultaneously. Then there are those who believe, The cash is always greener on the other side of the fence. These people are in whatever program who’s tape they listened to last. They’re in ten companies in ten months.

I know a gentleman who used to brag about his “expertise” regarding the MLM industry. He was quite proud of the fact he had been involved with 21 companies over the last 15 years. Of course, he hadn’t made any money in any of them, but the one he’d just signed up for was going to make him rich! Again.
MLM is like a marathon. And we all run (or maybe craw) the 20 miles to the finish line at different speeds. And, unfortunately, there’s always that guy over in the bushes, at about the one mile mark, whispering to you to meet him back at the starting line. He knows a short cut that will cut five miles off the course! Usually, the promise is false. He just wants you to run on his course. And you’ve lost the mile you already finished. And this little scenario is then repeated over and over. Two miles in, then back to the starting line. A mile and a half in, then back to the starting line. Over and over and over. Then the disgruntled distributor stands there back at the starting line blaming their lack of progress on the track conditions, their shoes, the weather, the race officials – everyone but themselves.

Folks, EVERYONE has, allegedly, a better deal than the one your in. EVERYONE will tell you their deal will make you richer, faster, easier. Buy into that, and you’ll never finish the race!

Pumping Up The Volume.

By this, I’m referring to the act of artificially meeting group and personal volume quotas by stockpiling product with money out of your own pocket. This also includes the act of front-end loading your new recruits.

From all the feedback we get from the field, and from all the press MLM receives, it seems obvious that this is a major killer of MLM success, not only for the recruits that are victims of this practice, but the experienced distributors as well. And in some cases, even the company itself is ruined by it (think laundry balls).

Several years ago, while investigating a company for a review in my newsletter, I went to an opportunity meeting and later met with one of the representatives. She strongly encouraged me to sign up for $500 worth of product since that was this program’s personalmonthly volume requirement for advancement. Of course, I also needed $2,000 monthly group volume, and five active front line distributors… and it was the 25th of the month! But that wasn’t discussed. There was absolutely no excuse for her to suggest that kind of purchase, other than to increase her bonus check. By doing this she completely ruined my trust in her. And besides, front-end loading is illegal! Sure, this company didn’t require a product purchase at start up, but these people were actually being taught by their upline to not sign anyone up unless they bought at least $250 in product. Otherwise, they would “poison” their downline. I agree a new distributor should buy some amount of product, but at a time and amount they are comfortable with. Not by force. Which would you rather have, a distributor do $1,000 in volume and quit in a month or two, or $100 in volume for the rest of their life?

What I think is even worse than front-end loading, as far as cause for failure, is stockpiling. There are so many people out there that are either over anxious, lazy, desperate, or just plain ignorant when it comes to this practice. They think if they take money out of their own pocket and meet all the monthly volume quotas, they won’t have to retail, or perhaps they’ll sell it all later. Or they may not want to wait to naturally meet the criteria for higher bonuses by building a retail base or downline, so they buy in at some huge amount of inventory. Of course, sometimes they do this out of desperation. Their downline is dwindling fast, or maybe they had a lot of people break away all at once. This might be a fair excuse for a month or two, maybe. But I’ve heard of people who do this every month. There was a popular story going around about a guy in a popular break-away program who purchased $3,000 worth of product every month to maintain his status level and $5,000 check, because all his eight front line people broke away. He claims to have quit this business with over $50,000 worth of product rotting in his garage. Here’s a thought. Do whatever you did to get eight front line break-aways and build your front line back up. Okay, maybe he couldn’t wait. Maybe he quit his job to do this full time, and couldn’t afford the lower bonuses in the meantime. My suggestion; don’t quit your job until your status is secured. I’m not trying to be sarcastic here, I’m simply trying to suggest that these situations all stem from bad business decisions on the part of the individual distributors.

The worst thing about this practice, is that once the disgruntled distributor gives up and quits with this mountain of stock they’ve accumulated, they bad mouth the company, their sponsors and the industry in general. They file class action suits, go on TV, get interviewed by national magazines… and every MLM distributor suffers because of it.

Distributor Apathy.

Probably the most obvious reason for failure, in anything, is simple lack of action. Especially in MLM. So many distributors are convinced that to be successful in this industry you get other people to sell for you. And in many programs they even believe their upline will build their downline for them as well. And, of course, some distributors are just not very motivated, or just plain lazy. They want all those wonderful benefits they heard could be achieved in MLM, but they don’t want to do what is necessary to achieve them.

The more a company, or it’s distributors, continue to promote their opportunities as ones that require little work, or that can provide success “easily,” the more they are going to attract people who don’t want to work, who are going to take it easy. And when they fill their downline with these people, they wonder why nothing happens.

During my seminars, I like to tell the story of a man who is looking for a chisel (an MLM opportunity). A tool he can use to carve out a sculpture (carve out a living). He does his homework. He shops around and looks over several chisels. After studying each one thoroughly, he excitedly make the purchase (signs up). Then, he goes home and puts the chisel away. Days go by. The block of wood stands ready, but untouched. Occasionally, he takes the chisel out and ponders it. Fantasizes about what he could create with it. He keeps hearing great things about this brand of chisel. It’s sharp, straight, and accurate. Very comfortable to hold. Once in a while, he takes a stab at it, literally. Makes a few scratches here and there. A few shavings fall to the floor. Weeks go by. The block of wood is still shapeless. Spider webs begin to form at its base. The man begins to notice what little effect this chisel has had on his carving. It’s just not taking shape, he says. Damn chisel! I’ve been had, he thinks. My family was right all along… these chisels are nothing but junk! They never work. Not just this brand, but all chisels, he assumes. He throws the chisel into the trash can out back. Then, at work the next day, his co-workers ask him how his carving is doing. Terrible, he says. Those chisels are nothing but junk. Don’t ever buy any of them. It’s not my fault. I don’t have the right tools. But I’m going to the hardware store tomorrow — I’ll findsomething that works!

I Quit!

MLM is the one form of business where you could accurately state,If you fail long enough, you will success. I’ve heard many times that in MLM, you can not fail, you can only quit. I believe this is almost true. Almost.

I met a woman after a seminar one night who informed me that she was going to quit her opportunity because, after four months at it, she was “failing miserably”. I asked her what that meant, in numbers. She replied that she had signed up “only” two people her first month, none the second and third, and two more her fourth month. Four in four months. She also said that those four were doing no better than her. So, they too were “failing miserably.” I projected out on the white board what her downline would look like after one year, factoring in considerable attrition. It came out to about 20 people, which would have earned her roughly $120 per month. “See, that’s horrible!” were her exact words. I asked her what she thought her downline would look like after two years, assuming she and every one else continued to fail just as miserably as they had the first year. Her response, with no hesitation, was “Well, 40 people.” An obvious answer, right? Twenty the first year, so double it after another year. Obvious perhaps, but absolutely incorrect. I asked her to give me the number of people who were building her downline her very first day in the business. She gave the obvious, and this time correct answer of “One – just me.” Okay. How many people would be working to build her downline the very first day of her second year in the business? “Twenty, besides me” she said. Correct, since the downlines they build for themselves would also be building hers as well. So, since there are 20 times more people building her downline, wouldn’t it make sense that she’d receive twenty times the results? If each of those 20 people “failed miserably” and all brought in only 20 people each that year, she would have 400 people in her downline – and an approximate income of $2,000 per month. Keep in mind, we assumes no “heavy hitters” in this scenario. Although math is perfect and the real world is not, and her actual results could very dramatically either way, the point was clearly made. Don’t quit.

Notice where the responsibility lies within each of the above points. Not with the company, or it’s products, or it’s marketing plan, or even it’s distributor base. It falls on the distributor alone.
Yes, yes, the company could go under, or it could be an outright flaming scam. But if you’ve done your homework, the chances are increased that even this dreaded scenario could be avoided. And if it does, it will only be a set-back, not an end to your MLM career.

MLM opportunities are, in one way, kind of like investing in the stock market (and I’m speaking metaphorically). If you’re an “aggressive” participant, go for “ground-floor.” Sure, the rewards could be greater, but be prepared to take your lumps. Conservative? Go for a stable, mature opportunity that’s been around for 20 years. Or, are you somewhere in between? If you want to take the extreme risk of getting involved with a deal that’s in “prelaunch,” then that’s your decision. The 96% failure rate of MLM start ups is no secret. Pleading “lack of knowledge” of this fact is not an excuse.

What about the guy who quit his job, bought $5,000 worth of water purifiers, sold one to his mom, and then joined a class-action suit against the company (true story). He was deceived. Lied to. Scammed! If wasn’t his fault… was it? No, if someone held a gun to his head and forced him into it. Otherwise…
I hear about this kind of thing happening all the time. Some distributors make very emotional, uneducated, terrible business decisions, then look for a scapegoat. If you owned a video rental store, and a supplier offered you a great deal on 1,000 copies of Ishtar, which you agreed to sight-unseen, and later you found that only one was rented would you sue the supplier you bought them from? Sure, some would. But who’s the one that could have read reviews, talked to critics, called other video stores, or just watched the movie first? Who’s really responsible?

In today’s information age, especially with the abundance of information sources available in and to the MLM industry, there is absolutely no excuse for a new distributor to go into an MLM opportunity unaware of the truth. A few simple questions, a couple phone calls, and a little bit of reading is all someone needs to do to know exactly what will really be expected of him or her, and what to expect from MLM, to be successful.

Multi-Level Marketing works! The concept is sound, and the good, legitimate opportunities are everywhere. Everything you will ever need to succeed in this industry is out there, right now. The only ingredients that still need to be added to the mix are, hard work, patience, knowledge, honesty and commitment. Things we must provide. All of us. We are responsible!


Len Clements © 1993

If it were possible to count all the words we speak within our lifetime, I’d guess “I” would be number one, “and” would be a distant second, closely followed by “to.”  Unless you’re me.  Then you’d probably find “why” right on “I”‘s tail.

Ever since I was a small child I’ve been asking that question.  I remember vividly having the “birds and the bees” explained to me at a very early age.  It was due to my questioning as to why Mommy had to go all the way to the hospital for my baby brother if the doctor was going to deliver him?

After Dad did the honors of teaching me the real story right from the start (he knew there was no hope of me ever buying into the stork bit), I remember asking why, after this elaborate, very deliberate, incredibly meaningful event between a man and a woman, did the father always act surprised when told his wife was expecting.  Did he forget?

About the age of nine or ten, during a cross country trip, I remember asking my parents; “Why do they say we drive on a parkway and park on a driveway?”  It wasn’t until many years later that I would hear, to my astonishment, that very same question asked of millions of television viewers during a show by the comedian Gallagher.

Gallagher has always been one of my favorite comics.  He asks a lot of good “Why…” questions.  Why is there an expiration date on sour cream?  Why doesn’t bomb and comb rhyme (a variation of my own question about do and go)?  Why is there a permanent press setting on an iron?  I love this guy!

I know that taking this why thing too far can get obnoxious.  I’ve really had to struggle to not ask the vendors at Oakland A’s games why their catsup containers are yellow and their mustard containers are red.  That makes no sense.  I’ve been dying to ask one of the tellers at my local bank why they just installed braille instructions on the drive-up automatic teller machine.  I don’t know how much longer and I can last on that one, but I’m hanging in there.

Why do all dictionaries contain a definition for the word “dictionary?”  Why don’t they just say:  dic•tion•ar•y  (dik’shen•er’e)  noun  1.  This thing you’re reading!

Why are there instructions on a bottle of shampoo?  Are there really people out there who massage in the shampoo — then wet their hair?

Why does the mashed potatoes section of a TV dinner always take three times longer to cook in a microwave?

Why does the prison doctor who administers lethal injections dab the subject’s arm with alcohol before inserting the needle (it’s true!)?  Is this guy really concerned about getting an infection?

Why would anyone buy Levi’s Oversized Jeans?  Why don’t they just buy normal jeans a couple sizes too big?

Why does fat chance and slim chance mean the same thing?

Why do all Bic lighters carry a warning label informing you the contents are “Flammable.”  Isn’t that why you bought it?

Why does that same warning label go on to suggest that the user should “…not hold flame near face?”  Who is this warning for, the Marboro Man… or Cro-Mangon Man?

Why did kamikaze pilots were helmets?  To prevent head injury?

What time is it at the North Pole?  I know that’s not a “why” question, but it’s still a darn good one.  Think about it.

This insatiable appetite to know why has carried on into my research and observation of the network marketing industry as well.

For example, why is it that if a large conventional business, employing thousands of people, goes bankrupt and/or is on the verge of closing, their employees, and many times the company itself, is pitied and people root for them to survive?  But if an MLM company, employing just as many honest, hard working people shuts down, it’s a scam.  Every time.

Why do ex-employees of closed companies usually see themselves as unlucky, or victims of the economy, whereas ex-distributors for closed MLM’s consider themselves “ripped off,” or victims of the company, or the MLM concept?

Along the same lines, why is it that if a car, real estate or insurance salesperson fails, he or she just wasn’t a good salesperson.  But if an MLM distributor fails, it wasn’t a good product, company, or compensation plan?

Why is it that if you create a company hierarchy where all those at the bottom can only succeed by climbing over those above them, and those above them are doing everything they can to make sure they stay below them, this is considered a legal, legitimate pursuit of the “free enterprise” system.  However, if you create the exact same hierarchy, but allow those at the bottom to create, and be at the top of, their own hierarchies, with unlimited support, training and encouragement from all those above them, this is considered a “pyramid scheme?”

Why is it that many states conduct lotteries which take in tens-of-millions of dollars more than they pay out, mostly from the middle and lower class, which have a one-in-ten-million chance of winning, but these same states will investigate, file suit, and even shut down some MLM opportunities because they employ a “luck factor?”

Why is it that any other kind of business that involves sales can induce and entice prospective sales people to join their company by displaying the earnings of their top sales people, and openly discussing the “income potential” of the compensation plan, but it’s considered “illegal” in network marketing?

I want to clarify something about that last question.  I’m not an advocate of high earnings claims in MLM.  But none-the-less, it infuriates me to no end to hear stories of top distributors being prosecuted for displaying evidence of their incomes, even with a stern disclaimer.  Prosecuted for telling the truth!

“Why ask why?”, the beer commercial asks.

Sometime for fun, and sometimes — to know the answer!

Win The Race – By Staying in One Place!

By Len Clements © 1996

One of the saddest things I see happening in this industry is the huge number of folks who wander aimlessly through this ever widening sea of network marketing opportunities. These are people who indeed find an island oasis from time to time, only to jump right pack into the cold, rough surf in search for a “better” paradise. As I watch them swim away, I know their fate. Another island, another return to the sea. Then finally, with no strength left to swim another stroke, their hopes and dreams for a better, more secure life through network marketing sinks to the ocean floor. But alas, there is no floor, for it has been covered, layer upon layer, by the drowned hopes and dreams of so many others before them.

Or, we can liken these people to a marathon participant who runs the first of a 20 mile race, then sprints back to the starting line — over and over and over. Then stands confused and frustrated by his lack of progress (and, most likely, blaming the course, his shoes, the race promoters, the weather…).

You see, building a network marketing organization takes time. It takes patience. But what few distributors (in any opportunity) seem to realize is that it gets easier, it happens faster, as time goes on. But so few MLM distributors stick around long enough to see this happen. Think about it for a moment. You start out with one person building your organization — you! Then you sign up a couple friends. Now you have three people all working to build your organization. In a month or two you might have only twelve people in your downline. But that’s twelve people who could all contribute to yourdownline. The more your group builds, the more people there are to help build it even bigger.

This phenomenon, called geometric progression or “momentum,” does exist, and it can occur within your own personal downline much like it does for a company. After all, aren’t all the distributors in a company part of one really big downline? Your downline can go into momentum too, on a smaller scale of course. However, depending on your activity, the opportunity you’re involved in, and at least a little luck, this onset of your own mini-momentum might take three months, five months, perhaps a year. As long as you’re recruiting at least one new distributors every month or two, it is mathematically inevitable that your organizational growth will begin to accelerate on it’s own.

So let’s say, for the sake of example, that momentum would strike around the sixth month. How many people in this industry do you think are long gone from their opportunity before they even approach that sixth month? After all, they’re not rich yet, and the promises of all those other opportunities are just so enticing, aren’t they? Well, the answer is thousands. Thousands!

And how many hopes and dreams lie at the bottom of the MLM ocean? That’s right — thousands. It’s no coincidence.

The ocean’s cold. There’s sharks out there. Find a nice warm island, make it your home, and see what you can build on it.

10,000 UNRECRUITED Heavy Hitters

And no one is Calling Them

By Len Clements (c) 1998

Several months ago I received a call from one of my downline distributors inquiring about a good “MLM list.” Bob then asked specifically if a list of “heavy hitters” existed and how I might approach them. My response was something to the effect of “Bob, why would you want a list of people who are the least likely to want to join your opportunity?” After all, heavy hitters are people who are making huge monthly incomes (that’s why they call them heavy hitters, right?). I’d assume they like making huge monthly incomes and probably would not be too interested in walking away from it and starting over from scratch.

“But Len, think about it,” Bob persisted. “Just imagine if I could have recruited…”. Bob then reeled off the names of three major heavy hitters, all well known throughout the industry (however, we’ll just call them Mark, Jim and Ken). Bob began to fantasize about the great wealth to be had by recruiting the likes of even oneof the three mega-earners he listed.

Well, I happen to know Mark, Jim and Ken personally, to varying degrees, and I know their story. Ironically, all three of these men claim to have once had a strong skepticism towards network marketing and at one time felt it was something they would never consider being involved in. Yet today, they are three of the richest, most successful network marketers in the country — as are their uplines!

“Exactly!,” Bob exclaimed. “So how do we sign up people like that?”

Mark, Jim and Ken were, at one time, not network marketers. Obviously. The lucky folks who personally sponsored these three didnot do so by scrolling though existing heavy hitter lists. They worked hard on opening the minds of people who they thought had a lot of potential, got them to consider network marketing, and today they are set for life.

You see, there are about 5 million people involved in MLM in this country today. There are about 285 million who are not. This means there are literally thousands, perhaps tens of thousands of Marks, Jims and Kens roaming around this country who, right now, are very skeptical of network marketing who think they’ll never be involved in it — who’ll someday make somebody a million dollar income! Thousands of them!

Personally, I think the very best network marketers are not involved in network marketing yet. Mark, Jim and Ken are only the best out of the 5 million who are involved. The odds are there are many people among the 285 million who are not that are far betternetwork marketers then even they are!

Today, there is a constant ebb and flow of distributors from company to company — those who migrate like Gypsies from program to program always looking for the better deal. And this segment of the MLM population is huge. The result is that many companies increase in sales volume and distributor count each month, but it’s usually at the expense of another MLM program. There are a number of examples of companies that experienced growth in 1995 that came primarily from the fall out of another MLM company. The People’s Network grows — Quorum shrinks. Pre-Paid Legal grows at the expense of The People’s Network. When Matol saw huge defections a few years ago, most went to New Vision, which is where all the Natural World distributors were just merged into as well. Usana grows, Växa shrinks. Likewise with Life Plus’s growth in 1994, which came at the expense of Kaire and Sterling Health. Gold Unlimited goes away, a dozen other gold and silver programs get a jump start. The examples are endless.

Really, no company has experienced legitimate momentum in the last five years. Not like Herbalife in 1983, or NSA in 1987-88, or Nu Skin in 1991. Or, to a lesser extent, Quorum and Melaleuca in ’92 and ’93. The point here is that these companies created this momentum by bringing in massive amounts of new distributors from outside the industry. And as a result, the industry grew as well.

But not today, at least not like in the eighties and very early nineties. Today, everybody seems to be into retreading existing distributors over and over and dreaming about landing the big heavy hitter. The industry has become a sluggish, lazy one filled with a lot of spoiled opportunist looking for something for as close to nothing as possible. And the opportunities available to them have exploited and perpetuated this to no end. Where there was once an industry made up of merit based opportunities that rewarded those who worked hard, retailed, and actually trained and supported their downline, there is now an industry full of fluff programs with token products that will basically sell you the farm for a small monthly personal purchase. Again, the point being that recruiting “outer circle” people (those not involved in MLM) is hard work, and so few MLMers today are into working hard.

Why is it so hard? Because outer circle recruitment involves a two, and usually three phase process — and the first two steps are very tough ones.

Step one is to open the mind of your prospect as to the possibility of just starting a home based business. Based on surveys performed by MarketWave in 1989-91, 85% of all Americans who do not own their own business do have the desire to be entrepreneurs. When polled as to the reasons why they do not pursue this desire, the four most common reasons were: Takes too much money, takes too much time, too much risk, I don’t know how. Understand, this means that over 200 million people in this country want to be self employed who are not — and for reasons that do not apply to network marketing! Nonetheless, these are powerful objections and ones that must be overcome before an outer circle prospect would even consider your opportunity.

Once the prospect has excepted at least the possibility that there might be a type of business which overcomes all of their concerns, you must then “confess,” if you will, that it is called network, or multilevel, marketing. At this point, you will very likely have to address the stigma that surrounds this industry and/or at the very least, educate the prospect on what MLM is and how it addresses their entrepreneurial concerns. The greatest challenge here will likely be that what you are proposing will sound too good to be true! This may actually create even more skepticism regarding MLM in general. So step two is to legitimize the industry as a whole.

(Gratuitous plug: These first two steps are the basis for my Case Closed! cassette tape. See below.)

So to recruit outer-circle prospects, the first step is to open their mind to starting their own business, the second step is to remove all the garbage about MLM that may be in their, and the third step is to then pour new information in — by finally presenting your specific opportunity. And as I said, steps one and two may be the most difficult to complete. So, wouldn’t it be so much easier to just find folks who are already involved in MLM, who’ve gotten past steps one and two, and just convince them that your products are better and your compensation plan will pay them more? I mean, why go through all the trouble of taking them through steps one and two when someone else has already done the tough part for you?

Because — if you don’t, this industry will not grow, your downline will be forever turning over as these transient MLMers move on to the next “better” deal, and — you will never recruit a heavy hitter!

There are thousands of them out there. Get out there and recruit one! Or, recruit three!!!

The BIG Lie

By Len Clements © 1993

I hate selling. Loath it. Like most people, I can’t stand the rejection. I’ve been told I’m good at it, and it appears I am, but I would never want to make a career out of it. Knowing this of myself, it begs the question, “why did you get involved with network marketing?!”. Yes, twelve years ago, something got me over this hurdle. For some reason, I got the entrepreneurial spirit and decided to get involved with a business opportunity that involved heavy retailing of products.

It would appear I’m not the only one. In a study we did last year atMarketWave, we asked 136 current and ex-distributors what they disliked the most about MLM. The most common answer? Nope, not meetings. Not ethics or company failures. It wasn’t stock-piling or front-end loading. It was selling! People didn’t want to have to go out and sell anything. Actually, 83% of those surveyed included this among their top three answers. Amazing.

So what would posses, what must be millions of people who hate selling, or think they can’t sell, to go out and jump into a business that demands constant, effective selling skills?

The money? Sure, to some extent. But I think we should give a little credit to the American public. Most folks realize that, sure, there is the potential to make obscene wealth in MLM, but what they really expect is to earn a nice comfortable living, or just some extra spending money. And the wealth could be months or years away. Years of selling.

Actually, the answer is quite obvious. Most of these people have been convinced, at least in the beginning, that to be successful in MLM you don’t have to sell anything. You get other people to sell for you!

Thinking back to my early days in MLM (with a company calledNature Slim) that is exactly what I was told. If I build this giant organization of distributors, I’ll get bonuses off of all their sales. All I have to do is buy the product for myself. The problem is, all those people in your downline are being told the same thing!

Today, we see all kinds of opportunities claiming “no selling necessary”. They encourage distributors to just buy and consume the products themselves, or for their families. In some states, this is technically illegal (although seldom pursued, unless provoked). And what exactly do you call promoting your opportunity? That area of your business probably involves the most selling skill of all.

And how about selling someone on the idea that they can be successful in the “direct selling” industry, without having to sell anything?

I hear companies claim that their video or audio will “do the selling for you”. Okay. How does the video convince someone to watch the video?

Or how about this one. “It’s not selling — it’s sharing“. Right. “Here, I’d like to share some of this wonderful skin cream with you. That’ll be $19.95”.

My all time favorite is, “the products sell themselves”. To this day, I’ve never seen a bar of soap call up one of my neighbors and invite itself over for a swim. Not once.

Some programs claim no selling is required, and they’ll even do all the recruiting for you. The only downlines they really build, are theirs! There’s just no free lunch.

Now, I realize that there are extremely “retail” oriented companies out there. Yes, they encourage hard work, and the heavy retailing of their products or services. That’s how they make their money, and keep Attorney Generals off their back. The distributors, however, seem to have a different agenda. Many of them will go out of their way to make sure their prospect doesn’t hear the company message. That would turn off that 83% that just wants to sit back while their downline does the work for them. Those that don’t want do any selling.

Actually, I shouldn’t lump all those people who hate the task of selling the products into this group. There are many distributors who feel that retailing is a mundane chore that will result in little more than a car payment. Recruiting, however, builds fortunes. So they blast their opportunity pitch at everyone in sight. They have no problem selling the sizzle. The retailing, again, they leave to “other people”.

Many people ask me, why do a select few individuals seem to make MLM work for them, on a monster scale, almost like magic, while most of us just flounder away? Well, a select few individuals are super-salespeople, and most of us aren’t!

All of this may seem as if I’m suggesting that we should all still be heavily retailing, even if we could personally consume to meet our quotas. Not at all. Actually, I like the personal consumption angle. I’m simply suggesting that, regardless of how the opportunity is structured, something must get sold! If not a product, then an idea, a concept, or a dream. To lead anyone to believe otherwise is… a big lie!

Don’t be discouraged by all this if you feel you are one of those that can’t, or dislike selling. MLM can still work for you. I’m certainly one of you, and if any of the companies I was involved with during the eighties had stayed in business, I may very well be a rich man today (although it certainly has provided a wealth of knowledge). Take some time to build your confidence. Acquiring selling skills can come naturally, in time. Taking a comfortable, slower, more passive approach to your opportunity will delay your success, surely, but better to succeed slowly than fail fast.

How to Add 1,000 People to Your Downline

Each and Every Week – Seriously!

By Len Clements © 1996

I was exploring the internet jungle a few weeks ago when I stumbled upon what appeared to be an open MLM forum, however it had pretty much been taken over by distributors for one dominant opportunity. Dare any member from a subordinate MLM species wander into their domain and there would be a frenzy of activity to see who could convince the newcomer that their MLM program was superior — and from the looks of their on-line conversations, they were succeeding.

The lure wasn’t the promise of quick and easy wealth, for there was actually little mention of high incomes. Nor was it the miraculous benefits of their amazing product line. Instead, they were trading recruiting figures. Massive recruiting figures.

One had recruited eleven people his first day in the business. Another claimed she built a downline of over 3,500 by her second month. Yet another claimed the company as a whole had gained over 180,000 distributors since January. And yes, one even claimed he had “personally recruited 100 people in a single day!”

This would all be very impressive — if I could pay my rent with distributor applications.

It’s fascinating how the marketing trends in this industry evolve from year to year. In 1991 and ’92 everyone bragged about how much their top earners were making. In 1993 and ’94 everyone was hyping their company’s total monthly sales or sales growth. And around the middle of this time span I remember there was a short lived phase where the age of a company seemed most important. Today, everyone’s talking about how many distributors their company has. It seems we’ve now entered a phase in the cycle where what is actually the least important factor is now considered the most important!

To create a marketing advantage, the “in” thing now seems to be how to redefine “distributor” so as to claim the highest possible number of them. For example, the above MLM program, along with several others now entering make-believe momentum, all have a free sign up system via an 800-number (In fact, in some of these programs you can even sign up distributors without them knowing you did it.) So, retail customers now routinely sign up as “distributors” to get the product at wholesale.

Several companies now allow their distributors to sign up their spouse, or any family members, and some even allow you to sign yourself up as many times as you wish! While others, like the above mentioned company, technically forbid such practice, their distributors are doing it anyway and without consequence. So while they may only gain 200 actual distributors next month, they may be able to claim an increase of over 1,000 distributorships.

The technique used above is to simply give out sequential ID numbers to anyone who orders even a single product, one time, and to all the positions occupied by each distributor. Then, call each ID number a “distributor.”

Another way to make sure that this number always increases is to never purge your inactive distributors. Technically, a company can’t terminate a person for not ordering product (while MLM companies, like any direct sales company, can require a sales quota to earn commissions, they can’t require a product purchase just to maintain distributor status). Instead, most will place non-ordering distributors in an “inactive” file and simply remove them from the distributor hierarchy. Some, however, will continue to count these people in their total distributor figure since they are, technically, still distributors.

Most MLM companies have some sort of annual renewal process where a small administration fee is charged, or at the very least a reapplication process. This is to weed out the dead wood. Of course, if you omit this process, as some are, and inactive distributors are still technically considered in the program, then essentially they are “distributors” for life! No matter how many quit, the “total distributor” figure will always be climbing. What’s more, the company can now claim a “zero percent attrition rate!”

And it would be true — technically.

MLM programs that employ a binary compensation plan have a unique advantage in this area that’s exclusively their own. In a binary, one person can potentially occupy numerous “income centers.” I know of at least two such companies they are currently claiming a “total distributor” figure based on the total number of income centers. Fortunately, most of the binary plan contingent have not followed suit.

So here’s the formula to build a “one-million distributor company” within five years:

1. Allow anyone to sign up for free, over the phone.

2. Count product customers as distributors, even if they only order once and you never hear from them again.

3. Allow them to sign up as many times as they wish, or at least disallow it and look the other way.

4. Allow them to sign up any and all family members.

5. Never purge your company database of inactive distributors.

(Or, you can just not reveal your total distributor figure and just let your distributors “estimate.” That should at least double the actual amount.)

Just imagine if Amway would adopt the previous criteria when defining “distributor.” They could easily claim to have 100-million of them by now! In fact, I recently saw an ad for a popular MLM program with the headline “Over 250,000 people have joined (blank) International!” Of course, the ad doesn’t mention that well over half of them are no longer distributors.

Semantics plays a very important role in the MLM industry today. By changing the standard definition of various aspects, companies today can create the illusion that they are in what ever stage of growth they desire. Want to sound like a “ground floor opportunity?” Just say you’re in “pre-launch” — even if you’re in your second year of business. Want to sound like a mature, stable company? Count all the years you thought about starting an MLM operation and then claim “ten years in development” — even if you launched yesterday. Want to sound like you’re entering a massive momentum stage? Count every single person who contacts your company, for any reason, as a distributor — then heavily promote how many distributors are joining each month.

Several years ago, this same logic was used by the second baseman on my Little League team. After losing the final game of the season by a goodly margin, and all but three of the previous seventeen games, this curly-haired little seven year old attempted to comfort me by exclaiming, “Ya’ know, coach, not counting the games we lost, we were UNDEFEATED!”

This also reminds me of the debate regarding whether the legalization of drugs would effect the crime rate. Advocates of this idea claim it would drop it dramatically. Of course it would! If you make fewer things illegal, they’ll be fewer laws broken. Hey, why don’t we just declare everything legal? Then we would have virtuallyno crime!

So, let’s get to the big question: How can you, personally, recruit 1,000 distributors a week, every single week? Simple. Get your company to employ the following recruiting system: You walk up to someone on the street, tap them on the shoulder twice with the index finger of your right hand, and say “I dub thee a distributor.” That’s it!

Think about the possibilities. You could literally recruit a thousand new distributors each day if you found a busy intersection in a major city. And if you trained just a handful of people in your downline to do the same, you could build an organization over 100,000 within days! And, of course, your company could easily claim to have over one-million distributors within just a few short weeks.

There is one small catch however. No one will make even one dime in commissions.

Okay, so now your upset with me. You read this article expecting to actually discover how to recruit 1,000 people a week. Well, I delivered. I explained exactly how to do that. Hopefully, I also explained the difference between “people” and “serious, active distributor.”

MLM Start Ups: Are They Strangling The Industry

By Len Clements © 1995

In Economics 101, they teach you about one of the most basic principles of economics — supply and demand. Here’s a little economics lesson as it pertains to MLM. I promise I won’t bore you.

A little over four years ago I did a survey of MLM companies to try to determine the true number of MLM distributors in the U.S. I came up with 6.1-million, and I counted a lot of people twice, I’m sure. About six months ago I did another rough count and came up with 6.5-million. A 6.6% increase. However, the estimated number of MLM companies went from around 200 to 350. A 75% increase! The result? The average downline decreased in size by 39%.

For most of 1992 to early 1994 I offered my services as an MLM consultant, specializing in comp plan design. Most of my 13 clients have been start ups. I no longer offer that service, except for casual phone consultation. And even then, I play the role of Devil’s Advocate almost exclusively. You see, I can no longer in good conscience support or assist people who are about to add more to the supply of MLM opportunities in an industry where the supply is already far outstripping the demand.

MLM Veteran Art Meakin once suggested to me that the minimum number of distributors necessary to maintain an MLM operation on a base level (just keep them in business) was about 4,000. I concur with that number. So far, in the first 17 days of 1995, I have also been in contact, directly or indirectly, with about 12 MLM companies who plan to launch this year. And again, I’m not even close to being one of the major players in the MLM start up consulting business. I expect the Alf Whites, Debbie Ballards and Doris Woods of the industry are getting many times more business in this area than I am (especially Debbie, since that’s where I’m referring everybody). So it looks like if I were to estimate that 400 companies will try to launch this year, I might be a bit conservative (like, triple that maybe). So if those 400 companies need at least 4,000 distributors, they will need 1.6-million new distributors to join MLM this year just to barely survive. Let me put this in perspective.

There are 2,000 people laid off from their jobs each day in this country. Even if that number were to double, and every single oneof them were to join one of those 400 new MLM companies, every single day of the year, we would still need to find another 140,000 new distributors just to keep those companies in business — and that’s not even counting what we’ll need to replace all of those who leave the existing 350 companies, let alone allow them to grow.

It pains me to say this, but the estimated number of distributors in MLM was also 6.5-million last year. In fact, I suspect this industry may have suffered a slight net loss in 1994. Every year for the past several years there’s always been one or two major forces in MLM that successfully bring in tons of fresh blood in to the industry. Nu Skin in 1991. Melaleuca in 1992. Quorum in 1993. And there were others. But who in 1994? Kaire boasted big numbers, but that’s all they were — numbers. They did well in ’94, but not 120,000-plus as they claim. Alliance USA started off with an explosion — but blew up later in the year. USANA also did well in ’94, but considering the murderer’s row they’ve got for a line up (Allen, Tracy, Waitley, et. al.) they should be approaching 100,000 distributors by now.

Why didn’t it happen? Why was there no blockbuster company in 1994?

Instead, we saw past powerhouses like Matol and Quorum take major hits. Up-and-comers like Vaxa and Reliv have stumbled as well. Perhaps the hottest property of 1994 was a blatant money game called Marathon!

Nope, 1994 was not a great year for MLM.

So… Let’s throw in another 400 more companies and spread those 6.5-million distributors even thinner. That should help.

But seriously. What’s the answer?

If it’s done right, 1995 has the potential to be one of the greatest years in MLM history. This will be network marketing’s Golden Anniversary. When will we ever have a better chance to receive positive recognition from the media and expose the good side of this industry to the masses? Hopefully massive numbers of those masses will join us en masse. We’re going to need them.

When I broached the subject of more tangible solutions several issues ago, I suggested there should be some kind of regulation of the number of MLM companies. Imagine — if there were half as many companies the average downline would be twice as big. Or at least some strenuous screening process. Or how about requiring a $50,000 bond? That should take out the garbage.

When I first made these suggestions I caught some heat for being un-American. It was all a restriction of free trade. Fine. You can restrict it and thrive, or expand it and dive. We could constitutionally right ourselves right out of a business.

But it’ll never happen, of course. So it’s a mute point. We will continue to see ads telling us to stop wasting our time with “penny ante deal” and start our own MLM companies (because they “always make money”) for as long as there’s MLM publications that will take their money. And disgruntled, unsuccessful MLM distributors will continue to buy into the pitch and start MLM companies from their kitchen table. And large numbers of MLM companies will continue to launch with no clue as to what’s required to be legally set up in all 50 states — thus be operating illegally.

Why be an MLM company owner anyway? The whole beauty of network marketing was that you could start your own businesswithout all the headaches and challenges faced by most conventional company owners. No payroll taxes, no legal hassles, no office to staff, no product development, etc.. As an MLM company owner, you not only have to perform all the same chores as any other company owner, but you have twice as much to worry about!

The typical employee-company relationship is one where the employee relies on the company for their livelihood. They can’t just pick up and leave and go get another job anyplace they want. That’s not the case in MLM. The company relies on the distributor! And most distributors know it. If things aren’t perfect, your “employees” just might take one of those other ten job offers they’re getting every day. Imagine the pressure on the company.

I wouldn’t take the job of any MLM company president in this industry for any price. Well, hold on. Let’s not get carried away. Okay, it would have to be an awful lot.

And if I did ever start my own company, it would have a full-blown computer system with all the bells and whistles in place from day one, a full stock of inventory of at least 25 quality products — and a million bucks in the bank!

One company that tried to launch recently didn’t even have a computer. They were keeping track of their company genealogy with a big chart on the wall!

So what drives so many people, mainly ex-distributors, to want to start their own MLM companies? It can’t be the income. Many network marketers make far more than the owners of their company do. The income potential is at least equal. Perhaps it’s the idea that nobody is doing it right and they can do it better. Everybody believes they can create the “perfect” MLM company. Well, there are 275-million people in this country, so unless you want to start up 275-million MLM companies, it isn’t going to be “perfect” to everybody.

I think it’s the illusion that it’s so “easy” to start and run your own MLM company. Hey, just get some good software, whip up a few products, distributors run to you in droves and you’re rich!

Folks, do what I did. Before you ever decide to run your own MLM company, work out of the home office of one for just one month. The fantasy that this business is easy will be blasted from your mind with the force of a twenty-megaton thermonuclear explosion.

Unfortunately, very few distributors ever really get to see the inside of an MLM operation.

And apparently even fewer of them took Economics 101.

“How Much Money Are You Making?”

And Other Completely Useless Questions

By Len Clements © 1998

In doing one’s due diligence of an MLM opportunity, there are a variety of very good, significant, revealing, and extremely important questions you should ask. Many articles, books, and tapes have been produced describing what, how and to whom you should ask these questions. But, what about the flip-side? There are, I believe, about as many totally useless, meaningless questions that provide little or no benefit to the prospective distributor. In fact, some of these often asked questions can even leave you open to deceptions and hype that otherwise may not have entered into the presentation.
Here are a few of my biggest “peeve questions:”

“Is your company debt free?”

I usually respond by saying, “Yes, if you don’t count all the things they owe money for.” You see, no MLM operation is truly debt free. Think about this. From even the most basic accounting stand pointaccrued commissions owed is a debt, is it not? Personally, I want the company I represent to have a HUGE amount of this debt! There’s also the possibility that a company is “debt free” because they can’t qualify for credit! It’s easy to be debt free when no one will loan you money. Also, consider what is involved with keeping up with a company’s growth curve. The difference between “keeping up” and “catching up” in this industry is usually the difference between life and death from a corporate stand point. If an MLM company gets even one month behind the growth curve it can be like letting go of the reigns of a wild horse. Forget it — it’s gone. How many times have we heard (or experienced) an MLM program where they have 1,000 reps one month, 2,000 the next, 3,000 the next, them boom — 30,000 the next. Followed by, of course, the inevitable and now cliche’ “growing pains” excuse. One very good reason the company is having these growing pains might be because they refused (or were unable) to take on some debt! Again, think about it. How would a company stay ahead of a potential 1,000% growth increase like the one just described? By installingmore phone lines than they currently need. By paying for moresophisticated computer software, and buying more hardware than they currently need or use. By occupying more office and warehouse space than is currently required. By maintaining moreinventory of product than they are currently moving. And how does an MLM company do this? By having a huge financial reserve or really deep pockets (as some, but not most, do) or — by accumulating some amount of debt! So, a company that claims to be “debt free” might actually be admitting that they are not positioned for significant, fast growth. Besides, since when does “debt” mean a business is not solvent and profitable? I’ve owned two very profitable businesses in my life (non-MLM) and both carried debt. It’s the amount of debt that counts. The simple fact that you do or don’t have it (or at least claim to not have it) is meaningless.

“Does your company manufacture its own products?”

There is really only one major advantage to an MLM company manufacturing their own products — one less middle man, thus usually a lower cost of products. But, of course, when an MLM company that manufactures its own products marks them up 900% so they can afford to pay out “The most lucrative compensation plan in MLM history,” well, the advantage is made pretty moot. Not only that, but several non-product manufacturing companies have reasonably priced products that are competitive with product producing companies. Personally, I’ve noticed very little difference in pricing between producers and non-producers.

Recently, I even had a prospect suggest that a competitor had “higher quality” products because they manufactured their own. Actually, it’s quite rare that an MLM company is also the manufacturing company. Usually, there is a separate product manufacturer which also happens to own an MLM company (or visa versa). Well, if a company that does not manufacture their own products were to be purchased by (or purchase a part of) their product manufacturer, how does that cause the quality of the products to increase?

The far better question might be, “Who formulates your products?” In other words, was their some real science, some real thought, put into these products, or were they simply whipped up and ranked out, with only token formulations, just so the company had some products to sell. Which is, I believe, the case with the majority of MLM product companies today. (I know I’m starting to sound real cynical. But believe me, I’ve earned the attitude.)

“Who manufactures your products?”

The reason I hate this one is twofold. First, I don’t know the answer. The vast majority of MLM companies do not reveal this information. No, not because there’s anything to hide, but simply because the product manufacturer demanded it! They really don’t want to be deluged with visits and telephone inquiries from hundreds, perhaps thousands of MLMers. Also, some manufacturers private label for more than one MLM company. Although the formulations could be vastly different, the perception might be that all the products are basically the same. The second reason I hate this question is because even if I did provide an answer it would likely be meaningless to the prospect. Okay, so I tell them the company is called American Diversified Products, Inc. So what? Now what are they going to do with that information. Either nothing, or start bugging ADP, Inc.

“Do your products work? How effective are they?”

Can you imagine someone answering this question by saying, “No, they don’t really work. They don’t have any effect on anyone.” Come on. This is a time waster question. Of course the distributor is going to tell you their products work! Personally, my product pitch is very simple. I can spend hours talking about the famous doctors and nutritional experts that developed the products and list all their credentials, I can tell stories about the history of the products and all the exotic locations around the word where we get our ingredients, I can get technical and go into all the stuff that happens in your body, on a cellular level, when you take the products, I can recite glowing testimonials relating all the miraculous results other people are getting, and blah, blah, blah, blah, blah… and then you try the products and they don’t work — you ain’t gonna’ buy ’em! But, if I tell you I don’t know a darn thing about these products, and you try them and get these “life changing” results we keep hearing about — you are going to be a customer of that product for life! The bottom line is that no MLM product is going to work for every single person. What it does for other people is irrelevant. There’s only one way that you, and all your prospects and customers, can know for sure if a product is genuinely effective. You’ve got to get it, but it on or in your body, and it works or it doesn’t work. Period.

“Do you really think this company is going to last?”

This question I don’t mind so much. It’s kind of like the question, “Can I really make money in this business?” It’s very unlikely that anyone in the 50 year history of network marketing has ever answered these two questions with a “No.” And if they did, their honesty level is probably about as high as their MLM income is low.

What the above two questions are really asking is, “How do youknow this is true?” They’re saying to you, “Convince me I shouldn’t be concerned — because I am.” This is a meaningless question only on the surface. Don’t blow it off with a simple “Oh sure, absolutely!” Give it some meaning.

“Is your company publicly traded?”

For most MLM companies, going public can be a blessing or a curse. Sure, it’s great to have a massive influx of cash to fund product development and foreign expansion, which is the explanation alwaysgiven for taking this action. But, how do we really know for sure what the motive was? Most companies don’t openly admit, “We’re going public because we need the money to survive.” But this is certainly the motive in at least some cases.

Also, a public company reduces the control and influence previously held by the owners. If the shareholders decide they don’t want to have their funds invested in one of those “pyramid deals,” they might have the power to change the company’s direction. Now, understand, this hasn’t happened yet, as far as I’m aware. But it certainly could happen, especially when a non-MLM public company purchases a privately held MLM company.

Finally, and most importantly, you have to open your books to the world. Sure, that works in your favor when things are going great. But when you have a bad quarter and sales drop 10%, which isnever suppose to happen to a geometrically progressing, right-before-momentum network marketing company (which is, like, all of them, right?!), what happens? Well, being the somewhat paranoid, fickle, flighty bunch of people that we are (MLMers in general, that is), the distributors get very nervous and confidence drops. Thus creating another bad quarter, and even less confidence and more nervousness.

When you’re looking good, going public makes you look great. But when you start looking ugly, going public means you can’t were makeup.

“What kind of comp plan is it?”

In no way is this a bad question unless the answer immediately determines your final decision. In other words, if you want to know if the company uses a break-away plan because you are avoiding ALL break-away plans, you might be missing out on some excellent opportunities. Same thing goes for those who are only looking for a certain type of plan. Some people will only consider unilevels. Some absolutely have to join a binary, while others unilaterally avoid them. This is kind of like a guy who likes brunettes refusing to date blondes. When you’re looking for an MLM program to create a relationship with, there are a LOT of other things to consider besides this one aspect. For example, I personally don’t like binaries. I swore I’d never join one — yet today I’m in a binary program. It’s not the plan type that matters, it’s what the company does with it! There are good and bad plans in every category and no MLM program should be immediately dismissed based solely on the compensation plan category (well, except for Australian 2-ups, or any variation there of — which have had literally a 100% failure rate throughout the entire history of MLM).

“How many distributors does your company have?”

The main reason I hate this question is because I’m always afraid that my truths won’t compete with somebody else’s hype. This industry is so full of semantic game playing and data torturing that you really put yourself at a marketing disadvantage by being honest and factual. While you might claim your company has 20,000 distributors, based on the actual number of active, individual people who are currently ordering product, the next guy is likely to answer the same question by siting how many sequential ID numbers his company has given out in their ten year history (which might be 500,000, even though only 15,000 are currently still working the business). Or, they might site the number of “Income Centers” assigned in their binary plan, which is usually 3 to 5 times the number of actual people in the program (many prepaid calling card companies are practicing this like crazy right now). Besides, what does the answer to this question really mean? Isn’t the number given more of an indication of how long the company has been in business? If you were to have asked that question to an Amway distributor back in 1959 they would have given you a really small number. And if you had joined back then you’d probably be reading this from the seat of your private Lear Jet right now.

“How much money are you making?”

I really, really hate this question! (And no, not because I don’t make a lot of money in this business. I’m doing just fine, thank you).

To begin with, I think that this should be just as rude a question as it is in any other form of occupation. Imagine that question being asked of a doctor, a lawyer, a grocery store clerk, or whom ever. Only in network marketing is this considered an acceptable question. It’s not, folks. It’s no less private an issue as it is in any other business.

Another reason you should not ask this question is because the answer may possibly be considered illegal. There is much precedent to show that siting specific incomes, whether in writing or verbally, or even making income projections, may be considered misleading or deceptive by various regulatory agencies unless you also state what percentage of all distributors are also earning that income, and what the “average” distributor is earning within your geographic area. This is, of course, information few distributors possess, nor would they want to divulge.

There are also so many ways for the answer to be technically true, but not totally. If you ask for the monthly income figure of a prospective sponsor and he says $25,000, how do you know what his “net” is? What if he had to spend $25,000 to earn it? Could you duplicate that? Or, how do you know if this income was created by him moving a large downline over from another company? Could you duplicate that? Or, how do you know how much of that income came from books, tapes, and other promotional material they sold to their downline? How do you know he didn’t earn $50,000 the month before, and $90,000 the month before that? On it’s own, 25k per month sounds pretty good, but placed in this perspective it now appears as if the organization is falling apart! How do you know how the income is being distributed? What if the company paid $25,000 to ten distributors, and thousands of others earned nothing? What if 90% of all the distributors were earning at least something, and this $25,000 earner was only “average” for the company? (Both scenarios are intentionally exaggerated to emphasize the point).

Finally, and most of all, the question has little or no barring what-so-ever as to how well the compensation plan pays or how good a network marketer you are. Much like the “how many distributors” question, your answer is more a gauge of how long you’ve been working that particular opportunity. The answer is also greatly effected by how much effort you are putting into the business and the caliber of talent in your downline. Had you asked the wealthiest, most successful network marketer in the country how much money he or she was earning the day after they had signed their distributor application they would have had to answered “nothing.” Does that mean he or she is not a good network marketer or their compensation plan doesn’t pay well? Obviously it doesn’t. On the other hand, some of the wealthiest people in this business are working with compensation plans that are not at all the highest paying — but they’ve been working them for ten or twenty years.

A better question might be, How much do you want to earn, and what are you going to do to earn it. How much your sponsor earns doesn’t count. You can’t buy groceries with your upline’s money.

Downline Pirates: The Scourge of the Industry

By Len Clements © 1999

Your friend is in a multi-level marketing program. They are dissatisfied. They jumped into the first program they ever saw, and had no idea what they were really getting into. They still believe in MLM, just maybe not in this particular product or program. They’re looking for something else. Knowing you are also involved in MLM, they may even ask you for a recommendation. Naturally, you tell them about your program. They like what they hear — and they join.

You are NOT a Downline Pirate!

The picture I am about to paint of these unscrupulous individuals is not going to be a pretty one. Before brush hits canvas, I wanted to make clear that everyone who has ever pitched their MLM program to an active distributor is not necessarily a Downline Pirate. Your prospect could be currently involved in a blatant money game or quasi-pyramid scheme and you only intended to show them the more honest side of the industry. Perhaps you were offering a complementary program to go along with their primary program. There are a few (only a few) valid excuses for enticing current MLMers into your program.

After the painting is done, scan it carefully. Only you can judge wether you are the viewer — or the subject.

My first experience with a Downline Pirate came in 1979. He was the worst kind. The kind that tries to rob you from your upline into theirs — in the same program! I experienced decent success in that program fairly quickly, and soon realized I was now choice meat. Not only did distributors from other companies covet my services (they were usually ex-distributors from my program, or strangers waiting outside our meetings [yes, even back then]), but this one guy even tried to get me to join his downline under a false name (my girlfriend’s), and discretely abandon my existing organization.

Despite the fact he had one of the largest organizations in the company (no doubt filled with shanghaied distributors from my organization), after the company folded he was never heard from again. Ever.

About three years ago, I came across a man in Southern California who responded to a classified ad my business partner had placed for his MLM opportunity. This prospect seemed genuinely eager to receive more information, and came across as very sincere. After sending him a package of information, he called my partner only to pitch him on his program. The brochures and video my partner send were waisted.

Already being in an investigative mode at the time, I sent this gentleman a box filled with literature, an assortment of company brochures, many product samples, and two videos. I included a cover letter specifically requesting the return of the videos, and even included return postage. Total cost: $18.00.

Sure enough, he calls me to tell me why his program is so much better, and tries to get me to switch. During a short “discussion” regarding his tactics, this jerk actually told me I was out of line for being so bent out of shape, and that I should consider my $18.00 loss as a “cost of doing business”. He went on to admit he receives “three or four” such packages a day, and that he has his office staff “trash” them.

Unfortunately, the conversation didn’t last long enough for me to find out if he had “trashed” the $2.90 for postage.

I recently came across a situation where a man described as a “real MLM pro” has been responding to generic ads placed by MLM lead generation services for the purpose of getting his name sent out to subscribers of the service. This “pro” doesn’t even have to go out and find his victims — now they call him! I though “pro” was short for professional?

Just today I talked to a woman who told me about her experience with sending out a postcard promoting her program to an “MLM enthusiast” mailing list. She sent 1,000. She claims she received two responses for more information — and 40 pitches on other programs!

Again and again I see information sheets that are designed specifically to recruit people from one program into another. There is always the side-by-side comparison of the comp plan, and occasionally even a comparison of products. Law suits have been filed recently alleging that mass corporate endorsed pirating is taking place as well.

So who is a Downline Pirate? Why do they do what they do? What are the repercussions?

First and foremost, a Downline Pirate is L-A-Z-E-Y!

Some of you may recall our F&M column of 6/91 titled The ABC Technique which describes the three parts of the recruiting process. First, you must open the prospects mind to getting involved in their own business. Second, once opened, you must first remove any preconceived ideas the prospect may have regarding MLM specifically. By step three, the prospect should be much more receptive to hearing about your actually opportunity. To some extent or another, you must always work through these three stages. And the first two may require the most work of all — unless of course, someone has already done the work for you!

A Downline Pirate is a COWARD!

One of the hardest parts about this business is either finding people who are interested in MLM, or interesting them in it. This process may involve a lot of rejection, and perhaps even ridicule. Let’s face it. It’s real easy to find people who are already interested in MLM — in someone else’s downline.

A Downline Pirate is NAIVE!

Anyone who thinks they can build a successful organization by loading it up with people who are willing to move over based on a better pitch is in for a first class education on attrition. Why do they think they are the only Downline Pirate out there? Don’t they realize their people are going to eventually get pitched by someone else? What do you think they’re going to do the first time another “better” opportunity comes along? That’s right. Poof!

Downline Pirates just can’t seem to understand that the only people they really want from that other program, are the ones that won’t switch! The serious, committed people are — committed.

A Downline Pirate is a HYPOCRITE!

The same clown who spent days hyping all the reasons why you should change programs will inevitably preach to you about loyalty, commitment and long term vision — the moment someone tries to pirate you away from them.

A Downline Pirate is a SUCCESS PIRATE!

Not only does stealing someone’s downline reduce their chances for success, but they may be setting back the pirated distributor as well. Every downline organization, if worked consistently, will eventually take on a momentum phase much like an MLM company. Remember, if you recruited just one person a month, and 40% a month did nothing and dropped out, and the other 60% did no better than you, you would have only about 40 people in your downline after one year — and over 10,000 half way through your fourth.

Every time you switch to another program, you start over on the time-line. As long as you keep switching, you’ll never get to the point where geometric progression kicks in, no matter how many you recruit personally. Downline Pirates are doing you no favors!

They aren’t doing the industry any favors either. MLM needs new blood. We must increase our numbers by attracting more professional people from outside our little world. The timing has never been better for America to discover, en masse, the value of what MLM has to offer this country. One of the reasons why it just hasn’t happened (yet) might be the way this industry feeds on itself. We, in general, seem content to just keep recycling the same people over and over and over, until they drop out. For the most part, those entering MLM for the first time just enter the same cycle along with everybody else. And the number of new people coming in isn’t exceeding those going out by much. Sure, we’ve seen the number of MLM participants increase by five times what it was ten years ago. But this isn’t really impressive at all considering the state of our economy and what MLM has to offer it, the immense size of the untapped market of prospects, and good ol’ geometric progression. Consider this: over the same ten year period, the number of people operating home-based business has increased by over twenty times!

From my own experience, I can tell you that the reason why all these tens-of-millions of new home-based entrepreneurs haven’t chosen MLM as their vehicle is not due to just skepticism — they don’t know about it!

In my daily life I come across many people who are not only not involved in MLM, they are completely oblivious to it. I don’t mean they don’t understand it, or know of only Amway and Mary Kay, I mean they literally never heard of it! How can this be? There are 6-million people out there promoting their opportunities with the most powerful form of advertising available. The spoken word! And they’ve been doing it for decades. Maybe it’s because so many of them are only speaking to each other!

A Downline Pirate is UNETHICAL!

Some may argue that MLM distributors are free agents. They are free to take, and be offered, a better deal. It could be said that corporate headhunters “pirate” employees from their companies all the time. Why should MLM be any different? Considering distributors are independent contractors, it should be even more acceptable, shouldn’t it? Let’s not forget the differences between MLM and the corporate structure. If you quit your job to take a position with another company, the company simply replaces you. Your departure would most likely have little or no effect on your boss’ income, or his boss above him, or her boss above her. In MLM, when you pirate a distributor away from another downline, you’re essentially stealing money from their upline. You may very well be directly impacting their sponsor’s ability to earn a livelihood, and their sponsor’s sponsor as well. Okay, sure. It may be legal. But having a right to do something doesn’t necessarily make it right.

A Downline Pirate is a LOUSY MENTOR!

This is a business of duplication. You do what successful distributors before you have done. A Downline Pirate who raids other people’s organizations my appear to be a successful recruiter to their downline. Their downline may even take on the role of Downline Pirate by example, even without the encouragement of their pirate sponsor. Pirating breeds more pirating.

A Downline Pirate is DOOMED TO FAIL!

I’ve never seen a single example of a downline build by picking the fruit of other people’s labor that has endured. Their “tree” may grow for a short time, but inevitably the harvester of this fallen or ripened fruit is provided sustenance for only a short time. After the fruit has gone sour or been devoured, there’s nothing left. And the pirate is off to harvest more.

Successful organizations have roots. They are primarily based on seeding, nurturing and growth. A picked long-stem rose will only last so long in water — a rose bush will create beauty forever if properly cared for.

Again, I must reiterate: Just because you’ve sent postcards to an “MLM enthusiasts” mailing list, or advertised in an MLM trade publication which is read primarily by people already in MLM, doesn’t necessarily mean you are a Downline Pirate. Many of these people are still in the searching stage, and there will always be a high percentage of those that are already in MLM whole are in transition — by there own accord. We’re talking about the careerpirate here. The jerks who feed exclusively, or at least primarily, on other people’s organizations. The guy who is always looking to go one-on-one with anybody he can, to try to talk them out of their program (any way he can) and into his (or hers).

So the picture has been painted. Look at it carefully. Do you see a depiction of what is wrong with this industry? Is it an illustration of what to avoid? An image of what to not be a victim of? For some of you, it may still appear to be nothing more than a white canvas, garnering no reaction at all. To still others — it’s a self portrait.