Evaluating Multilevel Marketing (MLM) Firms

A twist, and in many cases a bad one, to the franchising idea (see the preceding section) is a multilevel marketing (MLM) company. Multilevel marketing is designed to replace the retail store as a conduit for selling certain products. Advocates of the MLM business model maintain that, when given identical products, the one sold face to face (without the cost of maintaining a storefront and hiring employees and paying insurance) is less expensive than the same product sold in a store. Additionally, MLM advocates believe that buying a product from someone you know and trust makes more sense than buying from a clerk behind a retail counter.

Sometimes known as network companies, MLM companies can be thought of as a poor person’s franchise. For those weary of traditional jobs, the appeal is obvious: Work part time from home, with no employees and no experience necessary, and make big bucks. We’ve heard claims that you can make tens of thousands of dollars per month for just a few hours per week.