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The Other MLM Business Model

  • Posted by WatchDog
  • October 31, 2014 8:49 AM PDT
The other MLM business model - Same pitch, bigger fish.

The "Other" MLM Business Model - That Really Isn't a Business Model at All

Over the years I've observed a troubling business trend in new MLM companies that fail to ever reach traction.

In the standard business model, for MLM or any other business, one either funds the launch of a company out-of-pocket, or they fund it through investors.

The "other" model works like this:

Joe the Network Marketer, with a resume full of positions at companies that no longer exists, comes up with an idea. It might be the kind of idea that a real company could take to market and use to turn a profit. It has "sizzle", that undefinable MLM term that means it's easy to pitch, and people get excited when they hear it.

Joe the Network Marketer takes the idea to some "money guys". He tells them, "If we launch this company, we'll make a fortune. It will be the next".

Once the right investors are found, Joe closes the deal with "I'm going to need a salary of course. I can't just work for free while we're waiting to launch."

So Joe, who hasn't earned a check through a legitimate business deal in years, starts collecting a hefty check from the investor's funding for the business. Joe knows as long as those funds are available, or if he can get more investors, he has a paycheck.

The problem is there really isn't a company. There might be a business suite somewhere in the desert with an answering service, or worse, a PO Box in a strip mall and a cell phone with a voicemail message saying "you've reached the offices of ABC, sorry, we're too busy to take your call right now - but please leave a message."

Since Joe is already getting paid, he has no incentive to ever see the company launch. His job becomes one of all motion, no progress. Because often, Joe the Network Marketer, for all his resume blurbs, really has no real world business experience whatsoever.

The kind of experience required to take an idea from concept to company launch and generate a real profit after all overhead and salaries are deducted.

But Joe doesn't care. All that matters is that he keeps on cashing his paycheck.

Technically, you could call this approach a con - the investor is conned into believing that by putting up the funds, there will eventually be a company and a chance for it to be successful. But what I've been observing more and more lately, is that the company never really exists.

The Internet allows guys like Joe to create to facade of a business. A few hundred bucks can get a web template tweaked to look as legitimate as many corporations. The investor, who likely has no knowledge of the MLM industry has no idea what he's getting into.

Essentially, he's the victim of an MLM scam, just on a larger scale.  It's the one where Joe convinces his Uncle Harold to buy a garage full of energy drinks he's never going to sell or consume, on the promise that Uncle Harold is going to get rich because the energy drink market is worth billions a year. So he burns his bridge ( all all future invitations to Thanksgiving )but who cares, he makes a quick commission. Writ large, the same con is played out with the investor, who has a much larger wallet that Uncle Harold, by convincing him into laying out a hundred thousand dollars instead of just several hundred.

Joe doesn't care. Once the company folds ( always someone elses fault, because there's no accountability ) he will just add his title to his resume, make up a blurb about how he was pivotal to the company's "success", then move on to another idea, another investor, rinse and repeat.