Looking for extra income? Side gigs are common these days! There are a lot of ways to bring in extra cash: deliver pizzas, sell old stuff online, offer piano lessons, and the list goes one. And as I’m sure you’re aware, one of the biggest trends in earning extra cash is to become part of an affiliate or network marketing company, also known as an MLM.
What MLMs Don’t Tell You
So, let’s get real about these MLMs, direct sales, or network marketing “opportunities.” Often they make promises like, “work as much or as little as you want!” or “this is a great way to supplement your family’s income!” And while these statements aren’t technically wrong, there’s more to it than that. If you’re signing on to become part of, say, Rodan & Fields, LipSense, Tupperware, Mary Kay (or maybe it’s an energy drink,weight loss or any other of the dozens upon dozens of multi-level-marketing businesses) they often don’t tell you that the only way to really make money is to work your absolute guts out, putting in full-time hours on top of your full-time job. They usually require a hefty upfront cost for you to purchase an order of inventory, and then you have to sell the products and recruit others in order to recoup your costs and hopefully make a profit. And the biggest challenge is that the product is typically extremely overpriced. Asking folks to sell expensive products is a tall order, especially for people who don’t have a ton of experience in marketing or sales.
Low Retention Rates
I have over two decades of experience in studying these kinds of business models, and I can tell you that the average monthly reorder rate is about 20%. That means if you build a business of 100 customers, only about 20 of them will place some type of order in a given month (to be fair, some are higher to the tune of about 35%; but that is still very low). Also, since products are overpriced and it is difficult to make money, about 40% of your customers cancel in their first three months, while another 40% cancel over the next nine months. This translates to nearly 80% loss over a year. That’s a pretty big hole in the bucket of so-called residual income.
So here’s the long and short of it: there are people who make very good money as part of an MLM, usually those who can massively recruit and sell. If you want make a decent income from it, it will be long hours. Sadly, others often make little to no profit, and many never break even and end up losing money. Ever seen someone selling their products online in some sort of liquidation sale? It’s almost certain that they got into the business for a side income, but then realized they didn’t want a full time sales job and are now trying to dump their expensive inventory.
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