MLM Business Disadvantages: The 7 Most Common

Today, I’d like to review some of the most common MLM Disadvantages.

While I am a HUGE fan of our industry, I’ll be the first to admit that we are far from perfect. Like any industry, we have pros and cons. Although I naturally focus on the positive in things, today’s post will focus on the disadvantages of our industry.MLM Business Disadvantages

Common MLM Disadvantages

What you will read below are things I’ve studied, seen, or personally experienced during the past 19+ years in this industry.

# 1: Your Income is Based Off Others’ Efforts

The whole purpose of doing network marketing is to get the leverage of others. As the popular quote says: “I’d rather have 1 percent of 100 people’s efforts than 100 percent of my own.”

In our industry, it really doesn’t matter how well YOU perform. If you can’t find others who duplicate you and put in the work, you will be nothing more than an underpaid salesperson.

That’s why many “talented” salespeople quit our industry and transfer to a different industry where their pay is based solely off their own performance.

It’s critical to remain realistic regarding receiving commissions from the downline. You should place a heavy focus on recruiting candidates who are as enthusiastic about the products or services as you are. If you place so much emphasis on recruiting someone, you’ll notice that the majority of the recruits you’ve signed up aren’t as committed to selling.

Source: Home Business

# 2: You Don’t Own Anything

This is one of my biggest frustrations with the industry. As a distributor, you don’t own anything. You don’t own the patents, trademarks, intellectual property, company name, buildings, or even your own downline. The company owns these things, and you are an independent contractor with the company.

As an MLM consultant, however, you have zero control over these key business decisions. You don’t choose the products or have a say in how they could be improved. The prices and compensation structure are set for you. What you say about the products and company, and how you say it, is controlled by the MLM.

Source: HuffPost

# 3: You Can’t Sell It

Yes, some network marketing companies allow you to sell your business if you choose to. However, not all companies allow it. It’s vital to read your company’s policies and procedures PRIOR to joining, so you know if this is a long-term option.

# 4: You Can Be Terminated for ANY Reason

A company can terminate you for any reason they see fit. In some cases, they don’t even have to tell you why. Perhaps you got into an argument with a top rep, or a company owner, and before you know it, your account is terminated. In many cases, you don’t even have recourse or arbitration.

I have seen this happen to people in MANY different companies. Some of the terminations were justified. Others were not. The sad thing is most people did not have any type of appeal process. “Our industry is not perfect, but we are a better option than most traditional businesses!” ~ Chuck Holmes

# 5: Most Companies Won’t Last

While the promise of life-long residual income is VERY appealing, the truth is most MLM Companies don’t make it past the five-year mark, let alone 20 to 50-years. That means at some point in the future your residual income will dry up and go away when the company goes out of business.

According to the Federal Trade Commission, 99% of all MLM businesses fail, and in many cases, these failures come well before the companies have had a chance to turn a profit.

Source: Sheffield

# 6: Negative Public Opinion

This is one of the most serious MLM Disadvantages. In general, our industry has negative public opinion. Keep in mind our industry is not taught at home or in schools. It’s a foreign concept to most people. It’s not endorsed by the media, because we don’t give them advertising dollars.

Just about everyone knows “someone” who failed in MLM. Many of your prospects will be negative about the industry, even though they know little about it. Sometimes this can be a huge challenge to overcome.

The first drawback of MLM is that there are high rejection rates. Most of the people you talk to simply won’t buy whatever you’re selling. This isn’t unique to network marketing. Most businesses consider a conversion rate of 1-2% very successful.

However, being constantly rejected for a sale or recruitment can wear on some people. It can really get you down when you hear a “no” 100 times in a row.

In order to over come this you’ll need to work hard. This level of hard work to control your own destiny leads to the next drawback of MLM companies.

Source: Budget Boost

# 7: Small Commissions on Personal Sales

If you are a superstar performer, and you are accustomed to getting paid exclusively from your own performance, the “small commissions per transaction” is one of the biggest MLM Disadvantages. In most cases, we earn anywhere from $5 to $50 per sale. These small transactions mean you need TONS of personal sales to make a big income. Compare this to a big-ticket program (or a realtor) where you can earn $1,000 to $10,000 or more per sale.

The income through Multi-Level Marketing is very low. High competition between MLM firms makes it more complicated for the participants to make profit.

Source: Lead MLM Software

Final Thoughts

In conclusion, these are the most common MLM Disadvantages, as I see it. What are your thoughts? Do you agree or disagree with me? Leave a comment below to let me know what you think. I look forward to hearing from you.

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30 thoughts on “MLM Business Disadvantages: The 7 Most Common”

  1. Jonathan Akindoyin

    The general public opinion on MLM is negative. The fact it is a chain transaction, you don’t have to get a commission based on your effort but with the help of others. There is also no certainty that the company’s duration will exist; therefore, you can be rendered jobless in no time, especially without prior notice. However, it has numerous advantages, especially because you can earn even while sleeping. These disadvantages are major turn-offs that prevent people from it and constitute the general public’s negative opinion. As usual, your article is value-packed.

    1. Yes, the public does have a negative opinion about our industry. I’d argue that most people, probably at least 90%, have no desire to have a business of any kind. They don’t want merit based pay or opportunity. Instead, they are looking for security, a steady check and benefits. Of course, there is nothing wrong with that. To each their own.

      I’ve also found that most people who can keep an open mind and objectively evaluate our industry are normally quite impressed with it, especially if they’ve already owned a business in the past.

      When it comes to the negative public opinion, our responsibility as network marketing professionals is to educate people, set a good example, and do what we can to help improve our industry’s reputation.

  2. Hafiz Athar Ammar

    No business is perfect. Nothing is perfect. When you compare these disadvantages to traditional business, network marketing still comes out on top, especially for someone who doesn’t have a lot of money to invest in a business.

    1. Exactly. There will be battles and challenges. Pick them wisely. Nothing is totally smooth sailing. These disadvantages are much better than hiring employees, buying or renting an office building, and having to invest five, six or seven figures just to START a business.

  3. When we think about entering a business, all we want to see is the good things about it. Thanks for providing a reality check for MLM, so we know what to expect and how to manoeuvre through it.
    Negative public reaction, is perhaps, the worst part about the industry. However, it’s prudent to learn more about the cons so we are better equipped than the 99% who fail.
    Looking forward to more informational posts from you.

    1. Yes, negative public opinion is one of the biggest hurdles to overcome in our industry. One of our primary responsibilities as reps is to educate people. If we take the time to do that properly, even some of our negative prospects will come around.

  4. Shruti Bhardwaj

    All the points you mentioned are absolutely true. I believe the gaining experience in something first hand by yourself is unbeatably the best source and nothing should be given as much power to hold you back from doing something you might actually enjoy, which may also prove to be lucrative.

  5. Shakira Shareef

    I really appreciate how Chuck explained the major disadvantages in detail. If I plan to continue my journey in the MLM business, I must understand that it’s far from perfect. Every business has its downsides so does MLM business. Thus, it’s important to have a plan B.
    I can’t just have a plan B without understanding how the industry impacts my finance. So reading these cons help me get a proper idea of how things work.
    When I first learned about MLM business, I freaked out because the public opinion about it was so negative. I couldn’t decide whether to give this a try or not. But I understood the real picture after reading Chuck’s blogs. They are clear and transparent. He’s not saying that the MLM business is perfect, which is rare. We don’t see business owners or marketers talking about the other side of the picture. But if we want to get started, it’s important to know the whole picture. Thanks, Chuck!

    However, I’d like to add something. Even though it’s important to be an optimist, it’s way more important to be proactive.

    1. Learning how to deal with negative public opinion about our industry is important, especially as a newbie. However, once you’ve been doing it a while, and you truly believe in what you are doing, the things that other people say and do really don’t matter all that much.

    2. Yes, there are a lot of haters about our industry. It’s all good though. Haters are gonna hate!

      No matter what type of business you do, you will have haters and doubters. Any time you step out of your comfort zone and try something different, those closest to you will typically be the most critical of you. I’m not sure why this happens, but it’s quite normal.

  6. These points mentioned in this article are rarely shared about any industry. This is one of the top reasons why most people quit before they achieve success. I believe one should have enough information about the industry before entering the industry. It is futile to do business without fully understanding the pros and cons ahead of time.

    Through this article, I learned a lot of new concepts about MLM as well as other income-generating activities. Although the MLM business provides many opportunities to grow your own business it also has its own drawbacks as well. MLM business can be unfavorable to your career if you enter blindly.

    1. Yes, it’s smart for anyone thinking about starting a business of any kind to evaluate the pros and cons of their new business or business model first. However, most people don’t do that. They just start a business of out excitement and hope for the best.

  7. Candice Barbara Wilcox

    I like how you talked about the drawbacks and disadvantages of network marketing, even though you really love it. It’s important for people to see both sides of the story, so they can make an informed decision. Even with the drawbacks you mentioned, there are so many good things about network marketing. People should at least keep an open mind to it.

    1. Yes, when you evaluate the good and bad, it gives you a complete perspective. Nothing is perfect. No business or business model is perfect. As long as the benefits outweigh the drawbacks, it’s ethical, legal, and makes sense to you, I say go for it.

  8. I agree with you on all the points you have made. I think people need reorientation about this industry and some need to be educated about the industry. A lot of people don’t know how this industry works, they only believe what some other people say which is not true to some extent. One thing I believe is that if the advantages outweigh the disadvantages then it is worth trying.

    1. My mentor once told me that 95% or more of the people in our industry don’t understand what they have their hands on or they would be building their business big, with a sense of urgency, and 100% of the world not involved in our industry do not understand it, or they would be already involved.

  9. With web immersion truly expanding and the opportunity for agents to develop a worldwide presence that can make a beneficial downstream, many are assessing the upsides and downsides of network marketing, particularly the MLM business, to check whether it very well may be a practical business opportunity for themselves. As for someone who had little to no knowledge about MLM business, its quite scary to engage in such provided the cons. Personally, I myself have this fear entering into such, especially that it isn’t taught in schools, it requires me to depend on the information presented in this world wide web. This article was helpful to me in terms of furthering my knowledge in this field. I hope to read the pros as well, to eliminate the bias.

  10. The concept of the MLM industry is nothing if not modern and forward thinking. That being said, the model of the industry does, of course, have its flaws like everything else. It also has its pros.

    As mentioned in other comments, it’s highly unfortunate that so many MLM professionals are turned away without being given a chance just because of the industry that we are in. In my opinion, this stigma could be broken quite easily by simply educating others about the industry.

    That’s not the only social-related disadvantage we have, though. The other is that as an MLM professional, your pay is based off of the effort of others! If your partner fails, so do you, basically — and no one wants to put their potential in someone else’s hands.

    1. The same holds true in some other professions. If you are an insurance broker or real estate broker, your earnings are based off others. If they product, you earn a great income. If they don’t produce anything, you don’t earn anything. If you own a regular business, and have employees, your income and pay is dictated by the work of the employees. The only difference is the brokers and other entrepreneurs can fire people. We can’t!

  11. Just about everything in life has its pros and cons. You did mention all of the disadvantages of working in the MLM industry, but that comes with the job. One of the worst parts would be depending on someone else to do their job and not being able to do much about it. Negative public opinion is also a really interesting one. It’s true what you said about everyone knowing someone who failed, I’m one of those people (who know someone). These types of concepts generally spread by a word of mouth, and bad news travels faster than good, and people often tend to remember someone who failed, rather than someone who succeeded. In my opinion, however, these disadvantages don’t outweigh the possible benefits it brings.

    1. Yes, the public opinion of our industry, in general, is not all that good. Most people are simply misinformed or uninformed. Because our industry is not taught in homes, at school, or at universities, most people really know nothing about it. If you’re thinking about doing MLM, it would be in your best interest to talk with someone who is successful doing it, rather than getting advice from someone who knows nothing about it.

  12. I personally think that not owning the product is great. If you were starting from zero and want to take something to market, developing the product will take you too long, especially if you are not sure if there is a product to market fit. You can find a MLM company with a great product and see if the market reacts to your approach. Not being able to sell it, is a big no no.

    1. You are right about creating a product and taking it to market. It takes considerable time, money, energy, hard work, and even a little bit of luck. If you can find a good product at a fair price that people actually WANT to buy, it’s much easier to sell someone else’s product than create your own.

  13. Everything has its pros and cons and no one could deny that. Keeping advantages in mind help us to make a wise decision. I always look for rewards and it seems a little challenging to accept this fact. Being a part of the business but not able to sell anything is somewhat difficult to digest. Furthermore, you mentioned that companies can terminate anytime they want, isn’t it a little unfair? Even though the overall disadvantages of MLM are scary, but still people find their ways to be successful. I have seen so many people getting successful. People give a negative opinion because they are not being taught in homes. However, the disadvantages of the MLM community can’t deny its benefit.

    1. A lot of people in our industry struggle with sales. However, it is a skill ANYONE can learn. Also, I’d argue that anyone who has a job, a spouse, or children SELLS every single day of their life. They just don’t think of it as sales. The truth is, we all recommend things every day. We try to get people to see our point of view every single day of our life. That is selling. If you can take that same approach with your network marketing business, the sky is the limit.

  14. The negative concepts of the MLM industry can be a scary influence on those who are wanting to enter the industry. The public opinion of this industry is very negative and most people do not understand how someone can run a company from their home and the idea is foreign to them. I know a couple of people who have not had success in the MLM industry and at first I was hesitant in believing that it could be a legit business. While this industry has some disadvantages I know that every type of business has disadvantages and the MLM business model seems to have many more advantages than disadvantages.

    1. Our business isn’t perfect, we just have a better way. That’s one of the popular sayings from one of the best trainers in our industry.

      The primary reasons for our bad public opinion is we have many untrained distributors saying and doing questionable things. Some of that is out of ignorance, they don’t know what they don’t know. Or, they do things out of greed, hoping to make a quick dollar.

      Also, MLM is not taught in school, the university, or at home, so most people know very little about it. I would encourage anyone thinking about going into business to at least evaluate it objectively. It might be a good fit for them. It might not be. But you’ll never know until you look under the hood and take a closer look.

  15. Jessica L Tossey

    I personally love the MLM concept. Unfortunately, I agree with you on the disadvantages. I have so many people who won’t even give me the time of day because I am with a direct sales company. I wish the stigma around that would go away. Also not owning your business outright can be tough on some. It would be nice to be able to get to be a stakeholder in these companies.

    1. Every business has disadvantages. I think the benefits of our industry greatly outweigh the drawbacks. We’re by no means perfect, but we do have a better way for most people.

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