Today, I want to discuss the 8 pitfalls of network marketing, as I see it. Keep in mind this is just my opinion and we can agree to disagree.
Before I share my thoughts with you, there are three things you should keep in mind:
- Most people either love or hate our industry, very few people are neutral towards it.
- I love the industry.
- Our industry is by no means perfect (no industry is).
What is a Pitfall?
A pitfall is a hidden or unsuspected danger or difficulty. It’ something that can hold you back or keep you from achieving your goals. Some pitfalls are obvious, and others aren’t so easy to see.
Pitfalls are not exclusive to network marketing. They show up in every area of your life.
The Pitfalls of Network Marketing
What you see below are the top eight pitfalls in network marketing, as I see it. Enjoy!
# 1: Low Cost of Entry
The first major pitfall of network marketing is the low cost of entry. Because it’s so inexpensive to join, anyone can get started. That is the blessing and the curse.
Because most people have such a small amount of money invested in their network marketing business, it’s easy to do nothing and quit. It’s easy to throw in the towel when things don’t go exactly as planned. It’s easy to put your business on the back burner when life gets in the way.
Someone who starts a traditional business and invests $10,000 to $100,000 just to get started will do everything in their willpower to succeed. They will put in long hours, sacrifice their family time and health, learn new skills, attend events, listen to their mentor, etc. Why? To protect their financial investment.
Not so with most network marketers. Easy come, easy go! However, I’ve found that the top earners in our industry ACT AS IF they invested several million dollars in their business. They have the mindset of the traditional business owner, even though they are doing network marketing.
If you decide to join an MLM, then treat it as a legitimate business—even if it’s a side hustle for you. Many reps struggle because they don’t do this. If you don’t market, sell, and do the activities that make money on a consistent basis, your business is likely to fail.
Source: The balance
# 2: No Screening Criteria
The next pitfall of network marketing is that there isn’t any type of screening process. People with zero entrepreneurial experience or zero business acumen can join. Unemployed people can join. Employees can join. Broke people can join.
We tend to attract a lot of unqualified people who wouldn’t be qualified to start any other type of business.
Let me put this in perspective for a moment. When you try to purchase a franchise, they do a background check on you. You must provide references. The franchisor looks at your credit score, your income statement, your assets, and evaluates your work and business experience.
They are trying to determine if you are QUALIFIED and COMMITTED. They do their best to “weed out” the non-qualified people and only recruit “qualified” people.
Network marketing does not do ANY of these things. And we wonder why so many people join, do nothing, and quit?
Nine out of ten business failures in the United States are caused by a lack of general business management skills and planning.
Source: SummitBusinessSolutions
# 3: No Boss
Here’s what I’ve found. Most people are not entrepreneurial, even if they think they are. Most people do not have the self-discipline to manage their own time effectively and be their own boss. That’s why they work for someone else.
Even though you get a “free coach” in our industry, most reps will not listen to that person and do what they teach.
On the other hand, in a job, you must do what your boss tells you to do or you will be fired. And if you buy a franchise, you must follow the system, training, and guidance of the franchisor or you will lose your franchise.
For someone with self-discipline, network marketing is great. For someone without self-discipline, network marketing is a nightmare because YOU won’t have someone constantly looking over your shoulder, holding you accountable.
It doesn’t take long to realize how much entrepreneurship demands. You’ll be spending countless hours working on your ideas, and managing full teams of people (not to mention partner, vendor and client relationships).
In some ways, entrepreneurship can be seen as a juggling act. In others, it’s a game of micro-economics, demanding that you work with limited resources, like time, to gain the greatest value for the money you put in.
Source: Entrepreneur
# 4: Lots of Shiny Objects
Once people do join our industry, they instantly get exposed to hundreds of different shiny objects (online). You can’t spend even a few minutes online without seeing ads for the “next big thing.”
You’ve probably seen ads like this:
- Automated business…
- We build your team for you…
- Our system is the solution…
- Done for you recruiting…
Many newbies end up chasing shiny objects looking for the “easy way” to get rich without doing any work.
Nothing worthwhile is fast, free, or easy. Trust me on that one. The real key to success is to pick something that makes sense, commit to it, and put in the work until you succeed.
Until you develop the right skills and mindset, it doesn’t really matter what opportunity you join, you will struggle to make money.
Furthermore, the real key to success in this industry is to pick ONE company and focus on that company exclusively, until you reach your goals. Chase two rabbits, catch neither!
No matter how good you are as a network marketer, trying to operate two or more network marketing businesses is nearly impossible. For a start, when you have leads coming into your funnel, which company do you direct them to? What happens if they join one of your opportunities and find out you’re involved with several others? And more importantly, what about your reputation after teaching your prospects one way and one company’s benefits yet you’re out there promoting other companies.
Source: streetdirectory.com
# 5: Low Commissions per Sale
Many people join network marketing and just focus on selling the product. That is not a smart business move. In fact, it’s one of the biggest pitfalls in network marketing.
While you do need some personal retail customers, the major purpose of network marketing is to build a network.
Do not confuse direct sales with network marketing. They are completely different. Direct sales is about selling a product. It’s about one person doing a lot. Network marketing, on the other hand, is about a lot of people each doing a little bit.
Rather than one person selling $100,000 in products, 1,000 people each sell/use $100 in products. Make sense?
It’s difficult to make money in network marketing if you are just selling products. Why? Because you earn small commissions per transaction, maybe 10 to 20 percent of the sale. It would take a TON of personal sales to make a full-time income.
However, by leveraging the work of a big group, with a lot of people each doing a little bit, it’s easier to generate a large amount of sales and commissions.
Many people assume that they’ll be able to earn a decent income by signing up a few people and getting those people to sign up new people. However, this is often far from reality. It was found that 47 percent of people never even looked through the compensation plan before signing up for the network marketing program. You want to do your due diligence and see if you can make a good income in the program.
Another issue is the fact that while some companies offer great products or services, their compensation plan is very low. To make sure you avoid these issues, look for companies that offer high-quality products or services that people want to buy. Then look for companies that pay you fair or high commissions for direct sales as well as strong compensation plans for the rest of the downline.
Source: Market Business News
# 6: Public Opinion
Talk to 100 random people and I’d bet that at least 51% of them, if not more than that, have a negative perception about our industry. Some people are just ignorant. Others are misinformed. But the truth is, many people do not like our industry.
Network marketing is not taught at home or in college. Remember, most people have been taught to go to school and get a job. This can be a big obstacle to overcome.
The good news is you don’t need everyone you talk to, to buy your product or join your team. You are ultimately looking for people who are open-minded and looking.
However, it’s important to teach your new people that not everyone they talk to will be interested.
First of all try to understand, why your prospect has a bad image for MLM. Find what they know about it and bring clarity by telling them facts. Tell them “Yes, pyramid schemes do fraud by pretending to be MLM, but they are different from genuine products-based MLMs, which I am promoting.”
Actual facts and figures will help you to solve this challenge.
Source: Ventaforce
# 7: Bad Companies
Another one of the big pitfalls of network marketing are the bad companies. While there are many great companies in our industry, a huge majority of them are not so great.
Like any other type of business, most network marketing companies fail. It’s possible to join a company, work hard for a few years, build up a big team and residual income, and then have the company go out of business and you lose everything.
That does happen from time-to-time. It’s not really the end of the world, even though it might feel like it when it happens to you.
One of the smartest moves you can make is to do your due diligence BEFORE you join a company. Evaluate the owners of the company. Evaluate their track record.
Are they financed properly? Are the owners reputable? Does the product line make sense and provide real value?
A little bit of homework on the front end can save you a LOT of time and frustration on the back end. This is one of the major advantages of joining an established company that has been in business many years. They have worked through most of these issues and they are STABLE, even if they aren’t as “sexy” as a new company.
“A little Learning is a Dangerous Thing,” Absolutely right! A few people join network marketing organizations without an apposite understanding of the company. Thus, it is crucial to conduct briefed background research about the organization that you aim to join. Don’t be forced to be part of a specific network via your relatives or friends as many of these are merely concerned in earning recruitment commissions. It is necessary to take the company’s product into account with the compensation plan. Check its financial background and the performance of the products. Most of the multi-level marketing organization fail because of poor financial management. Always go for a progressive, revolutionary, and steady company.
Source: Entrepreneur
# 8: Outdated Training
Many network marketing companies are still stuck in the 1970’s and 1980’s way of thinking. Many network marketing companies have not embraced the internet. They frown upon, sometimes even prohibit, their reps from leveraging the internet to build a business.
I will NEVER understand this way of thinking. It’s 2020, not 1980. Get with the times!
While home parties, private business receptions, hotel meetings and three-way calls still work, not everyone who joins our industry in modern times wants to do those things. In today’s age, people want to work smart and use their cell phone to grow their business.
I can’t say I blame them. Make sure you partner up wit a company that embraces technology, jumps on trends, and encourages their reps to think outside the box. Otherwise, you will end up frustrated, working with a company that only holds you back.
If you’re new to the game and lack the skills to navigate your industry, or you haven’t taken the time to keep your strategies up to date, it’s much like trying to navigate a dense forest with no map or compass.
Training can spell the difference between striking it big and floundering for ages, so you’ll have to continue learning so that you know what moves to make in this rapidly changing landscape. Read regularly, and focus on cultivating strength in the areas where you’re currently weakest.
Source: successfactory
Conclusion
In review, these are the top 8 pitfalls in network marketing as I see it. While our industry is by no means perfect, it’s amazing. It offers a way for the average person with little to no money to start their own business and build up a leveraged, residual income and obtain complete financial freedom.
What are your thoughts? What do you believe are the pitfalls of network marketing? Leave a comment below to let me know what you think. I look forward to hearing from you.
Chuck Holmes
20+ Year Network Marketing Professional
Top Earner & Top Recruiter
Email: mrchuckholmes@gmail.com
P.S. Learn how to grow a successful network marketing business. Secret tips, training, and practical ideas. Free training delivered by email.
Thanks for covering these common pitfalls in network marketing. You could objectively make a list of pitfalls for EVERY type of business. Nothing is perfect. As long as the idea is sound, it’s legal, ethical, and moral, and makes sense to you; I’d say go for it.
Yes. The major pitfall is anyone can join. That is the blessing and curse of our industry. The only real screening process is the person’s work ethic. Will they put in the work, or not? They can decide. Most will not, but a few will.
Thanks for such valuable insight. There are very few people who have such in-depth knowledge about network marketing and just jump in for the sake of money. As you rightly said, most people work 30-40 hours per week only to make an average mount, while others expect to make a lavish life working only part-time.
I figure it’s time we all learn a thing a two about the business before we just “dabble” in. Thanks for highlighting all the traps to avoid. Will be diving into the details further to see if this industry is meant for me.
People may join for the “money” but they stay or leave for the relationships. There are lots of ways to make money in our GIG economy. The real power of the MLM industry is not the part-time income. You can do that anywhere. The real power of our industry is building a long-term, residual income. It’s building a leveraged income where not everything relies on you trading hours for dollars. It’s building an income that can pay you 24/7 for years to come, even if you stop working. If people truly understood that, they would take their business much more seriously.
My takeaway from this read; self-discipline and consistency are very important to do to succeed in MLM. While it comes with a high level of self-autonomy and flexibility, the downside is if you are not self-disciplined you will not be able to perform well to achieve your goals. MLM is no easy feat. People might think since there is no or very little cost of entry, anyone can join but those who consider it so soon get washed out.
In my opinion one of the major pitfalls or challenge would be to identify a legitimate pyramid scheme from those who are just out to make a quick buck at your expense. So as you rightly put it, it is important to do research and make an informed decision.
Thanks for the article. It is very informative
I 100% agree that if you do not have self-discipline, you will not succeed in MLM or any business. Entrepreneurs must have initiative and do what must be done, without being told what to do.
First of all, I would like to say that this is the most informative and detailed article that I’ve read about the pitfalls of network marketing. It’s true that many people tend to look at network marketing as easy money. What they don’t understand is that to be successful, a certain level of hard work and dedication is required regardless of the industry you’re in. Network marketing provides a great platform to many aspiring entrepreneurs and young professionals to make their own income but it also provides the same opportunity to incompetent and unqualified people and then eventually they end up quitting the business at an early stage.
Yes, network marketing is a great source of entrepreneurship for most people. The people who are uninformed about our industry simply don’t get it.
Hmm, every one of these topics about pitfalls of network marketing is interesting. I was intrigued by number 6 the most. Public Opinion is an important factor. Internet marketing is not taught in schools. You have to find as many sources of information as you can. You can find a mentor. Yes, it is true that more than 51% of people don’t like this industry. Not all of your customers will like your product. But that’s not a bad thing, it’s a regular thing in business. And I agree that you need to look for open-minded people and explain to them this mindset. I agree with numbers 1 and 2 as well. People will not consider internet marketing seriously enough if everyone (someone with 0 experience) can start it and then quit. Very very interesting article, Chuck!
I’m glad you enjoyed the article. Public opinion can be tough at times, but there are still MILLIONS AND MILLIONS of people who don’t even know what network marketing is.
I completely agree that there is a general belief that anyone can get started in Network Marketing and when failure comes, they just blame the Industry. They think that by just investing their money, they are going to be successful by some miracle or magic force. That is a big misconception of our industry. Besides investing money, you need to invest hard work and your personal time. Also, in my opinion not having a boss is a huge pitfall, because no one is going to tell you what to do or how to do it. You are in charge, so if you are not self-disciplined, failure is expecting you right around the corner.
Yes, many people think of our industry as a lottery, sadly. It’s not. It’s weird. People work a job for 40-60 hours a week and make a salary, yet many of those same people think they can join our industry and make the same amount of money, right out the gate, just working part-time. I don’t think so. Those are unrealistic expectations.
Many people have a negative idea about MLM because what you see is controversial when you look it up on the internet. You’d have to dig deeper to find the basic concept of MLM. Of course, there are illegal businesses, but as Chuck said, every industry has it. As the participants of the industry, we have to weed out the bad.
However, reading this blog is essential if you are a newbie. These pitfalls are easily avoidable, but not if you don’t know them. I’m glad I got hooked on this site. I’m actually on a reading spree.
Also, I’m pretty new to MLM, so reading these pitfalls will help me avoid them. On top of all, I understood something. As a freelancer, I guess MLM is something that I can try. A freelancer is a boss as I have to take care of all the activities alone, which means I might be able to handle this as well.
“Act as you invested several million” – well said, Chuck. I’m going to implement this in my freelancing journey as well. Thank you!
If you already work for yourself online, MLM can be a great extra income stream because it won’t interfere with your other businesses. Plus, you have something extra you can offer your customers, to maximize your profits.
I think every new rep should get trained on this subject, so they have a better understanding, and they can help educate their prospects properly about the industry.
Nothing is perfect. Our industry has some pitfalls, just like any other industry, but we also have a lot of great things going for it. Education is key.
Before reading this article I didn’t know a lot about network marketing. I like that Chuck talked about the good and bad. People thinking about joining our industry as a distributor should read this article. Most people searching the internet about MLM, only read the bad stuff. However, there are lots of benefits of doing network marketing. If you only focus on the negative, that is what you will find.
Yes, the internet is loaded with information about our industry, especially negative stuff. Keep in mind there is no screening process. Anyone can anonymously post anything they want about our industry. Many people think that because something is on the internet is true. Not so. You must evaluate each source when you read anything online to figure out what their angle or take is on it, and if they have an agenda to post something bad.
Reading this article has changed my perspective about Network marketing. But one thing I have realized is that if you are not committed you might not make a dime from the network marketing. People need to stop seeing network marketing as a get-rich-quick scheme. The more you work the more money you make here. You hit the nail on the head with this article.
In any business, you must be committed. It’s hard to “dabble” in any type of business and expect to make a profit. The major challenge in our industry is 99.9% of the people just dabble. They don’t take it seriously and then they wonder why it didn’t work. I tell people don’t be mad about the money you didn’t make for the work you didn’t do.
I feel like that, yes, the low cost of entry is the blessing and the curse. It does allow anyone to start, but there is no real incentive to go further. Whereas when you invest a lot of money you will claw back through everything and anything in order for your business to become viable and to make a profit. And yes, if you are not qualified and committed you won’t do much to grow your business.
Yes, when people invest a lot of money in a business they will do anything and everything to protect their investment and make the business work. They will work 10-16 hours a day, seven days a week. They will learn everything they can about their business. They will hire mentors and coaches and consultants to help them. They will be coachable and keep an open mind. If I could get network marketers to think like this, you would see a lot more success in our industry.
Easy come, easy go. No skin in the game financially, and it’s easy to quit.