Is Multi-Level Marketing Passive Income

Is Multi-Level Marketing Passive Income?

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Is Multi-Level Marketing Passive Income? The question, quite often asked, depends on who you ask. The marketing efforts of MLM's, leave little doubt, but can you trust them? We will get you the truth.

There is an easy standard to apply to the question “is multi-level marketing passive income?”. If you stop selling, does the income stop, or does it keep coming? That is all there is to it. I will look at the three largest MLM's and the one that I have personal experience with and show you that you can make passive income from an MLM.

Table of Contents

Note: This post may contain affiliate links, which means if you buy from my link I might make a small commission. This does not affect the price you pay. See the full affiliate disclosure here.

Multi-Level Marketing Passive Income- Real Or Not?

First, let's acknowledge that most people hate MLM's and think they are scams. But, on the other hand, many people have tried it and not made any money, so they label it a scam or a pyramid scheme. To illustrate the difference, we can look at this chart for what makes it a scam or pyramid scheme and what doesn't.

Scam/Pyramid Scheme

  • You get paid for recruiting
  • There are no products/services being sold

Legit

  • No pay for recruiting
  • Commissions are based solely on products/services sold

Many companies dance a fine line that they are technically legitimate, but they operate in a scammy manner. According to the FTC, “Most MLMs say you can make money two ways: by selling the MLM’s products yourself to “retail” customers who are not involved in the MLM or by recruiting new distributors and earning commissions based on what they buy and their sales to retail customers. Your recruits, the people they recruit, and so on, become your sales network, or “downline.” If the MLM is not a pyramid scheme, it will pay you based on your sales to retail customers, without having to recruit new distributors.

If you look at the top 3 MLM's based on their annual income, they are:

Amway 8.8 billion

Avon 5.7 billion

Herbalife 4.5 billion

There are 100's of MLM companies, and it's pretty clear there is a lot of money being made. But do they offer passive income or as they will refer to it as residual income. Let's look at each one in detail.

Amway

Amway sells several different product lines such as nutrition, personal care, beauty, and home. You do not have to sponsor people or buy inventory with Amway, and if you stop selling, you can continue to get paid on new sales as long as your customer base keeps ordering. So can Amway provide passive income? It's possible if you are not the one delivering the orders.

Avon

When you hear the name Avon who doesn't think of makeup? Avon has a long product line of personal care products, jewelry, wellness, and home. You do not have to buy inventory, and you get an online store of your own. Suppose the customer chooses Rep Delivery; it's not passive. Rep delivery can be turned off, so there is no choice, but because this muddies the water, I would say passive income, while possible, is not likely.

Herbalife

Herbalife is mainly known for nutrition drinks and supplements but also has skin and hair items available. In addition, you get your website, and your customer's products can be shipped directly to them, creating a possibility of passive income on future repeat orders.

Recap

I was going to continue with more examples, but it is the same story with all top companies. They do promote recruiting/sponsoring, but it is not a requirement, nor do you get paid for doing so. This makes them legal. They all have products you can sell, but if those sales stop, your income will stop. There is nothing unusual about this. If you owned a brick-and-mortar store and the sales stopped, your income stops.

My problem with all of these companies is there are plenty of products you can buy that are very similar without being in an MLM. That being said, I have never used any of their products, so maybe they are so much better that if I tried it, I would keep buying, and based on their annual sales, they must have some great products.

So why do people cringe when suggested they buy from or become an MLM representative? My feeling is the pressure your friend or neighbor exerts on you to buy or join. The methods all of these companies promote are home parties, make a list of friends and family, weekly meetings, 3-foot rules, and on and on. The problem is these don't work, and you will have friends and family avoiding you. Believe me; I have tried them all.

LegalShield

This is the MLM that I am involved with; actually, the only one I have ever been with. Before you go running, I am not trying to recruit you. You will not see a link to my website or my phone number. I am merely using this as an example because I have personal experience. I have been a Rep since 2015, and here is what I like and what I don't like.

Likes

  • No inventory
  • Monthly membership service
  • No products
  • Pays residual income

Dislikes

  • Difficult to sell
  • Recruiting pushed too hard
  • The service is not that great
  • Customer retention is poor
  • You are punished for poor retention

You may ask yourself why I am involved with something that has these negatives. I am not involved, at least in the last year. I stopped all activities mostly because my new sales stopped during the pandemic. But even before that, I did not do any marketing tactics the company promotes because they don't work. I did in the beginning but quickly realized they don't work.

Where does that leave me? Well, I still get paid residuals on all my past sales so long as the customer is still paying their monthly subscription. So I don't do anything, but the money still comes. Sounds pretty passive, huh?

Conclusion

Whether you are looking to join an MLM or already in one, the passive income can be there so long as you have built up a client base that keeps ordering products or paying for their subscriptions. Getting to that level with any MLM is a struggle, and most people will not make it. So I will offer this piece of advice- follow your path and not the direction of the uplines. Also, don't buy inventory. If you have to buy inventory, don't get involved. I will attach the income disclosures for the companies I mentioned so you can see the real numbers.

Income disclosures:

Amyway

Avon- I can't find an income disclosure for Avon. That is a bad sign.

Herbalife

LegalShield

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