You’ve probably seen the term used online, as part of a disparaging remark about a product or a company someone suggested another person look into. Advocates of this business model prefer to call it network marketing or direct sales, while its many opponents often refer to it as a pyramid scheme. What is it, really, and why has it become such a hot button issue?

Multilevel marketing is a business approach that forgoes traditionally paid sales staff in favor of individuals who work solely for a tiered commission. These individuals earn a set percentage on each item they personally sell, as well as a percentage of the sales made by each person they’ve recruited to the business. The best way to visualize this structure is by imagining a pyramid, though supporters of it would argue that unlike the (now illegal) pyramid schemes of years past, they do have a physical product to offer their customers.

Products sold through network marketing range from make-up and essential oils to bags, cleaning cloths, clothing, cookware, and books. There are wraps, weight-loss supplements, vacation clubs, and insurance policies. There’s even wine and chocolate being marketed this way. Regardless of the product though, all these companies are really selling the same thing: the promise of financial freedom.

It’s that promise — the way it’s made, and the people to whom it’s made — that incites the rage of those who doubt the company’s ability to deliver on it. This may be the time to mention that signing up to sell MLM products isn’t free. To get started, a would-be representative has to purchase a start-up kit (normally valued in the neighborhood of $200, but in the case of one company, the cost is a few thousand dollars), on which the rep who recruited her will earn commission.

Who makes an easy mark for the sale of this start-up kit? Anyone who’s struggling with any financial issue. Anyone who can’t spare that $200 in the first place. The prospect seems especially appealing to new moms who dread leaving their newborns to return to work, and stay-at-home moms who miss the camaraderie and validation they left behind in the paid workforce.

Dedicated direct sales reps would argue that it takes money to make money. If you started a new job at a department store, you might need to buy clothes in a certain style or color to wear to work. You’d probably have to pay for your gas and car insurance, or your bus fare, so you could get to your job every day. Why shouldn’t you pay then, to start working from your couch? The difference is that working a retail job results in a guaranteed paycheck for the hours you spent at worked, and most mlm salespeople never recoup their initial investment.

The reason most people who attempt multilevel marketing lose money rather than make it is the subject of some debate. Obviously buying a start-up kit and then forgetting about it is bound to result in a net loss, but how hard should someone expect to work before they break even? And exactly what does this type of work involve?

To succeed in network marketing, a rep has to promote her products and her company, which means she has to make as many people aware of them as possible. Her social networking profiles are her billboards, and her friends and relatives are her customers. The idea is that in time, the rep can expand beyond the market of people she knows, and acquire THEIR friends and relatives as her customers, then THEIR friends and family after them. All she needs is a little support getting started. She needs everyone she knows to tell everyone they know about her and the amazing product she sells.

The unfortunate truth in a lot of cases is that her friends and family aren’t likely to do that. Sure, a few might buy something from her here or there, but they’re the same people who would also have just given her cash if they’d known she needed it. Most sellers don’t find enough of a market in the people they know, either because no one is very interested in the product, or because those who are already buy it from someone else — perhaps even her upline (the person who just recruited her). What’s an mlm rep to do in that situation?

This is where the supportive upline and the tightly knit community come in. They’re invested in her success, because they’re amazing people, and/or because they’re set up to earn a commission on her sales. They encourage her, and remind her she has what it takes. She can succeed in this business, IF she works hard enough. They advise her to try new tactics like these (are you ready?):

• “No,” doesn’t mean no. It just means, “Not today.” Keep asking until you wear them down. Don’t accept excuses. Anyone who can afford a cup of coffee or a dinner out can afford to help you meet your sales goal for the month.
• Guilt works wonders. Remind them of how close you are to your goal, and how badly you need them to buy. You’d support their business if they had one, right?
• If you can’t sell someone the product, try selling them the position instead. Signing them up to sell under you is even more helpful than selling to them! Remind moms who stay at home that they could be doing more for their families. Remind moms who work that they could have more time at home with their kids. Sell the idea of joining our team.
• Don’t mention the name of the company in public forums. Build interest around it instead, and when people ask, tell them to send you a private message for more information. This gives you the chance to talk to them one-on-one, and shoot down any notions about us that they’ve heard from other people or read online.
• Look at everyone you encounter as a potential customer. What’s wrong with their lives, and how can your product help them make it right? See a mom at the park with her new baby? Go congratulate her, compliment the baby, then tell her how your shakes can help her lose those extra pounds!

This is how a lot of good people, smart women, hard-working moms with common sense and solid morals end up stooping to underhanded sales tactics in an effort to move products they may or may not even believe in. They’ve been convinced they aren’t enough on their own, without representing the company, and that low sales and net losses aren’t a result of a flawed system, but rather a result of their personal failures. Their pushy methods drive a wedge between them and the people who care the most, and they end up believing their only real family is their direct sales team.

They often resort to buying their own products, telling themselves it’s wise to maintain a larger inventory for future customers, when in fact they just need to turn in some “sales” to appease their uplines. They pour more and more money into this venture and only end up drifting further from their financial goals. But the more time and money they invest, the harder it becomes to entertain the thought of cutting their losses and walking away. Their uplines actually encourage them to cut ties with anyone who suggests it.

When they do finally find the strength and clarity they need to let go and get out, the “friends” and “sisters” they met throughout their journey usually drop them like a dirty diaper that’s been left in the car on a hot day. I’ve seen this happen to more of my friends than I care to think about, and that’s why I cringe every time I get invited to a “party,” or a “demonstration,” or a “pampering session.” Friends always tell me their company is different, that they’ll be a success story, and I know that statistically, it’ll eventually be true for one of them. But for those who aren’t willing to invest their life savings, alienate their friends, and spend every waking moment trying to change other people’s minds about what they want, there are better ways to make a modest income working from home.

If you’re considering joining an mlm, or you’re already a part of one, I hope you realize this post isn’t intended as a personal attack on you. Not everyone blindly follows the advice their upline gives to them, and not every rep values success in their company over real life relationships. If you’re one of the exceptions, I wish you the best in your direct sales career, and I hope you’ll be one of the few who beat the system. With that in mind, I’d like to share a few parting thoughts for you to keep in mind:

• Be careful about your taxes. When you work as an independent contractor, you need to set aside both the portion of your check that would have been taken out by the government for taxes, and the amount that your employer would have had to pay on your behalf. The standard is to file quarterly, and send in the amount you owe to avoid a fine in April. Track expenses too though, as they can often offset your earnings.
• Keep a record of the hours you work. If you bring in $50 a month from your business, you’re doing better than most in the mlm world. But if you put in more than fifteen hours of effort to earn that, chances are you could be making more elsewhere. Stay-at-home moms, especially, tend to undervalue their time since there’s no longer any dollar value attached to it by an employer. They think of any money they make while at home with their kids as a bonus, but those hours are worth something to everyone in the family.
• Respect your potential customers. See them as people first. Apple doesn’t insult me when they try to sell me the latest iphone. Disney doesn’t tell me I could afford to vacation there if only I’d stop going out for dinner all the time. That wouldn’t help business for either of them. So if you’re selling weight loss products, keep the focus on what they’ve done for you, or your past clients. Don’t single me out and say I look like I could stand to lose a few pounds. If you sell oils, don’t tell me my loved one can go off all her medications by just putting two drops of it on her leftmost toe every fourteen seconds. (Where did you go to med school, Karen?)
• Keep the sales stuff separate from who you are as a person. Send me a message now and then without talking about a special flash sale or addressing me as “hun.” Give me an update on what your kids are doing, check up on me and my family, or share a funny story that happened to you and leave it that. Let me know my friend is still in there, and that she hasn’t been completely consumed by a sales bot. I’d be much more likely to attend your parties and engage with your posts if I knew that.