Top MLM FAQs - MLM questions and answers

Top MLM FAQs - MLM questions and answers

Nikhil Ravindran
Updated on 23 May 2022
13 min read

Most frequently asked questions (FAQs) in MLM industry

1. Can one work for one or more MLM company over a single period of time?

Majority of the MLM companies never say YES to work for more than one at a time. This not just violates the company policies but also the product selling tactics will open up for other companies, especially the competitors.

Even though they all are following a somewhat similar model of marketing or compensation plan, tactics differ the most. Most of them add up their rules and make the plan flexible to work with necessary changes or customization.

Hence distributors are mostly allowed to work for one Distribution Company and avoid the chances of the disclosure. Independent distributors might be allowed to take up the distribution of products from multiple MLM companies under their own risks.

2. Who exactly a sponsor is?

A sponsor is someone who recruits a member into the network and becomes a part of the MLM business network. The so-recruited members will be added to the downline slots and this sponsor will be beneficial out of it directly with bonuses and commissions.

3. Who are upline and downline members?

Consider a member in a MLM genealogy; we’re going to define upline and downline members by considering this particular member. The members above this particular member are known as upline members and those who are beneath this member are known as downline members.

4. How many members can one sponsor?

There are no sponsor member limits and one can sponsor and manage unlimited downlines. With more members, the sponsor earns more bonuses and commissions. However, an MLM company has the right to restrict this sponsorship with a limit.

Bonuses and commissions differ in accordance with the compensation plans. Always join an MLM Company suitable for your marketing approach and style. One must get maximum profit out of the effort that puts on individual product selling.

5. Is MLM business approved by attorneys?

The attorney side in MLM is always about legal consulting and not about providing a definitive approval for the working part. There are many MLM attorneys to check the law-following review, and other sorts of stuff, it’s more legal advice. If any violations are found, attorneys have the right to take legal action. That’s why MLM business is often dealt with lawsuits. If a business is following every law then there are no concerns.

6. Does one have to pay taxes for the revenue earned from MLM business?

Individual marketers or distributors have to pay taxes depending on how much they earn. Tax filing has to be handled by the distributor himself/herself and there are laws that make an independent earner to pay taxes quarterly.

So individual tax is the responsibility of the distributors in the MLM business and MLM Company is not responsible to look after their tax scenarios.

7. How the internet changed the fate of an MLM business?

Time has come forward all too far from the traditional marketing models and internet is the best channel to make sales boost up to the extreme level. The Internet has provided a great opportunity for MLM companies as well as distributors in its best ways.

Digital marketing as an affiliate brings more sales for distributors and direct marketing via the internet provides fortune for MLM companies/organization. Fate is brighter and advances in times. The growth rate of revenue promises a consistent change.

8. What is the difference between direct selling and direct marketing?

If an MLM company is directly marketing their products to customers then its direct marketing and if the distributors are selling products to customers then it’s direct selling. Basically, this is the difference between these two terms.

9. How to pay commissions to distributors?

If a distributor met with the criteria set by the MLM organization then he/she will be eligible to receive commissions and other compensations. The compensations so acquired will be credited to the distributor’s wallet. This money can be withdrawn at any moment after it is credited to their account. However, the business admin has to approve the withdrawal request.

Epixel MLM commission software is a stand-alone platform with customizable commission modules that can be configured to automate the payouts for each payment cycle.

10. What to focus – selling or recruitment?

The primary focus of an MLM business must always be product selling. Well, the focus must also exert on expanding its business with recruitment. For steady business growth, a balance must be maintained between sales and recruitment.

See how to maintain the balance between product sales and member recruitment using MLM Recruiting Software.

Visit Top 7 network marketing recruiting tools to read more on recruitment.

11. What types of products are sold in the MLM business?

There are many categories of products sold through MLM business and few among them are skin care, health & wellness, cosmetics & beauty, household goods, food & supplies, personal care, etc.

12. How popular is MLM in the world market?

MLM is popular all around the globe and has been around since the beginning of the 20th century. One or the other way most of the business world is into MLM. The popularity grew up from the beginning period itself and the revenue has grown up to a value of 190 billion USD back in 2017. The revenue model is taking a steep growth at times and it reflected in the living style of people too.

13. Which is the best MLM Company to join?

There are many worldwide companies to join and here is certain potential companies you might be interested in.

Refer to this article for more MLM companies.

14. Are there any communities or associations in the MLM industry?

Yes, there are many communities and associations to reach out in the MLM industry. MLM communities are resourceful and provide you the story of both scam and the genuine ones. There are associations like DSA, WFDSA, etc. that gives enough insights regarding the industry.

Alongside there are conferences and other stuff from the popular big guns of the industry that strengthens up the core side of MLM. These all sectors together strengthen up the industry knowledge with high value.

15. What is Party plan?

A party plan is a marketing plan where a host sells the product in a party or similar events with the help of an MLM organization. It’s a part of direct selling and the income is driven from both independent and from the sales of recruited people. The host of the event is given an opportunity to become a distributor and a company representative will be there to monitor things (not followed by everyone). With neat presentation and marketing skills, the host will make product sells from the guest line-up. To easily organize and manage the party, a Party plan software come in handy.

In the beginning period, it was women who was into the party plan with their social connecting skills and at present, men are also a part of the party plan.

Read on how to gain more profits from a party using advanced party plan tools.

16. What are active and inactive members terms meant for?

Members who keep a state of selling throughout the period of time are “active members” and those members will be ideal for marketing. Those members who are not making regular sales or not even single sales will be tagged as “inactive members”.

17. What is MLM Software?

An MLM Software is an automated system used to manage, organize, and develop MLM business without any complexities. This software system offers 100+ features to manage the business with a module-module approach. With high-end security and transaction system, an MLM Software is perfect to maintain the course of business.

An MLM Software is known by other terms like a direct selling software, network marketing software, etc.

18. How to choose an MLM Software?

Choosing an MLM Software is not easy there are many software providers available in the market and each of them has its own unique value. To choose an MLM Software, the primary concern will be the awareness regarding what you are into, what is there for you in MLM market, and much more. It’s the purpose that chooses a package.

There are many options like a cloud-based package, white-labeled package, SaaS system, etc. The most preferred package will be a customizable one where one can customize everything that ranges from developing a new marketing plan to advanced features.

19. What is an MLM business?

A typical business model used to control and organize sales of company’s products directed from the workforce or distributors in that network. The revenue model is earned from two sides of the business in MLM, one from that of product sales and other from the compensation rewarded for the member recruitment.

MLM business is more a direct selling business and here apart from the direct sales, member recruitment has also been added. MLM is also known by other terms like network marketing, referral marketing, etc.

20. Is MLM a legitimate business model?

Yes, MLM is legal when it follows the rules that have been written by the representing country as guidelines. If these rules are followed by an MLM organization, the business model is legitimate. FTC has provided detailed legal guidelines to follow and basically if an organization is not following such rules, it’s a pyramid model.

Here is an article about the legal side of MLM to follow.

21. What is the role of the distributor?

A distributor is a non-salaried person who enrolled in an MLM organization with a small package and sells company product on a commission basis. Here the company doesn’t appoint these distributors and not a big charge is levied as enrollment fees.

Traditionally, MLM companies follow a retail-wholesale system where the distributor buys company products for wholesale price and then sell it for retail price. The difference between these two values is the distributor’s profit. A legitimate MLM organization takes back the unsold products from the distributors if they resign from the company.

However, at present distributors join the network with an enrollment fee and no need to buy products for a wholesale price. Commissions are provided based on their sales and to encourage these people some extra bonuses are provided.

22. What are the criteria’s for joining an MLM business?

There are not much criteria’s to join in as a distributor in an MLM business. Still, there are certain criteria like,

  • One needs to sign up and enroll in with a membership
  • A membership fee has to provide during the initial registration
  • To make the distributor membership active, he/she has to make their first sale or purchase a package (for free registration)
  • KYC is must now to enroll in

These criteria differ from company-to-company and it is decided from the organization end.

23. What is the motive behind the distributor’s will to join MLM business?

The motivation behind joining an MLM company is different for each individual. Some of the most common reasons are,

  • MLM as an extra income source (part-time)
  • If a person has marketing abilities then that person can use those technique drive sales and earn a good set of commissions
  • A full-time career can be built out of this strategy
  • Product branding and make people spread the word

There are many such motivations behind every network marketing success story.

24. How is income driven in a distributor network?

The income-driven in a distributor network will be through individual sales as well as sales made by the downline distributive network. Extra bonus and compensations are also added by organizations like fast-start bonuses, compensation plan bonuses, etc.

25. How to identify a pyramid scheme?

Identifying a pyramid selling business is not as easy as it looks like. Certainly, there are ways to find such odd business out from the genuine one by considering the below fact-check!

  • Check the history of an organization and whether there are any scam motives has been there in the past times
  • If the business is more on member recruitment rather than product selling there is a chance that it may fall under the pyramid selling category
  • If there is no actual physical product to sell then for sure it’s a pyramid selling scheme
  • If unbelievable offers are being advertised to customers it might be an illegal form of product selling business
  • A large amount of money is charged for distributors as joining fee

As per FTC guidelines, the two factors that make sure a business is a pyramid or scam is inventory loading and lack of retail sales.

Here is an interesting article regarding the pyramid selling for in-depth knowledge.

26. What are the signs of a balanced MLM system?

The signs that give you enough confidence while joining in will be a balanced ratio between product selling and workforce recruiting. Multi-level marketing focuses on both networks strengthening as well as product selling/distribution.

The imbalance makes the business to fall under the illegal category.

27. What is the growth rate of a distributor or a consultant and how much the distributor earns?

A distributor earns a fair part of income from single-level marketing and multi-level marketing i.e., the sales made by the distributor himself/herself as well as from that of the sales made by sponsored or downline distributors.

Both growth rate and earnings depend on the above two factors or patterns. A steady growth-rate is not a common sight in the MLM world and only a handful of people have the ability to manage it.

28. Are the top-level employees the only one with a high-income rate in MLM business?

In a legal MLM business, everyone has the opportunity to earn. If there are good products to sell then there will be actual customers to buy it. No matter when a distributor joins, if a company offers good products then it won’t affect the selling part.

Many big heads like Amway, Avon has been in business for a long long time and they are a perfect example for a perfect business model.

If the opportunities are void then it will be a pyramid selling scheme where 88% of the bottom-level employees will face lost or cheated and can’t even recover the initial joining amount.

29. What are the compensation plans?

Compensation plans are the heart of an MLM business and there are many such plans available in the industry to choose from. A compensation plan in simple terms can be defined as a marketing plan that gives the admin about how the whole business works with the criteria for earning compensations, the business architecture, package upgrades and much more.

An organization chooses a compensation plan according to their regulations and policies. Few types of compensation plans are the binary plan, matrix plan, generation plan, board plan, etc.

30. Is the revenue model perfect for an MLM company?

The revenue model highly depends on the compensation plan an MLM company chooses from, and finding a proper consulting can do it. The revenue model is perfect if it finds matching with the company regulations, it will help to grow bigger.

31. What is the future of MLM looks like?

The future of MLM business looks brighter and it’s a good opportunity to improve business life. Everyone is into MLM or direct selling to enhance their business opportunity; this adaption looks healthy and futuristic.

It’s the perfect way to mold business and the right method to adopt. There might see certain changes in the business structure like alternatives for door-door sales, digital marketing stuff, etc. These changes will add more popularity among the people and this particular business model will always be an open channel for driving income, branding opportunity, connecting people, and much more.

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Comments (1)

Vollanda's picture


Mon, 04/04/2022 - 11:34
Thank you for providing the information. It helps me to start my business.

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