How to choose an MLM company: 6 questions before you commit

When you build a terrace, you first choose the spot. Where the ground is firm, where the water runs, where there will be shade in the afternoon. Only then do you dig.

I experienced it in my own garden, when I was digging the foundations for the seating area my wife Lenka wanted. And the longer I dug, the more I knew that the spot is the most important decision of the whole build.

Choosing an MLM company is the same. When a leader changes company, they don’t choose only products. They choose the place where they will build for the next ten years. Their name, their time and the people who will go with them.

What is an MLM company and how does it differ from a pyramid?

An MLM company, that is, a network marketing company, sells real products or services through a network of independent partners who receive a reward from sales. A pyramid, by contrast, stands mainly on entry payments and the recruiting of new people.

The difference has legal weight too. Under EU rules on unfair commercial practices (Directive 2005/29/EC, Annex I), operating or promoting a pyramid promotional scheme is prohibited in all circumstances. This is a scheme in which a person pays for the chance to receive a reward that comes mainly from bringing in other people, and not from selling or consuming products.

Every EU country has transposed this rule into its own law.

A simple test: if everyone stopped recruiting new people tomorrow, would anyone go on buying the products? If so, that is a good sign.

How do you choose an MLM company? 6 questions to ask yourself

When choosing an MLM company, ask yourself six questions: who buys the products, how long and how the company has been operating, whether you understand the compensation, how people who left are talked about, whether there is room for your style and whether the company is ready to grow.

1. Do people who build nothing buy the products too? If a company is held up only by recruiting and not by satisfied customers, something is wrong. Ask how many customers buy repeatedly.
2. How long has the company been operating and how does it manage its finances? In many EU countries a company’s annual accounts are public in the national business register. You can start the search through the e-Justice portal. It takes ten minutes.
3. Do you understand the compensation rules? The rules should be written down and available before you decide. If it takes a three-hour presentation for someone to explain it to you, keep asking.
4. How do they talk about people who left? A decent company and a decent leader talk about them with respect. Culture shows in how people are treated when they have nothing more to offer.
5. Is there room for your style? You don’t have to squeeze into other people’s tables to lead people. I write more about it in the article A leader in network marketing doesn’t have to fit into the tables.
6. Is the company ready to grow? Beyond borders too. A team you want to build for years needs room and a company that thinks about growth in advance.

What are the warning signs when choosing an MLM company?

The warning signs when choosing an MLM company are pressure to decide quickly, promises of earnings, a compulsory purchase of a big starter package and more talk about recruiting than about customers. If you see at least one of them, slow down.

Good signs and warning signs when choosing an MLM company

Area	Good sign	Warning sign
Products	Ordinary customers buy them too.	Almost only partners buy them.
Entry	A low entry fee or none.	An expensive compulsory starter package.
Rewards	The rules are written down and clear.	Big promises without a document.
Communication	They talk about products and about people.	They talk mainly about money and recruiting.
Decision	You get time and materials to take home.	“You have to decide today.”
People who left	They are spoken of with respect.	They are “weaklings” and “traitors”.

How do you check an MLM company before you decide?

You check an MLM company best by combining public documents, conversations with people inside and outside it and trying the products yourself. Don’t rely on the presentation alone, however good it is.

1. Read the rules and the contract at home, in peace. Without anyone sitting behind your back.
2. Look the company up in the public register. When it was founded, who runs it, whether it publishes its results.
3. Talk to someone who has been in the company for more than a year and to someone who left. The two sides will tell you different things and both are useful.
4. Try the products as a customer. If you earned nothing from selling them, would you still buy them?
5. Take your time. A good company will still be there in a month.

Why don’t I name the company here?

I don’t name the company I work with on the website, because I don’t want you to decide by a name or a logo, but by the questions above.

I’ll show it to you in a private presentation. And we can happily go through it point by point using this list.

Frequently asked questions

How do I know an MLM company is not a pyramid?

An MLM company is not a pyramid when it sells real products that people outside the network buy too, and the rewards come mainly from sales. If people are paid mainly for bringing in new people or for an expensive entry package, that is a warning sign, and in the EU such a scheme is a prohibited practice.

Is network marketing legal in the EU?

Network marketing is legal in the EU when the company sells real products or services and the rewards come from their sales. Pyramid schemes, where people are paid mainly for recruiting, are prohibited. The rule comes from Directive 2005/29/EC on unfair commercial practices, which every EU country has transposed into its own law.

Should I choose a new or an established MLM company?

Both a new and an established MLM company have advantages and risks. An established company has a verifiable history, a new one can offer more room but has less data on its finances. In both cases check the products, the rules and the people, and don’t decide by promises that right now is the right moment.

How much does it cost to start in MLM?

How much it costs to start in MLM differs from company to company. A decent company doesn’t ask for a big compulsory purchase at the start, and the entry fee is low or none. If someone wants a big investment on day one, slow down and ask why.

Sources

• Directive 2005/29/EC concerning unfair business-to-consumer commercial practices (Annex I)
• European e-Justice Portal: find a company in the EU business registers

Tom