My mentor, Roni, and I were catching up after 8 years. We met when she was doing at show at the professional theatre connected to my University, and I was her dresser. One day before rehearsal, she asked if she could take me to breakfast and tell me about her day job. Since she was basically my hero at this point, I said yes. At this breakfast, she gave me a deliciously smelling body butter, and let me through a presentation, then on index cards (because this was before iPads y’all!). I listened, and it all sounded so great--earning money by leveraging your network, having a day job that made me a non-starving actor when I graduate, having a white Mercedes, etc. When I talked to my dad about it he said ‘Well, Katie it sounds like one of those things where you put a lot of effort in at first and don’t make a lot of money.’ And College Katie did not like the idea of devoting more time to something to keep her as broke as college students are so… I passed. Fast forward eight years, I’m an actor in New York, miserable at my serving job, and someone else prospects me for the same company. I tell them I know someone who does that, she asks who, and when I tell her Roni’s name, her eyes light up and she tells me, ‘She’s doing really well! She’s at the top of the company and retired her husband.’ Even though I was still wary of this venture, I set up the meeting anyway and caught up with Roni. It was true. She had ‘retired’ her husband after he lost his job a second time (this was all after the 2008 recession.) She was a mom, a wife, an actor, a producer, and… a successful network marketer. She was living proof that this industry works. And I looked at her and said, ‘This is all great, but I still think it’s a pyramid scheme.’
I don’t know where in my life I gained this knowledge or opinions about pyramid schemes. I have never had a bad experience with one, I’ve never personally known someone to lose thousands of dollars by being manipulated into the business. My guess is it’s just cultural osmosis. Pyramid schemes are quick and easy jokes for sitcoms. Look, the deadbeat character just bought 100 blenders and now they have to sell them off! Look, that guy is trying to pitch his business opportunity while they’re saving the planet, hilarious! Some of these are funny, but some of them make my blood boil. So! I’m here to clear the air once and for all. Before I joined my company, I did research about the industry itself and my company in particular. I encourage you to do the same. As you start your research journey, here's what I've learned.
First, let’s give a little history. Network Marketing first came to be in the 1940s. Before that, traditional direct sales worked a little differently. Sales people would have a particular region they were responsible for, and a high quota to reach each month. So, if a company wanted to sell $500,000 in product, they would hire 100 salespeople with a monthly quota of $5,000 of product a month. You only make money on commissions, and not by bringing anyone into the company. Somewhere along the way, a company realized they could create total chaos, and exponential growth, by incentivizing employees to recruit new salespeople by offering them a 2% commission on revenue new recruits. They would also allow anyone to begin recruiting from day one. So, if you bring on on person one day, then the next day you each bring on one and so on and so on, that leads to exponential growth. It essentially flipped the number on its head. 5,000 salespeople were now selling $100 a month, and the company grew exponentially. This idea caught on, and Network Marketing hit its major heyday in the 80s and 90s. This is also when a lot of companies pretending to be legitimate Network Marketing Companies created pyramid or ponzi schemes for profit. Now, the industry of direct sales is a lot more regulated to help combat these companies. Since then, legitimate companies have been working diligently to rebuild the reputation of what can truly be a powerful industry.
Okay, that was boring, let’s get to the fun stuff. So what exactly IS a pyramid scheme, and why is it not the same as a network marketing company? Network Marketing companies are legal when three guidelines are followed. First, the company’s main objective has to be selling legitimate products at a market driven price. Pyramid schemes will sell a fake product, or a product of extremely poor quality and masquerade it as a great product. Second, Network Marketing Companies cannot promise or guarantee incomes. It is against compliance for any company to guarantee you’ll make a certain amount. In fact, if you want to see what your friend really makes doing their network marketing business, each company is required to release an annual Income Disclosure Statement. Google your favorite company and prepare for your jaw to hit the floor… or, ya know, just gain some insight. This statement will show how much the average person earns and how long it takes them to earn it. Lastly, and most importantly, distributors are not paid for the act of recruiting others. Pyramid schemes only profit off of new distributors buying an exorbitant amount of product, and the amount of product actually sold to customers is immaterial. This is the most dangerous and personally anger-inducing aspect of those companies. If you are only rewarded for bringing warm bodies onto your team, you will not care if they win, lose, or succeed, and thus some not so great people will lie, cheat, and steal to take advantage of folks looking for a way out of their current situation. The easiest way to tell if a Network Marketing company is truly legitimate is whether people still use their products even after leaving the business, or use their products without doing the business. There are a lot of people that sign up for a company, later quit, and still use those products every day. I see this personally in my own sales stats every month. (Shout out to those old consultants who still love and use the products. #fizzforlife)
So now that you know that the words pyramid scheme and network marketing are not in fact interchangeable in all situations, I want to address some other common objections. Please know, that even though companies are now regulated by the Direct Selling Association, there are still companies in existence that are flagrant abusers of the above guidelines. I am in no way endorsing every company in the industry. So if you are looking into a company, please do your own due diligence and research. Not all network marketing companies are created equal. When I got off the phone with Roni after our 8 year catchup, I googled my company’s name and ‘pyramid scheme.’ It sounds silly, but I did! I read the articles and reviews and watched a funny video with talking bears Roni sent to me, and I still decided to join this company. And anyone who knows me, knows I am no fool for anybody. Okay, so now to the ‘Yes, buts’ that come after I explain how I’m not operating within an illegal ponzi scheme.
No one makes any money doing this.
Well, if my story above is true we, know that there are in fact people that are making a legitimate income with this business. The truth is, not a lot do. If you look at an income disclosure statement for any company, you’ll see that only about 10% of the distributors are making more than about $1,000 a month. And usually only about 1-2% are making the coveted six figure income. It’s true! I’ll also tell you that if you look at the income distribution of any entrepreneurial field, like maybe my former industry of performing, those numbers are the same or even worse. That’s the reality of entrepreneurship. It is an effort based business. You will only get out what you put in. Network marketing can sound so easy when you say the words ‘working part time from home.’ But a lot of people ignore the word ‘work’ and get excited about the ‘part time’ aspect. I’m here to tell you the god’s honest truth. This business requires hard work. People roll their eyes at me and my ‘little skincare business’ not realizing the skills I develop daily: marketing, leadership, discipline, coaching, connection, follow-up, customer service, public speaking, resilience, tenacity, not giving a f*ck what people think. To name a few… And the lovely magic of the industry is that whatever you need to work on in life shows up in your business. Oh, you have a problem with follow through? You’re about to learn that lesson hardcore, girl! You care too much what people think? Here’s an opportunity to learn this lesson again and again until you have a barren field of fucks to give! To some people this may sound absolutely awful, and I get that. For me, it was exciting to know I’d have a toolbox filled with things I’d worked on to bring into every part of my life. I knew being a successful network marketer would make me a better friend, a better wife, and a better artist.
You have to sell to your friends. Ew.
This was my major hesitation when I first started. Let me tell you a little about commerce. It’s based on word of mouth and your network. If a friend starts a hair salon, you go. If a friend opens a restaurant, you go. If you liked them, you tell your friends. Same diff. Now, if you don’t like that friend’s salon, or the food they’re serving, you don’t have to go. I probably did get some pity buys from friends when I first started my business. That’s okay, I really appreciated the support at the time. But the decision to keep purchasing the product is entirely on them, and our friendship is not based around whether they buy from me or not. A lot of other self marketers like real estate agents, coaches, or financial advisors have no problem mixing friends with business, because that’s the way their business works as well. Not everyone’s down with that, and I get it. The idea is to grow your business beyond your first circle, and you do that through referrals and continually expanding your network. Like any other business. If someone has their head on straight, they know that their success does not solely depend on a friend’s support of their business. But the hope is that their product or service is of value to their community. If it is, you’ll have friends who every time they see you gush about how much they love their skin before continuing with friend time. And if not, you just go back to being friends. Easy peasy.
I’ve had a terrible experience because of [X].
Remember the part in the little history lesson about ‘total chaos’? Yea, this is what I mean. The lovely part about this industry is anyone can do it! You don’t need a diploma, degree, or any qualifications. The crazy part about this industry is… anyone can do it. So not only is the incredibly motivated small-town mom with no college degree going to build a life-changing, legacy leaving empire, but so is that whackadoo with zero social skills or training. So yes, some crazies sneak in there. They usually don’t last, and they most definitely can’t grow a long term business. But would you let one rude server ruin your opinion of restaurants forever? I don’t think so. If you take issue with what people are doing from the same company, then you can start to recognize that you aren’t aligned with the culture of that company. And that’s totally fine! There are great companies and there are not great companies! Also understand that if someone near and dear to you messed up and gave you a bad experience when they started their business, that they’re still learning. No one starts their first network marketing company with all their skills neatly developed. There are some things I did early on that I totally cringe about now. It’s part of the learning process. So, forgive your friend! And if that person was a stranger, they’re fine! Let them go, too!
I hope this cleared some things up. Unless you’ve been in a network marketing company or have known someone directly, you don’t always get to see the beauty and power of what this industry can do for people. But I promise you (as much as I can compliantly), with grit, and tenacity, and a desire to help others, you can change your life with this powerful opportunity.
Stay tuned for a future blog post about how to spot a legit, awesome Network Marketing Company!
Most of my information for the history of Network Marketing came from
The Four Year Career by Richard Bliss Brooke
If you want to see the talking bears video, check it out here.