It’s no secret that discussions about multi-level marketing (MLM) can ignite passionate debates among mothers. Supporters of these businesses will fervently advocate for their success, while skeptics often label the entire model as a scam. A glance at the comment sections of any article addressing MLMs reveals a rapid descent into chaos.
However, the stark reality is that a staggering number of women who embark on MLM journeys end up facing failure—99% to be exact. This statistic isn’t just the opinion of a disgruntled former consultant; it stems from a report prepared for the Federal Trade Commission (FTC) by Jon M. Taylor, MBA, Ph.D., from the Consumer Awareness Institute. What’s particularly frustrating is how potential consultants are lured in with misleading reassurances about the risk of financial loss.
MLM promoters frequently argue that small businesses have high failure rates, citing figures between 90-95%. They use this to downplay the alarmingly high failure rate within MLMs. Yet, reliable sources such as the Small Business Administration (SBA) report that 44% of small businesses survive at least four years, with 31% lasting at least seven years. Additionally, the National Federation of Independent Business (NFIB) indicates that throughout their lifespan, 39% of small businesses turn a profit, while 30% break even, and only 30% end up losing money. This paints a success rate of 64%, a world away from the fabricated 90-95% rate often touted by MLM advocates.
What truly stands out is that the loss rate for MLMs is a staggering 99%. This means fewer than one in 100 participants actually make a profit, while the vast majority lose money. The odds are even worse than trying to get a full night’s sleep with newborn triplets. As Taylor pointed out, you’d be better off trying your luck at a casino—though he doesn’t recommend that either.
The financial losses are evident in the experiences of those involved. For instance, women joining LuLaRoe often invest around $5,000 initially, and depending on the inventory they choose, some might spend even more. To remain classified as active consultants, they are also required to purchase a minimum of 33 items monthly. A quick analysis by Quartz reveals that if a consultant sells 30 pairs of leggings weekly, it could take them nearly three months just to recoup their initial investment. And even then, they must continually reinvest in new stock.
One former consultant shared her story with CBS News, revealing that she found herself over $7,000 in debt, burdened with leftover inventory that even fellow consultants wouldn’t buy. The pressure to finance these initial orders leads many women to resort to credit cards or even crowdfunding through platforms like GoFundMe. They do so out of desperation, with the companies profiting significantly from their struggles.
The market is becoming increasingly crowded with consultants, creating fierce competition. For instance, a Florida mom named Emma started selling LuLaRoe in March 2016, initially thriving and earning as much as $24,000 a month with a team of consultants under her. However, as the number of sellers ballooned to over 80,000 by early 2017, she faced a stark reality—she was left with $20,000 in unsold inventory, realizing that the initial success was fleeting.
The situation is not unique to LuLaRoe; rather, it exemplifies a broader issue, reflecting the challenges faced by women seeking economic independence through MLMs. The pressure and stress have escalated as markets become saturated, leaving many on the brink of financial ruin.
This isn’t merely a cautionary tale about leggings or LuLaRoe. It symbolizes the struggles of women in rural and suburban areas facing economic hardship, with MLMs offering a glimmer of hope, albeit a very frayed rope. If you’re intrigued by more about ways to support family growth, check out resources like March of Dimes for guidance on fertility treatments.
In summary, while many women are drawn to MLMs with dreams of success, the harsh reality is that a staggering majority end up losing money. It’s crucial to approach these opportunities with caution and a clear understanding of the risks involved.
Keyphrase: MLM financial loss
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