I’ve been giving considerable thought lately to MLM’s and their business models. One of my clients is setting up a consulting firm to help new entrepreneurs start their own business as a MLM networker. He feels most people need more than the standard MLM pitch to create residual income. Another very close friend uses network marketing not as a revenue generator but as a tax benefit, more on that shortly.
MLM, or as some prefer to call it, Network Marketing has been around for many years. The first one I remember falling for was Amway. After many years of corralling people in clandestine meetings in ‘friends’ homes under the Amway banner they changed the name of the billion dollar company to Quickstar as a way, I think, to dump the bad connotations of being ‘Amwayed’ into buying the premise. The Quickstar name, I must admit , even bamboozled me into going to a meeting thinking it was some new business opportunity.
Obviously MLM’s, be it Melaleuca, (my buddy insists, and I agree, its network marketing not MLM), Primerica, Qivana, Monavie (they still around?), Lyoness (trying to get into the Canadian market) and others are NOT for everyone. They all have the same common formula, write down your top 25 friends and start there with canned spiels from head office, no deviation allowed. Unfortunately some people are sales oriented and others hate the idea of selling to friends. With the first no, many people will give up and move on leaving their original entry fees behind and racking it up to a poor choice of business. I tend to think if most people wrote down 25 friends that would be their entire mailing list of family , buddies and acquaintances. Then what?
Enter my ‘close friend’ who has little in the way of contacts (she is new to BC),she is not comfortable selling anything, and has a great job which really provides a good income for her and her family. Her job also wears her out so when she gets home at night she is a little pooped to say the least. So why would she get into network marketing?
I helped her find, not a loop hole, but a rationale for doing MLM without the expense of time. She has two followers under her MLM umbrella that provides a very little income, some would say ridiculously small income for an MLM â€“ under $100 a month. She does buy product from the company and loves the products. She subsidizes the product purchased with revenues from her ‘downline’ of two. We developed a Tax plan for her.
Last year with earnings of about $800 in her first year of business she claimed it as a business on her tax return. Most businesses lose money in the first 3 years of business anyway (at least on paper) so why not take advantage of that? Since it is her first year of business she was able to claim all the usual start up expenses associated with that, a new desk, laptop, office furnishing at home, part of her telephone/internet, portion of her rent, her car of course plus gas, her expense of product, and of course, entertaining possible customers. On the tax return I was able to get her a $3900 tax refund from the combined earnings of her day job and her ‘business’. Is it a scam? Not at all!
She has, under the guidelines from Revenue Canada and the Supreme Court of Canada, ‘the expectation to earn a profit sometime in the future’. Period and over and out!
For those of us who don’t like selling to our friends marginal products, for those of us who don’t like asking acquaintances to meet for a coffee to discuss a business opportunity now there is a model to follow minimal MLM standards of customer acquisition while generating revenue from the back-end, namely saving taxes. Does that work for you? Does for me. Talk to an accountant.