IBO_Logo_Q_green.black_largeI’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 – 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.

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45 Comments

  1. Great article …. makes total sense and people would be foolish to not find an “MLM Company” with a quality product that they like and can use and become an “Affiliate”.

    Keep up the great writing.

  2. it is actually very hard to know what to do in this industry… can be very happy times for some one who can actually make a lot of money doing this, but sad times for a newbie who is just getting started and has not seen a cent yet.

    but the reality of this industry is that there is a lot of miss communication, reality is that 1% – 3% make it big, all the other 90% are trying to make it,and 7% will never get in cause (its a pyramid)lol. People have to get educated and have to get inform on who is who and what is what, and enjoy having to learn, because is having a great attitude, as you do this will get you the success one wants.
    I’m writing a blog post on a couple in there 60’s that are just having Fun, Founders of the Ten Ten Formula how to Make $2000 in 3 to 6 Months, that’s residual income. Real Masters In the Industry.
    It’ll be up soon: EN.GerardoErnesto.com

  3. Thank you for this sensible critique. Me and my neighbor were just preparing to do some research about this. We got a book from our local library but I think I learned more from this post. I am very glad to see such great information being shared freely out there.

  4. Hello there! This is kind of off topic but I need some help from an established blog.

    Is it difficult to set up your own blog? I’m not very techincal but I can figure things out pretty quick. I’m thinking about creating my own but I’m not sure where to begin. Do you have any points or suggestions? With thanks

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  6. I hadn’t thought of that Gary, setting up an MLM with the possibility of making some added revenue but also making tax refunds on a sole proprietor, thanks for the sane advice

  7. I am working part time with a network marketing company, (correct name in my view too) and am happy I did. The opportunity is there to make as much money as one likes, it is just a ratio of effort versus time; so a lot of effort over a medium amount of time leads to great part time earnings. Some of my peers are working the business full time and that is great too.
    It is a no brainer and business for now, recession proof and bossless, what more could you want.
    Anyone in the UK interested to hear more about the opportunity can contact me directly through my email

    1. thanks Tony for the comment. I don’t like to recommend MLM businesses but I did ask people to connect with you directly by email. Good luck with that venture

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  15. MLM works and is the vehicle renlossibpe for helping many people on the road to find financial independence, typically within 2-5 years.There is, however, much confusion and misunderstanding concerning this business model. A pyramid scheme has no real product so commissions are based on bringing new people into the scheme who in turn also bring new people into the scheme. It’s usually the people at the top that get the most while those at the bottom get very little. Eventually all pyramid schemes collapse because there is no real product being sold.MLM, on the other hand, usually has a very real product that is sold either by retail or through members personal purchases (usually both). Members are encouraged to build a network of distributors to market the product.In MLM you can earn more than those at the top if you apply some effort.In a pyramid scheme you can never earn more than those above you, so when investigating an MLM company see if you can find out if there are people earning more than their sponsors, (this is the crucial test to weed out pyramid schemes)

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