5 Red Flags Your "Side Hustle" is Actually a Predatory MLM Scam

This blog post corresponds with After School Empire Podcast Episode 11.

Sarah's Story

Sarah is a dedicated middle school teacher who has been struggling to make ends meet. Between budget cuts and rising living costs, Sarah's paycheck just isn't stretching far enough anymore. One evening exhausted after grading papers, she scrolls through Facebook hoping to find a solution. As she browses a post catches our eye.

"Earn extra income from home, flexible hours. Be your own boss. Make money while you sleep."

Intrigued, Sarah clicks on the link. It leads to a video of smiling faces, tales of luxurious vacations, and promises of financial freedom. She thinks this could be the answer to all of her problems. 

Sarah attends an online meeting and listens as the presenter talks about a revolutionary product and a once in a lifetime opportunity. There is an upfront cost, but the potential earning sound too good to pass up. Encouraged by testimonials and eager to improve her finances, Sarah decides to invest her savings into this new venture. 

Weeks go by and Sarah spends more and more money on inventory and recruitment materials, but the promised returns never come. Her friends and family, initially supportive, start to avoid her calls because they know she's just going to try to sell them something. The pressure and anxiety mount as her financial situation worsens. 

Sarah soon realizes she's trapped in a vicious cycle of spending without earning. Her dreams of financial freedom have turned into a nightmare, leaving her deeper in debt and more stressed than ever before.

Unfortunately, Sarah's story is not unique. And here's the hard truth...there are predators out there specifically targeting teachers like her. They know that we, as teachers, are desperate to make extra cash and don't always have a lot of time to do so. They fill our minds with visions of financial peace wall, secretly plotting to take us for everything we have. 

What is an MLM?

Let's start at the top. What is an MLM? Multilevel marketing or MLMs are business models where participants earn income through direct sales of products or services and by recruiting new members into the company for which they make those sales. Each recruited member becomes part of the recruiter's "downline" and participants earn commissions based on the sales and recruitment activities of their downline. In other words. You get brought in to sell a good or service, but you're told to recruit others to also sell these so you can make a commission off of their sales. If that sounds like a pyramid scheme that's because it's exactly what it is.

A lot of these MLMs target teachers specifically because teachers often face a lot of financial pressures due to our low salaries. MLMs promise you financial independence, flexible hours, community support, professional development, and really all they're going to do is take your money. 

Examples of MLMs

You'll find MLMs across a broad spectrum of industries from fashion MLMs, like LuLaRoe to health and fitness MLMs like Herbalife or Arbonne. There are also makeup and jewelry MLMs such as Avon or Mary Kay and even professional services like Primerica - an insurance company built on an MLM model. Here is an exhaustive list of MLM companies put together by the Anti-MLM Coalition. As you can see, there really isn't an industry that doesn't have predatory MLMs.

Many of these companies like Amway, Avon, Herbalife, Vorwerk, are multi-billion dollar organizations who are lining their pockets off of false promises and shady business models that are ruining people's lives.

Are MLMs Really That Bad?

You may have just read some of those names above and say, "Well, my friend sold for that company and they actually made some good money." To which I reply, congratulations to your friend because they are in the vast minority.

The FTC released a study that said 99% of people who engage in MLMs lose money. That doesn't mean the other 1% are whirling around the world in their private jets, it just means that they didn't lose money. So if I told you I want you to go out and do something and there's a 99% chance that you're going to die and a 1% chance you're not going to die are you going to go do that thing? Chances are probably not.

So think about that financially. If there's a 99% chance that you're going to lose your money, you might as well go to Vegas and start putting the money in the slots because it's going to probably be a lot more enjoyable than working for an MLM.

5 Red Flags That An "Opportunity" Is Actually An MLM Scam

Let's look at five red flags to help you identify MLM recruitment schemes.

Red Flag 1: Emphasis on Recruitment Over Sales

Red flag number one is emphasis on recruitment over sales. Many MLMs will use phrases such as:

Build your team and earn passive income!

The more people you recruit, the more you earn!

Residual income through your downline.

Basically, what they're saying is when you sign up to be one of us, you are at the bottom of the pyramid of the pyramid scheme and you're going to have to recruit more and more people to try to expand this pyramid before you can ever start making money. 

Red Flag 2: High Upfront Costs (With Unrealistic Promises of High Returns

Red flag number two is going to be high upfront costs with unrealistic promises of high returns. They might say:

Invest $500 today and earn $5,000 in a month.

Join now for $350 and receive an exclusive starter kit worth $1,000.

Limited time offer...become a member for only $299. 

Despite their grand promises, 99 out of 100 times, they will simply be taking your money. Many of these models require you to buy initial sales inventory. Then as you resell it, you're going to have to buy more and more inventory from the parent company. The parent company will continuously role out updated products and tell you that customers will want the newest offerings, leaving you with stock piles of now "outdated" inventory. Which leads to an ongoing cycle of you paying the parent company (i.e., expenditures) without making substantial profits (i.e., net revenue).

Red Flag 3: Vague or Unrealistic Earnings Claims

MLMs make grandiose claims of earning "potential" for those who join their company. Commonly used recruitment phrases include:

Earn up to $10,000 a week from home.

Make $5,000 per month while you sleep.

No experience necessary. Start earning $1840.20 - $7,000 per month immediately.

I've said this on social media before, but a good legit side hustle is a lot like Texas barbecue. It's going to move low and slow. If somebody says you're going to start making $10,000 a week in two days' time, that is simply not realistic. To try to convince you, they will lob ficticious examples at you of Great Aunt Bobby Sue, who did it. And their hope is that you step out of your logical brain to think, "if it worked for her, then it will work for me!"

Is it possible? Sure. Is it likely? No.

You're just going to lose money. Nobody's going to set you up in a situation where you have no experience, you do nothing, and you make $10,000 a week. It doesn't happen. If it did, then everybody would be doing it. These companies are making their billions off of innocent people's financial desperation.

Red Flag 4: Pressure Tactics and Urgency

The fourth red flag is aggressive pressure and urgency tactics. 

MLMs will often have presentations where they give participants a high pressure pitch often with a hard deadline for making a decision (e.g., 60 minutes, 24 hours, before you leave the room). This will be paired with statements such as:

Due to popularity, there are only a few spots left.

This is a once in a lifetime opportunity.

Join today to lock in your exclusive benefits, but your decision window is 24-hours.

If somebody is trying to force you into a decision like this, they're trying to tap into the impulse response part of your brain; as opposed to your logical brain. This is the same reason stores like TJ Maxx or Ross require you to snake through products before getting to a cashier. By doing so, they hope you see something you hadn't planned to purchase when you came into the store, and you're going to grab succumb to your impulse to buy that candy bar or scented candle in order to get more money out of you.

In many ways, this is the same tactic used by MLMs. They want you to fear that you're letting your future self down by not signing up for their program and their hope is that, before you can think through it logically, you're already pulling out your credit card to join their program or purchase your initial inventory.

If somebody is trying to force you to make a decision on the spot, giving you a countdown, or telling you that there's limited time/space left, they are trying to dupe you.

Red Flag 5: Lack of Transparency

The final red flag is a lack of transparency and detailed information. The recruitment materials might say:

Sign up now and we'll explain everything you need to know during your orientation.

This is a proprietary business model. You'll get details upon membership. 

Basically they're saying, "Hey, trust us. All you have to do is give us your money and then we're going to tell you what you need to be successful." Most successful entrepreneurs say legitimate businessmen and business women are going to give you their best stuff for free because they want you to think, "If they are giving this away for free, just imagine what they have behind a paywall." MLMs, on the other hand, treat their knowledge as a highly guarded secret reserved for a select few who have to pay for access. 

Wrapping Up

If I sound a little more angsty in this post than normal, it is because this stuff honestly pisses me off. Teachers work so damn hard to serve their kids and communities to be targeted by MLM predators. If somebody tries to rope you into an MLM, my hope is at least you will be knowledgeable enough from reading this short post to recognize it is a scam.

I started After School Empire because I want to help teachers make extra money, not lose money to scams like this. I have had family members and friends lose money because they got caught into the spiral of MLMs. I have also had teachers share with me on social media how MLMs have absolutely wrecked their finances. 

There are plenty of legitimate ways for you to make money. Go back to some of my earlier podcast episodes where I talk about different categories of side hustles and five questions you can ask to start finding your own side hustle. I even have an episode where I lay out my seven step process for launching your own side hustle. None of these involve MLMs.

As I close each episode of the podcast, please remember, "People want to give you money. You just have to find a reason for them to do so."