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There are a lot of outspoken bloggers and critics online, as well as negative opinions floating around the social networks, but the positives drown out the negatives. It’s not hard to find a loud voice criticizing the direct selling industry through a quick Google search. And it is true… there are many pyramid/Ponzi schemes, primarily internationally based, that parade themselves as MLM/direct delling… and they are not. They are merely pyramid headhunting recruitment schemes that often use bogus products and services as an excuse to move money. The entire emphasis of such organizations is to cause investors to pay money and cause others to do the same, with a thin veneer of an actual product or service. In fact, the revenue to pay commissions instead comes from distributor payments and not sales to the ultimate user.

Despite this, the facts remains MLM and direct selling are a major part of the fabric of commerce. Statistics on 2014 sales, compiled by the World Federation of Direct Selling Associations, indicate global sales of $183 billion and 100 million distributors. In the U.S., there are 18 million distributors posting $35 billion in sales. Numerous direct selling companies are traded on the NYSE.

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Recruit Top Distributors

Your ability to recruit directly equates to your success.

When you are starting your MLM, direct selling, network marketing, or party plan business, you’ll find that recruiting experienced distributors is often essential to your company’s success. And if you don’t have the background yourself as a successful recruiter then you need to budget for a “sales manager” position for an individual who does have that capability to recruit.

Your ability to recruit directly equates to your success. If you have a background in recruiting and a background in direct selling, then your need for capital will be substantially lower. Recruiting top distributors will enable your company to have the capital to stay afloat and even grow. If recruiting is slow then you will need to raise one to three years of buffer capital in order to support your company in the event of stagnation or loss. And remember, the remuneration that is offered to top distributors will be effective in their decision to stay and help grow the business.

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Jody (Coughlin) Greene argues in her Forbes article titled “Is MLM a Bad Word?” that MLM has had a bad reputation because its structure is similar to pyramid schemes and its negative image isn’t deserved.

Not only is network marketing a proven business, being one of the longest-running business models in the United States, but its marketing strategy has also proven successful. Distributors create income through their personal sales and the sales of those who they’ve recruited in their downline. Because of its pyramid-like structure, MLM has in some cases gotten a bad name.

Ms. Greene explains just some of the criticisms faced by network marketing companies:

Criticism has focused on their similarity to illegal pyramid schemes (hence the “scheme” reference), price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company’s products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members’ enthusiasm and devotion.

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We are often asked a question about the past and the future of direct selling, network marketing and the FDA. It’s a good question because so many major players in our industry, ranging from Herbalife to Nikken, to Melaleuca to Amway, are driven by health products and dietary supplements. The direction of the industry has generally been a very good one. Until the mid-1990s, companies were very concerned about what health claims they could make about products. It came to a head in 1994 when the FDA’s strictness regarding claims became so difficult that Congress almost unanimously passed a bill called “The Dietary Supplement Health Education Act (DSHEA)” of 1994, which recognized the importance of providing health information to the consumer so

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People often ask about MLM/direct selling’s history with the government. It’s a long history. At times it’s been bad, and then it has been good. Then it has been bad. Then good. It’s been somewhat reciprocal. Multilevel marketing, and the industry, basically began in the 1950s with Mary Kay, Shaklee and Amway. Imposters came along in the 1960s, operating pyramid schemes, namely the Dare To Be Great program in which people were recruited to get people to seminars where they would pay large sums of money. In turn those people would recruit others and get them to pay money. This caused the Federal Trade Commission (FTC) to take a look at our industry.

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Network Marketing is a post-World War II phenomenon that was kick-started by companies such as Amway, Shaklee and Mary Kay. However, the origins of network marketing today planted their roots just prior to the turn of the century, in 1900.

Historians often say that “you can’t know where you are going if you don’t know where you have been.” The early journey was interesting and set the pace for what all networkers are doing today.

The Earliest Periods

Face-to-face selling is not new. It’s as old as history itself. It crosses all continents and cultures.  Primitive tribes bartered food and crafted goods to trade with each other. Phoenician traders moved beyond barter to use currency in selling goods on trade routes. Over time, trade routes for sellers evolved in the Orient, Middle East and Europe. Moving beyond a self-sufficient agrarian economy, cobblers made shoes, tailors made clothes and metal smiths made tableware to be sold directly to consumers. The Industrial Revolution led to mass production, and traveling sales agents called “chapmen” or “bagmen,” carried samples and took orders for later shipment.

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Have you been waiting for more videos from MLMLegal.com? No problem!

We’ve added six more videos to expert MLM Attorney’s Jeff Babener’s Youtube Channel! These videos are educational and answer common MLM questions clearly and concisely. Attorney Jeff Babener discusses issues that relate to MLM compliance, pyramid schemes, earnings claims and calculators, factors for success, direct selling industry history, and why MLM executives choose the network marketing business model.

Check out the videos on Jeff Babener’s Youtube Channel.

Or, view them at MLMAttorney.com, where you can (and should!) share them with the networkers in your circles!

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