Multi Level Marketing vs Direct Sales

MLM, also known as Multi Level or Network Marketing, and Direct Sales are two distinct segments of the booming home based business industry. More and more people are looking at starting their own home based business and with thousands of companies to choose from it can be a daunting task to pick not only a company, but the correct business model for you. In order for you to make the correct choice you must be fully educated the two types of business models I have detailed here.

Direct Sales and MLM companies typically operate in what is called the home based business industry. Most of you have most likely been presented the opportunity to take part in one or both. Some examples of companies would be Monavie or Herbalife (MLM) and Liberty League or Wealth Masters (Direct Sales). As I mentioned earlier, they are very different so let's take a look at each and go over the features and beneifts of each before comparing them.

MLM, sometimes referred to as Network Marketing, is a business model where a person is allowed to not only be a customer, but also have the opportunity to resell the products. In addition to being able to resell the products and earn commission on those sales, a person is able to sign up other reps and earn an override on their sales. Now is where the "multi-level" come in to play because it doesn't stop there. The original rep can also earn overrides on the reps his reps sign up and essentially build a team of reps he or she is earning overrides on.

This typically will go down several levels of overrides. Most plans pay on average, a 5% commission or override on these teams and reps are required to purchase a certain amount of product each month, called an autoship, in order to qualify to get paid. The payouts are small in real dollars, but they count on getting a small piece of hundreds or thousands of reps long term. These plans can get very complicated, but this is the general concept of how it works.

Direct Sales on the other hand is what its name implies, direct sales of the company product(s) to the customer. The rep or associate will typically profit the difference between the wholesale and retail cost. Where MLM plans are generally complicated for the average person outside the industry to understand, direct sales plans are easy to explain as it mirrors what happens everyday in the marketplace.

Direct Sales companies are noted for typically having high end products with higher price tags, but also pay a higher commission. For example, Liberty League International has a product that retails for $1,495 dollars and the wholesale cost is $495, which will pay the associate an upfront commission of $1,000.

Most companies have some type of training sales attached to the new associate before he or she can make the commission on his own sales, much like in the financial industry with insurance agents and brokers. Once a rep has completed training for that product he would be qualified for life to receive pay on that product sale. These companies usually have 2 or 3 additional product at a higher price that an associate can upgrade to where additional commissions are earned by the original associate.

Again, these are rudimentary examples, but you should get the idea of how the two work now.

How do they compare? MLM is a lower barrier to entry and many see that as a plus, it also requires a lot more reps on your team to earn a significant income, sometimes up to 200 just to make $1,000. It will also take you time to build a team this size so the upfront income is minimal. The MLM leaders promote walk away income once your team is built, but that is simply a myth that doesn't really exist in the end.

Direct Sales companies require more startup expenses, but the ongoing cost can be lower after a period of time. They offer the potential of higher level earnings in a much shorter time, but except for one maybe two companies, don't provide the residual income potential a solid MLM company will. Some of the top companies do provide a significant passive income stream.

In the end, it is personal preference. While I feel one is the better option, that is another article altogether. One should evaluate the company management, the products and the systems they use to market in order to find the correct fit for them. Each has its advantages and disadvantages, but both are great options if they match up with you!

Best of luck!