Why MLM Makes Sense

In order to explain why MLM makes sense, I need to first talk about two people: Peter Drucker and Franklin Delano Roosevelt. First, Drucker.

Peter Drucker famously said that a business exists for one reasoning, to create a customer. That being the case, a business has two main functions: innovation and marketing. Click here to read more.

Innovation can be understood as the act of making something better and more valuable. Specifically, more valuable. Because in order to qualify as genuine innovation a product must pass the market test. That is to say, people must be willing to pay for any given improvement. Stated simply, an innovation is any improvement that people are willing to pay for. Click here to read more.

Marketing is a little more simple. I think we all have an idea of what marketing is. What you may not know is that marketing grew out of selling. That is to say, selling came first. However, over time, management principles were applied to selling. and a new branch was created. That branch was called marketing.

Since selling is more fundamental than marketing, we should say that the two main functions of a business are innovation and selling. For example, when you go into the Shark Tank, what they care about is your sales. Sales rule supreme.

Being that innovation and selling are the key tasks, they are also very valuable. When Ben Franklin famously said that thing about, “An investment in yourself always pays the best dividend,” he was talking about innovation. Click here to read more.

Boiled down to its essence, business is really simple. First you need to create, or take ownership of, some valuable. Next you need to sell it to people. That is all there is to it.

Lots of people make things better (innovate) and better everyday. As Felix Dennis once said, good ideas are ten-a-penny. The problem in business (the limiting reagent, as we say in chemistry) is usually sales. More sales solves most problem. Because sales is the ultimate problem-solver, it possesses the ultimate value. Here is where I need to start talking about Franklin D Roosevelt.

I think we all know what happened on October 24, 1929. That day is known as Black Tuesday. In many ways it was the start of the Great Depression, a time of dire economic conditions. In 1933, the United States Congress began to pass a series of laws, that combined with executive orders from FDR, and came to be known as the New Deal.

Part of the New Deal legislation included laws creating a minimum-wage. The idea was to reduce the number of workers that could be under-paid and exploited. But, as is always the case, businesses did not take it lying down.

In 1935, in an effort to avoid the minimum-wage laws, companies began to reclassify their salespeople as “independent contractors.” Pretty nifty. But, what happened? Did people refuse to take a job that did not contain the security of a minimum? Hardly!

Plenty of men and women lined up to take on the job of salesperson. The reason is very simple. While there is no guarantee, the compensation is much more lucrative should you choose to actually produce. And, companies do not mind paying commissions because it means additional revenue.

Like Peter Drucker says, there are no profits inside a company. Inside a company there are only costs. “The only profit center, in a business, is the customer's check that has not bounced.” Salespeople find those customers. Salespeople bring in the money, and so they are well compensated. Like Grant Cardone says, if you want to make more money, get closer to the revenue.

Lots of sales jobs do not contain minimum-wages. And, that is just fine for plenty of salespeople. A lot of salespeople are willing to trade-in the guarantees for increased earning power. Enter MLM.

When a person is a multi-level marketing (MLM) distributor, s/he does two main things. S/he sells and s/he recruits. And, when you really think about it, recruiting is a form of selling. When you are recruiting, what you are selling is an opportunity. So, really, MLM is all about the profession of selling.

So, now, follow me, and think about it. Business is conducted by people. To have a successful business, you need good people. For this reason, all successful business owners know the importance of recruiting. Recruiting is a very valuable skill. And, since selling is the most important/scarce function in business, it is also the most valuable.

Hopefully you can understand why recruiting, and developing, good salespeople is extremely valuable. And, that is exactly what an MLM distributor does. An MLMer is willing to trade-in the safety and security of a guarantee paycheck in order to eventually earn an enormous income.

This is exactly why MLM makes so much sense. A company is willing to pay handsome commissions because, in doing so, the company also makes a profit. Recruiting, training, and developing a sales force is the way to generate lots of revenue for the company. In turn, the person who developed that sales team will makes lot of money. And, shouldn't it be so?

If you have followed me to this point, if you understand what Drucker said, and what FDR did, you will understand why MLM flat-out makes sense as a legitimate, perhaps ideal, business opportunity.

Always remember, selling and innovation are THE entrepreneurial functions.