Part of the guide: Network Marketing Lead Generation
I’ve been around network marketing part-time since 2002. In over twenty years, the single most useful skill I’ve developed isn’t closing, prospecting, or building a downline. It’s being able to look at a company for about an hour and answer one question: does money in this business come from customers, or from recruits?
Every MLM says “customer-first” in its marketing. Almost none of them behave that way when you check the mechanics. So this post is the checklist I actually use — the specific things I look at, in order, with what a pass and a fail look like for each one.
Work through it before you join anything. It’s also worth running on a company you’re already in, which is harder emotionally but more valuable.
Why this distinction is the whole ballgame
This isn’t just a preference thing. The FTC’s business guidance on multi-level marketing is built around exactly this distinction: a legitimate MLM compensates people based on sales to real customers, while an unlawful pyramid scheme compensates people primarily for recruiting. In the BurnLounge case, the appeals court affirmed that when rewards are driven by recruitment rather than genuine product demand, you’re looking at a pyramid — regardless of whether a product technically exists.
So “customer-first vs recruitment-driven” isn’t marketing language. It’s the line between a business and a scheme. Here’s how to find which side you’re standing on.
The checklist
☐ 1. Would anyone buy this product at this price without the income opportunity attached?
The foundational question. Strip away the comp plan entirely and ask: does this product win against Amazon, Costco, and the local store on some real axis — price, quality, or genuine uniqueness?
Pass: you can name real people who buy it purely because they like it, with zero interest in the business.
Fail: the honest answer is “people buy it to stay qualified,” or the product is a vague ecosystem of tokens, training, or “access.” I wrote about how that second failure mode has migrated into new packaging in the MLM playbook that bought crypto and a prediction market — the product changes costumes, the mechanics don’t.
☐ 2. What percentage of buyers are NOT distributors?
Ask the company or your upline directly: of everyone who bought product last month, how many were retail customers with no distributor agreement?
Pass: they can answer, and the number is substantial — real outside customers are the majority of volume, or close to it.
Fail: they don’t track it, won’t share it, or reframe the question (“well, our distributors ARE our customers!”). Distributors buying their own product to hit rank is exactly the pattern the FTC guidance flags as a warning sign. No data is itself an answer.
☐ 3. Read the comp plan: where does the money actually flow?
Skip the presentation and read the actual compensation document. Look at what behavior earns the most money.
Pass: meaningful retail margin on customer sales, and bonuses tied to customer volume.
Fail: the big money sits in fast-start bonuses on new-recruit enrollment packs, team-volume bonuses that recruits’ own purchases can satisfy, and rank requirements you can only realistically hit by signing people up. If recruiting a distributor who buys a $500 starter pack pays you ten times more than selling $500 of product to a customer, the plan is telling you what the business really is. Believe it.
☐ 4. What does it cost to be “active,” and what do you get for it?
Pass: no purchase requirement to earn commissions, or a small one that’s genuinely product you’d use anyway.
Fail: monthly autoship minimums, qualification volume, tool subscriptions, and event tickets that stack up to hundreds a month before you’ve earned a dollar. Recruitment-driven companies are internally-funded: the “customers” are the distributors themselves, paying to keep the door open. That’s a fee with extra steps.
You have been paid late before
You have watched the number on the dashboard not match the number in your account. What is different now is simple: it settles on a public contract you can check yourself, not a dashboard I control.
Read the contract →Most participants earn little to nothing. No income is guaranteed. You can verify every payout on the public smart contract.
☐ 5. Look at the income disclosure statement — the actual table, not the highlight reel
Pass: the company publishes one, and the median (not average) earnings tell an honest story you can live with.
Fail: no disclosure exists, or the fine print shows the overwhelming majority earning near zero while stage stories feature the top fraction of a percent. The FTC’s Business Guidance for MLM participants is blunt about this: most people who join MLMs make little or no money, and income claims that hide that are deceptive. If the disclosure embarrasses the opportunity pitch, the pitch is the lie.
☐ 6. How are people trained to talk to prospects?
Sit in on the training before you judge the culture.
Pass: training focuses on finding people who want the product, and on serving customers well enough that they reorder.
Fail: training focuses on your “warm list,” handling objections from skeptical family, and getting everyone to a recruiting event. If the sales training is really recruiting training, you’ve got your answer. This is also why professionals bounce off most teams — I covered the alternative approach in how to recruit professionals without sounding salesy: lead with something real, or don’t lead at all.
☐ 7. Is the product simple enough for a real customer to understand and reorder?
Pass: a customer can understand what they bought, why, and how to reorder in under a minute, without you in the room.
Fail: buying requires navigating packs, loyalty tiers, points, and a back office. Complexity is a tell — customer-first companies remove friction for buyers; recruitment-driven companies add friction that only committed distributors will tolerate. I broke down this exact pattern in the complexity trap: if a normal person can’t easily be a customer, the company doesn’t actually want customers.
☐ 8. What happens to revenue if recruiting stopped tomorrow?
The thought experiment that summarizes everything above. Freeze enrollment for ninety days. Does the company still have a business?
Pass: yes — existing customers keep buying because they want the product.
Fail: volume collapses, because volume was enrollment packs and qualification autoships. A company that dies without recruiting was never selling products. It was selling positions.
Scoring it honestly
Don’t grade on a curve. In over twenty years I’ve watched a lot of smart people find one pass among seven fails and cling to it, because they’d already bought in — financially and emotionally. The checklist only works if a fail counts as a fail.
If a company fails three or more of these, it’s recruitment-driven no matter what the About page says. That doesn’t automatically make it illegal — that’s the FTC’s call, not mine — but it tells you what your daily life will be: perpetual recruiting to replace people who quit, selling an opportunity you’d struggle to defend with the disclosure statement in your hand. That treadmill is a big part of why I stepped back from doing network marketing seriously, and if you want the broader warning-sign list beyond just this axis, keep my MLM red flags rundown open in the next tab while you research.
And if you run the checklist and realize what you actually want is income that doesn’t depend on anyone’s downline — customers, content, and products you control — that path exists too. Start here and I’ll walk you through how I approach it now.
The companies worth your time pass this checklist easily, because they were built to. Everything else is a recruiting machine wearing a product costume. Now you know how to check the tag.
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Most affiliates earn little, and that is disclosed up front. The difference here is not a promise about what you will make. It is that you can verify every payout yourself, on a public contract, in about twelve seconds.
See how the payout works →Most participants earn little to nothing. No income is guaranteed. You can verify every payout on the public smart contract.
This is a very practical checklist, thank you. Question about item 5, the income disclosure statement — in Turkey we do not have an equivalent requirement, so companies here simply do not publish one and nobody asks for it. Is item 5 then only a useful test for US-based companies, or should I still ask the company directly for their own numbers even without a law requiring it?
Elif, sorry if this is a silly follow-up, but I’m wondering the same thing from the other direction — I’m in the US and my company DOES publish an income disclosure statement, and I’ve genuinely never looked at it because I was scared of what it would say. Reading item 5 again, is that fear itself a kind of answer, or normal for anyone starting out?
Bonnie, read it. Fine, it might depress you for an afternoon. Not reading it doesn’t change what it says. It only delays the point where you have to decide what to do about it, and delay has a cost too.
Bonnie, that fear you’re describing might be the most interesting part of this whole post. There’s a version of this checklist that’s purely diagnostic, and then there’s the version where some part of you already suspects the diagnosis and the checklist is just the excuse you needed to finally look. I run a bike shop, and I know exactly which of my own numbers I avoid checking on a bad month, for the same reason you’re avoiding that PDF. The dread is information. Worth sitting with why it’s there before you decide whether to open it, because the decision either way says something.
Playing devil’s advocate for a second, because someone in this thread should: the strongest case for not reading it is that median-earnings data can’t describe any one person’s effort, network, or timing. A company full of people who never prospected properly will always produce a discouraging median regardless of what the comp plan actually rewards underneath. I don’t think that fully survives item 3 or item 8 once you check both, but it’s the honest best version of the argument for looking away.
Walt, I take your point about a median not describing any one person’s effort, but at sixty-one I no longer have the years to spend testing whether I am the exception to a discouraging number. The disclosure statement is not a verdict on my worth. It is simply data I am now old enough to insist on seeing first, before the years instead of after them.
Structurally, items 1 and 8 are testing the same variable from two directions — ‘would anyone buy without the opportunity’ and ‘what happens if recruiting stopped’ are both asking whether demand exists independent of the comp plan. I’d collapse this into three inputs — retail margin, non-distributor buyer percentage, revenue-if-frozen — and one output. Same information, fewer boxes to fill out while someone’s mid-pitch across the table from you.
Tomas, I hear you on the decision tree, and I’d have wanted the same shortcut when I ran the diner. But I’ll tell you what nineteen years of watching vendors walk through my door taught me: the redundancy is the point. I asked the freeze-test question about my own business more than once in my head — would people still come if I stopped advertising tomorrow — and getting the same answer twice, from two different angles, on two different days, is what let me trust it instead of just believing it because I wanted to.