How to Evaluate MLM Companies

When Trying to decide between MLM companies, make sure you choose a good one!

In order to evaluate an MLM company properly, there are things that must be understood. “The expense can be high for an improper evaluation.” If you don’t join the right company, you could miss out on millions of dollars of income; if you choose the wrong company, you could waste resources (time, money, credibility, etc).

In my experience as a consultant and trainer for MLM companies and leaders worldwide, I have seen several good companies and several bad ones. It is essential that you select a good one. No, I’m not going to give you a list of good companies;  evaluating each and every company would be a full-time job. Instead, I’m going to give you my criteria for evaluating an MLM company, thereby putting YOU in control.

Here is a general view of how I evaluate an MLM company, listed in order of importance:

1. Is the company going to last long term? No one can be successful in a company that fails.

2. Does the product sell outside the network? Meaning, are there consumers who will buy the product that are not going to join the MLM business?

3. Will I be rewarded well for my efforts? This has to do with the commission plan.

4. Does the training produce a successful distributor?

Note: The last item on the above list deals with training. Training is extremely important as it sets in motion the activities of the group or organization. However, the reason training is last on the above list is because there is
effective training available elsewhere, obviously.

Multi-Level Marketing contains three major sections: the Industry, the Structure of the company, and the Activities of the distributors. Understanding how these three parts work independently and together is how you can properly evaluate an MLM company.



The MLM Industry was proven a legal form of distributing goods and services by the U.S. Federal Government in 1979. In addition, the MLM business model has proven itself highly effective at distributing products and services to consumers based on the same benchmarks used by Wall Street.

The Industry of MLM is made up of MLM companies, MLM suppliers, MLM associations, and MLM distributors. It’s of little value to study the MLM “Industry,” as it’s simply the container which holds MLM companies and the people who distribute their products and services. By way of an example, if you wanted to study real estate, you wouldn’t study the real estate industry – you would study residential housing or commercial buildings, property evaluation, building codes, construction, etc. The same is true for studying the MLM industry.

If you want to validate the legality of MLM, hire an attorney and have them read the document called “The Amway Decision” at the bottom of this page. However, make sure you review this page first. Remember, you’re not asking the attorney, “Should I do MLM?” Most attorneys are not qualified to give you that advice as they’ve not succeeded at MLM. You’re only asking them, “Is MLM legal?” If you want more information on the legality of MLM, click here. If you want to learn how MLM works, click here. Understanding what MLM is is also helpful.

Now let’s move to the Structure and Activities that make up each MLM company, which is what will ultimately make up your experience in MLM.

Structure & Activities

The Structure of an MLM company is unique to each company. The structure of an MLM company is made up of these four structural parts which dictate the activities of the distributors within an MLM company.

  • Intention of company owners.
  • Product or service they sell.
  • Commission plan.
  • Training provided to distributors.

The  structural components of MLM vary company to company and set in motion the type of company it will be – good, bad, ethical, unethical, successful, unsuccessful, legal, illegal. Yes, a company can be illegal in a legal industry. For example,  there are doctors who do illegal things within the legal medical industry.

Good companies and bad companies are “made” based on:

1. The intention of the company owners.
2. The product (or service) they sell.
3. The compensation plan they use to reward production.
4. The type and effectiveness of the training

Poor Company Intention:

Evaluating an MLM company is not much different than looking for employment in a traditional company. If the company owners have the intention to “get rich” without providing a valuable product to a consumer or providing a valuable opportunity for the company’s distributors, then the company will have a hard time surviving. In publicly-traded MLM companies, the company’s “fiduciary duty” is to the shareholders of the company instead of to the distributors. Shareholders demand increasing stock value. If that demand results in reducing the amount of commissions paid to distributors, then the death of the company is soon to follow. Another indication of poor company intention is if the company has a short-term vision of making several million dollars and then selling the company to investors.

Good Company Intention:

Good company intention is where the owners have a long-term vision of helping people with their products and a long-term vision of providing a valuable opportunity for their distributors.
MLM companies should view their distributors as their greatest asset.

How to evaluate the company:

  1. Ask how the company got started and who started it. Is the dreamer who started it still involved? Has the company been sold to investors? If yes, it’s not a good sign unless the purchaser has a similar or greater vision.
  2. Ask if the company is solvent (capable of meeting financial obligations).
  3. Ask if the company is growing (more sales than last year). In a private company (one that is not publicly traded on a stock exchange) this may be difficult to find. This doesn’t mean the company is “hiding” something. However, I like it when a private company allows an outside accounting organization to “rate” them. Dunn & Bradstreet is such an accounting organization. The MLM company doesn’t open its books to everyone, but will open its books to an accounting organization who will issue a rating on the company. If a private company is unwilling to do this, then it’s very hard to evaluate. Also, just because a company doesn’t have more sales this year than last year doesn’t mean it’s not a great company – but if it does have increasing sales, that’s a plus.
  4. Does the company listen to and implement suggestions from leaders? The company doesn’t have to implement all suggestions – the important thing is that the marketing arm (the distributors) must communicate with the product arm (the company) to create strategic plans and better products. Most good companies have a “leadership council” of some kind that meet quarterly or semi-annually.
  5. If the company is over 10 years old, does it reinvent itself by opening in new countries and creating new products? A “single” product company will find itself running out of customers after a given period of time, just like any company does.

How to choose a good MLM CompanyPoor Company Product Structure:

If an MLM company selects a worthless or overpriced product, the company will most likely not last. Distributors will not be able to sell the product if it is low-quality or can be purchased at a lower cost from another MLM company or traditional industries. If the product is low-quality or too expensive, distributors will focus on recruiting new people rather than selling the product because the business idea is easier to sell. This creates a company where the only people consuming the product are the distributors. Do you see how poor product structure dictates poor distributor activities? This is extremely important and explains how it is possible to have an unethical (or even illegal) company within a legal industry.

Good Company Product Structure:

Conversely, if a company selects products that are valuable to consumers, then distributors will enjoy selling them because the consumers will be enthusiastic about the products.It also makes it easier to recruit new people because those who consume the product will want to become distributors. A valuable product is the backbone of a successful company because it’s what makes a consumer’s life better. Only valuable products cause a consumer to keep purchasing them.

How to Evaluate the Product:

  1. Your first step should be to buy the product (or the service) and use it. Do you like it? If you don’t like it, don’t join the company.
  2. Are there a lot of customers who will want to buy the product or use the service?
  3.  Identify what “niche” of buyers you will be dealing with. A niche can be viewed as a group of buyers. Take cars as an example: a lot of people buy a car for basic transportation – that’s a niche. Others buy more expensive cars, such as minivans, sports cars, or even Rolls-Royces. All of these niches have been successful. You need to ensure that the MLM product or service you will be selling is in a niche you want to be in.
  4. Is the product (or service) effectively priced? Personally, I’m not one who wants to sell the cheapest product on the block. I much prefer to compete based on quality. I also love to have patents on the products I sell. But to be competitive, you need to have a product that is price-competitive. If it’s not, there has to be some legitimate reason why not. Take vitamins as an example: you can buy Vitamin C very cheaply, or you can buy it expensively. If Vitamin C is all the same you would not have a sellable reason to charge more. But all Vitamin C is not the same – high quality Vitamin C costs 25 times more  wholesale than the synthetic version. If you can explain the difference, this will justify the more expensive price for your product.

Poor Distributor Commission Structure:

If a company uses an MLM compensation plan that rewards only the recruiting of new people and doesn’t reward the sale of products to consumers, the company will have caused the activities of the distributors to be focused exclusively on recruiting new people and not selling products. This is not bad if the company is set up to be a wholesale buying organization.But it is bad if the company is set up to be a retail sales organization and no one is selling products. I hope you get the importance of this – the company can have a great product, but if it doesn’t also have a compensation plan that rewards people for selling the product the activities will be primarily focused on recruiting new distributors! Also, if the company has a commission plan that pays out too much money to distributors, the company can go bankrupt. So don’t fall for the new company that claims, “We pay out higher MLM commissions than any other company!” That is just hype.

It’s also important that people are not allowed to “buy” the top level of the commission plan. Let me explain: suppose that in a commission plan a person who has developed six leaders receives a higher percentage of commissions.  If a person is allowed to buy that position rather than earning it, then people with money can bypass developing leaders. That “short-cut” is extremely damaging long-term, as those who buy the commission plan are bypassing learning how to be a leader and how to develop leaders. If people can buy those commissions rather than earning them, training will no longer focus on developing leaders; purchasing higher levels of commission will become the focus. Those people who really can’t afford to buy the levels will try to emulate their upline and buy the levels on credit cards. This is a house built on sand! This activity will eventually destroy the company and its distributors.

Good Distributor Commission Structure:

The ideal commission structure is one that rewards distributors for selling product, rewards developing leaders, and whose top level is relatively difficult (but possible) to obtain (explained more here). Those that obtain the top level should earn at least $500,000 dollars per year. Last, the MLM company should not allow members to purchase positions in the commission structure.

How to Evaluate the MLM Compensation Plan

  1. The commission plan should allocate approximately 40-50% of every profit dollar to the commission plan.
  2. The commission plan should reward at least 30% profit margin for wholesale to retail mark-up. This rewards the person for selling the product to a consumer.
  3. The commission plan should be difficult to achieve – but it should be achievable.
  4. The top level of the commission plan should pay out a minimum of $500,000.00. This amount is based on the current income level it takes to attract strong leadership.
  5. The company should not allow people to bypass developing leaders by buying positions in the compensation plan.

The Activities of both distributors and owners of the MLM company determine whether that company is operating legally and ethically – just like every other business. Legal and ethical activities in MLM include selling products to consumers that make their lives better, servicing the customer, and training new distributors so they get results.

Training Activities

As you’ve learned from the above, the product and the compensation plan have an enormous amount to do with “setting in motion” the activities of the distributors. However, the training is the main part of the business that most directly affects the distributors’ activities.

I’ve seen MLM companies that have done everything right (great intention, great product and great compensation plan) but end up destroyed because of  distributor leaders whose training activities create an unethical atmosphere  that honest people do not want to be a part of, or that even drag the company into trouble with the state or federal government.

In MLM training, there is something called “The ___ System.” It might be called the “Fast Start System,” or the “Company Training System,” etc. The “system” is the method a distributor uses to introduce a prospect to the business. This is only part of the training that is needed. An effective MLM training process should include EVERYTHING A PERSON REQUIRES to succeed. Read and reread that sentence until it is really understood! This would include how and what to say to prospects, how to respect prospects, how to service prospects – as the majority of people do not come to MLM havingthis skill.

The MLM training is what converts a distributor into someone who is effective in MLM. This isn’t any different than any other organization in the world. Those organizations (sports teams, military, corporations) who train their people better than any other always do better than less-trained organizations.

If you find the company, compensation plan, and products to be desirable, but the activities of the individuals who are training you to be undesirable, you may need to branch off and create the culture you envision. If that’s the case, you found the right web site.

How to Evaluate MLM Training

  1. Does the training produce an effective distributor? The only real test of training is, “Does the MLM training create success?”
  2. Does the training include selling the product to consumers?
  3. Is the training specific and does it teach you all the skills necessary for MLM success?

Below are some examples of activities to watch for – both good and bad. These activities will indicate whether people are being trained correctly or incorrectly:

How to Choose a Good MLM CompanyDo they promise you enormous sums of money for little or no production?

These poor examples are not made up – they are just as I’ve heard them.

Example of poor activity: “This company is amazing! I joined 3 months ago and my check is now over $30,000.00 per month! I don’t even know what I’m doing! This is so crazy – I just tell people about it and my check keeps going up!”

Example of good activity: “This company is amazing! I joined 3 months ago and took the training very seriously. I have about 30 customers who love the products/service. I’ve sponsored a handful of people and am working with them to train them correctly. I’ve already surpassed the income I was making in my previous job, but now I get to be at home with my family.

Do they violate laws by claiming their products do things like cure cancer or heart disease?

Example of poor activity: “These products are amazing! Oh, my gosh! My brother was diagnosed with cancer last year and I got him on the products and now he has NO MORE CANCER! I used to have migraine headaches and these products got rid of my migraines! I also don’t have PMS anymore!”

Example of good activity: “These products are amazing! Personally, prior to using the products I had migraine headaches. I can’t claim the products had anything to do with the migraines going away because I increased my water intake to take the products, but someone would have to pry these products out of my hands. I like them that much!”

Are they interested in you?

Example of poor activity: Do they call you and tell you what “they’ve got” without  caring what you want? Do they cause you to feel like just a cog in their wheel?

Example of good activity: They talk to you like a person. They’re polite, ask you how you are and what you’d  like to achieve. They return your phone calls and e-mail within 24-48 hours.  They work to locate “where you’re stuck” and then provide workable solutions to get you unstuck.

NOTE: The above is a two-way street. You cannot expect someone to work hard for you and you not work hard for them. Be industrious when you’re not on the phone with your upline. There’s nothing worse than a leader taking the time to train you and you not doing anything.

In conclusion to this page on “How to evaluate an MLM company,” find a company whose owners are committed to products that actually help make people’s lives better, a company whose owners see their distributors as their most important asset. Also, make sure the compensation plan pays its leadership very well and that there are leaders who have achieved the top level. This is difficult with a brand new company, so you will have to compare their compensation plan to a company that has a similar compensation plan. If the person who is recruiting you is a good trainer, consider yourself very fortunate; if not, don’t complain – that’s a waste of time. Just teach yourself.

Recommended next page: Is MLM a pyramid or scam?

Tim Sales

About the Author

Tim Sales

Tim’s experience in building his own downline of 56,000 network marketers helped him develop his signature training series. A public relations ambassador for the network marketing industry, Tim has also dedicated his time to debunking the false information spread about the network marketing industry.

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Doug Lee

Good article. At first I wasn’t going to bother reading this one since I am happy with the company I am with. But I read it and I am glad I did. Great info for someone who is looking and for an experienced MLMer to check their company against.
-Doug Lee


Great article, wish I had read this when I first started. I’ve learned much of this the hard way but I would like to add one thing. You should always read the Policies and Procedures of your potential mlm. It’s not the most exciting reading but it’s where you find out what the refund policy is, when (or if) the Company has a right to change the compensation plan, and other issues that come up when you’re dealing with independent distributors. I’ve found that the simpler the P & P’s, the better.


“Wow, I’ve seen exactly what I was looking for! Now I know the good way to choose the best opportunity! Thank you!”

Marie-Noelle Belanger

that was exactly the kind of information I was looking for choosing the right MLM compagny!!!

thank you so much

Patti Roney

Thank you for covering the “good, bad & the ugly” concerning all areas a new person should be researching! Not everyone is fortunate enough to just “fall” into the right company! It matters!!! You have given great guidelines for the new person who is looking! Thank you!


Thank you Tim…..great insight


This is a very good article showing the pros and cons, the practices of a good MLM company vs. a bad MLM company. Gives the red flags to look for before you join, helps people chose a good MLM company based on intellect/facts rather than emotion. I also appreciated the links within the article, so that you don’t have to hunt for information, it’s all right here. Thanks!


Thank you Tim you hit the nail on the head.


Tim thank you for your efforts. A great resource for interested prospects.


I could not feel any better then when I found out Dr. Charles King gave my MLM Company straight A’s. Great Article Tim

Tambria Alexander

Since the bottom line is helping other people and doing what is best for them, it is great to have an article that helps people evaluate the plethora of companies out there. Although I love the company I work with, I realize it may not be the best match for everyone I prospect. Thank you for providing an article that I can give to people who are searching for the ‘right’ business.


Great article. This is going to be fantastic for interested prospects. Great job Tim.


I hadn’t given specific thought before to company structure affecting distributor activity, but it’s spot on. I also give you points to suggesting distributors branch out if the training they’re receiving is not producing results. Very few trainers in the industry have the guts to say that. Thank you!

Steve Stearns

How to evaluate a company is one of the scariest parts of getting involved. Thanks for making the choice a little less daunting while challenging some of the companies around to rethink their strategies. Great job Tim.

Joe Kresser

I felt that the first part of this article kind of kept repeating it’s self. When you say that top levels should not be able to be purchaced. I agree to some of that because of the leadership but there are many leaders that have proven themselves in the MLM industry that are capable of coming into an existing organazation and being a leader.
I also agree that the hype should be kept to a minimum.In my opinion, They are sending the wrong message and drawing in the wrong people by using hype. I love your good sxamples and bad examples. I will be using those. All in all good article. Thumbs up!!! Joe K

Albert Watkins

Great insight Tim, thank you.

Patty Jones

Thanks Tim


Thank you – great constructive information.

Kelly S.

I love the concept of teamwork inherent in this post. Thanks!

Dee Austring (Aotearoa/NZ)

One size definitely doesn’t fit all! Find the company whose products you can be passionate about, because it’s so much more fun when you’re passionate about what you do…

Gavin Chapman

In my opinion, people shouldn’t simply join with the very first potential company – or sponsor – they come across without some thought, reflection and research. They should thoroughly check company, sponsor and upline out. Any sign of lack of integrity – look elsewhere in MLM. While checking it out, they should learn what this industry of MLM is truly about. Tim Sales’ Brilliant Compensation and this site are great for that. If the prospect really THINKS while reviewing this material, he/she will WANT to join a good MLM company with a good and worthy sponsor. Then it’s just a question of doing a little research and asking around to find a good ‘fit.’

Valencia Burton

Sometimes you don’t know what you don’t know! And now you do! Thank you Tim!

Dianne Z

This will be great for those prospects who like to analyse everything – it gives them a how-to guide, and for those who have doubts but don’t know why. Thanks

marilyn holm

This was a long article but well worth the read. It’s helped me pinpoint the weak spot in my company, which is training. It’s good in some areas, but weak in a couple of spots where I really need help. However, this article is very upbeat about training yourself and going to other sources to fill in the gaps of the training. My company is strong in every other attribute, so it’s very reassuring to have my gut-level assessment verified in this factual assessment.

Rolf Hefti

The right principles explained at its best. Well done Tim!

Adam Wenzel

Excellent advise on how to evaluate companies. Very valuable information.

J Brad

Tim – Another great article. You tell it like it is. Thanks again for this great resource.

Anastasiya Kabischer

Tim, thank you very much for all you do!!! I wish i could have known about you and what you do years before. The article is great, my only question is will you translate this site to a different language (my interest is in Russian language)?
Thank you again for your Good Heart! That is what will save the World!

Dave Bennett

So far I am amazed by the level of professionalism in every aspect of this and all of the other websites that a part of Tim’s organization. I have heard lots of advice that is similar to some of the “training” I have had available to me is several different MLM ventures I have been involved with over the years but the success I have had using the Brilliant Compensation DVD and this website has been incredible. I have prospects looking at my business and the company I represent that were seeds I planted years ago. People that have always had an excuse for not looking that are now very interested in joining my organization. 🙂
That last character is a very big toothy grin.


Yeah, we got it. Tripped off of any hype.
How to select a good Company, the right Company (what to look at, what to look for, what to look after) is clear.
What are the criteria, pittfalls, forrunner signs, everything relevant.
Humm!..We got this one.


Tim, I was on your training call this evening. My first time. I have to say that I was very impressed with the knowledge you have to share. You suggested to a caller to visit this website if you are new and trying to seek out a great MLM company. I thought I would check it out. I find your website’s to be inspirational, educational, motivational.

Madiba Thompson

I am so very thankful I stumbled onto this article on Google, ironic it was right after watching Brilliant Compensation the animated version. People need this clear concise information without being sold on a company. Why? So anyone from the new school or old school can make a solid business decision given the specifics of Network Marketing, MLM, or what I like to call a Recession Proof Income. The verdict on the truth is out, the details are on these webpages ENJOY!! Thanks Tim you are a blessing to the Network Marketing industry.

Jana Cotton

Tim, this is without a doubt the best article you have written!! I am so thankful you are here to help explain our business!

Barbara Matthews

Yet another reason I recommend this site and your trainings to my team and my prospects. I appreciate having unbiased, third party information available to help us educate our customers and future business-builders. Thank you.

June Y

Hi Tim, thank you so much for all the articles that cleared my doubts & confusion. I know for sure that I have chosen the right path by doing MLM. This will definitely help me grow & be successful in what I am doing. Cheers! I will continue reading so please don’t stop writing?

Adrian Paul

Excelent, thank you for this, now i’m do what to do. Thank’s i appreciate.

Sheila Schiffman.

Great explanation as usual Tim. Every one should subscribe to your newsletter you put out. I have learned so much and I’m in MLM for many many years. I can’t get enough information. MLM aka Make Lots of Money. Imagine what you can do with the money, giving back to your community, for the less wonderful is that? I enjoy every minute of MLM. Even the people you meet along the way are so worth it.I like to call it “Intelligent Marketing”
Start spreading the news about this wonderful industry and your company. TEAM Together Everyone Achieves More..Team work makes the DREAm work. Success to all. My prediction in the not too distant future is everything will be MLM..they most efficient way to bring a product or service to the end consumer saving them MONEY. In the next five years one in two families will have a Home Based Business..great tax advantages and residual income is the best. I’d rather have 1% of 100 people than 100% of myself..J.Paul Getty one of the richest men said that how true. If you could go to work tomorrow for some reason how would you support your family. Build MLM once you have it for a lifetime if you build it right.


Thank you for sharing. I found your lines below as a major issue for us.

“I’ve seen MLM companies that have done everything right (great intention, great product and great compensation plan) but end up destroyed because of distributor leaders whose training activities create an unethical atmosphere that honest people do not want to be a part of, or that even drag the company into trouble with the state or federal government.”

Is it legal for our upline to get our downlines and re-sign them under her within the same company? It was reported to the company but will not give back our downlines. What protection do we have as distributors in MLM, if companies will allow such actions? What can we do and where can we go? Thank you.

Jeff Wahlen

In response to Marisa, and anyone else experiencing such disreputable (but dependably common) behavior by any distributor, may I suggest you immediately advise your management. Then, if they don’t respond, advise the DSA, Tim Sales, Troy Dooly, and Len Clements, constructively disseminating that news to the MLM blogging community. That’s news. And news travels fast!

Allegations are tough to prove though, and freedoms abound in this business community, so be precise and accurate with what you are reporting. Leaders can join whichever company they choose, whenever they so choose, at their whim with absolute impunity. You can’t deny them that liberty. Personal integrity and credibility, however, are not as sheltered or out-of-bounds to criticism. It’s a valuable reputation that can be diminished with cross-recruiting, deception, and inconsiderate pursuit of exploitive gain.

As always, eyes wide open. And seek counsel. Upline, downline, crossline, competitors…seek counsel.

Viola Tam

Very thorough analysis for anyone who do not want to miss out on any important factors prior to joining a MLM company. This truly reflects Tim Sales sincere and dedicated attitude towards helping the whole MLM community, right from the time people are choosing to the time that people are to train their new people.


This is a great article. I have forwarded it onto my whole team. I am very happy to say, that my company fits every single one of your criteria with flying colors. It makes me so gald I joined the company. I appreciate you taking the time for your insights Jim.

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