Why Small Business Owners Are Turning to MLM

In my last blog post I outlined two alternative and somewhat adventurous ways that small business owners are bring cash into their businesses, even in this cash-poor economy: factoring and creating multiple streams of income.

Factoring is a way for small businesses to generate cash by selling their accounts receivables for up-front cash. Creating multiple streams can take many forms, some of which I outlined in my last blog post. Each of these options has pros and cons, and each of these can increase a small business’ cash flow if implemented right.

Now I’m going to introduce a third option that is enticing many small business owners as a viable new income stream: MLM, also known as multi-level marketing or network marketing.

Why MLM and Why Now?
Many small business owners who had previously shunned the MLM industry are now joining in significant numbers. The question is, why now? Small business owners are habitually busy, so it doesn’t make sense that they would add another business to their already overloaded schedule. Yet they are, and for good reason.

1. MLM is Supported by Capitalist Big Wigs
Did you know that investing guru Warren Buffett owns several MLM companies, including Pampered Chef? Did you know that best-selling authors and well-known businessmen Robert Kiyosaki and Donald Trump wrote a book supporting this industry? In fact, Donald Trump believes in it so much he recently launched his own MLM company. The MLM industry, formerly the king of scams and schemes, has grown up and become a solid business proposition.

2. When Cash is Tight, MLM is Inexpensive
In this cash-poor economy, an MLM business has one of the lowest startup costs and overhead of any business. Rather than buying a franchise or investing in other companies, many small business owners are joining MLMs and operating these businesses in their homes, which keeps the overhead low and increases their tax advantages. On average, small business owners are spending $350 to $500 to start their businesses, and roughly $200 to $400 per month the run it. Although it may not produce income right away, most who consistently work their business earn a passive income, over and above their expenses, within 6 months to 2 years.

In this economy every penny counts so even a small income stream will pay off. Did you know that last year 91% of foreclosures could have been prevented with $500 additional income per month? Plus, according to Dun and Bradstreet, 95% of all businesses close because of lack of cash. Many small business owners are realizing that investing in an MLM business is a smart investment for the near future.

3. MLM Helps You Claim Additional Tax Advantages
Sometimes cash comes not in the form of greenbacks, but in the form of taxes that you or your business don’t have to pay. Most small business owners are in a catch-22 when it comes to taxes. They are damned if they make a profit, and damned if they don’t. For instance, one shopkeeper earned a good profit one year, but ended up paying huge taxes on her take-home pay to the IIRS. To prevent that, the next year she increased her business expenses by hiring an employee to mind her store while she took more time off. Her net after-tax income was the same in both years. It doesn’t seem fair, does it?

Many small business owners are caught in the same situation, but they can change that by starting an MLM business in their homes. When a small business owner owns and operates an MLM out of her home, she can hire her children (7 years or older) to work in her MLM, and claim that child’s wages (translation: allowance) as a tax deduction. She can claim additional square footage in her house for office use and deduct that from her taxes. She can deduct her commuting miles between home and business round trip. She vastly increases her ability to deduct certain kinds of expenses, which ultimately means her take-home paycheck, after taxes, is much larger. Now isn’t that a creative way to generate dollars?

The Conversation is Just Beginning
There are a lot more advantages than can be listed here for small business owners to start their own MLM businesses. This is just the start of the conversation. MLM isn’t the same scammy industry it used to be, just as the economy isn’t the goldmine that it used to be.

If you own a small business and you are looking for a way to create a new stream of income, consider MLM. These days, an open mind can lead to a healthier checkbook. To learn more about how MLM can create a new income stream for you, consider these resources:

Educational webinar
Free consult
Phone chat with a warm body
Read the MLM blog

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Photo credit: lunch chat

Tags: MLM, multi-level marketing, network marketing