What’s a downline?

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A downline is a term commonly used in multi-level marketing (MLM) to describe consultants or representatives who work with another representative. For example, if Susan starts working for a company and then recruits five other people to work with her at the same company, those five people are her downline. In the MLM business model, owners or representatives typically earn most of their income through their downlines rather than selling products or services themselves.

MLM is similar to what is described as a “pyramid scheme” but with a few modifications. Both models require members to subscribe to other members as a source of income, but with a pyramid scheme there is no actual product or service being offered. Members earn money from members under membership fee charge and nothing else. In an MLM model, there are actual products that members sell via the Internet, third-party hosting, and other methods.

In addition to earning commissions on sales and recruiting members, representatives of an MLM company also earn commissions on sales and recruitment earned by their downline. This is also the primary way reps work within the company, with a larger downline generating higher commission rates and adding perks like a new title and bonuses. This incentivizes reps to work harder on recruiting rather than selling, which benefits the company’s top owners and directors because they are also earning commissions for each new recruit.

There are some downsides to an MLM based business. The main ones are that MLM companies have a very high turnover rate and that income is at least partially based on other people’s work ethic. Since many recruits don’t make the expected money when they apply, the number of people who drop out of these companies and drop out of school is usually high. This results in recruiters losing membership, which in turn can cause them to miss out on their minimum income allotments needed to maintain higher status.

MLM business models are also set up in such a way that a member’s income is based partially on how hard others work. Recruiters are responsible for helping their downline succeed because their income is also based on how well their members recruit and sell products. This is useful if other team members are hardworking, but others join companies to receive discounted products or because they believe that too little work is involved in making money.

Many downline based pyramid schemes and MLM companies have been reported as scams so it is recommended that potential members research each company carefully before signing up. Even businesses that operate legally often overstate the typical income of their members and understate the amount of work that is actually involved in running the business. Any prospective member should learn the average income, the number of hours spent earning the income, and the overall success rate of any given business.

Asset Smart.

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