MLM & network marketing

Multi-level marketing, explained without the hype.

Multi-level marketing and network marketing are two names for the same thing: a direct sales pay plan where you earn on your own sales and on the sales of people you bring in. Here's how the money moves, what most people really earn, and what to check before you join.

Updated Oct. 4, 2026 · 8 minute read

MLM vs network marketing

Same model, two names.

People search for “MLM vs network marketing” expecting a difference. In practice there isn’t one. Both describe a company that sells through independent consultants and pays them on two things: their own sales, and the sales of the people they recruit.

The names come from different angles. Multi-level marketing describes the pay plan, which reaches several levels below you. Network marketing describes how the product moves, from person to person through a network. Many companies prefer “network marketing” because “MLM” carries baggage. The structure underneath is identical, and so are the rules.

Both sit inside the larger world of direct sales, which also includes single-level companies that pay only on your own sales, and the newer affiliate model.

The short version

MLM and network marketing are the same pay model under different names.
You earn a commission on your sales plus overrides on your downline’s sales.
The FTC says most people who join make little or no money. Read the income disclosure first.
Legitimate plans pay for product sold to real customers, not for recruiting.

Businesses that involve selling products to family and friends and recruiting other people to do the same are called multi-level marketing (MLM), network marketing, or direct marketing businesses.

Federal Trade Commission, Multi-Level Marketing Businesses and Pyramid Schemes

Terms used for direct sales pay models and what each one means
You’ll hear	What it means	Why the name
Multi-level marketing (MLM)	A pay plan that rewards you for your own sales and for sales made by people you recruit, several levels deep.	Describes the compensation structure.
Network marketing	The same model. Companies and consultants often prefer this name.	Describes how products travel, person to person through a network.
Direct sales / direct selling	The wider umbrella: any selling to customers outside a store by independent sellers.	Includes single-level and party plan companies that aren't multilevel.
Affiliate or social selling	Commission on sales through your link or code, usually with few or no levels.	A growing alternative to multilevel plans.

How the pay works

Your sales, your team's sales, and the rules that connect them.

Every multilevel plan is built from the same parts. The FTC sums it up: you make money by selling to retail customers, and by recruiting distributors and earning commissions on what they buy and sell.

Reading the tree

Picture yourself at the top. You recruit three people: that’s level 1. They each recruit two: level 2, six people. Those six each bring in two more: level 3, twelve people. That’s 21 people under you.

In this illustrative plan you’d earn 25% on your own customer sales, then a 5% override on level 1’s sales, 3% on level 2 and 2% on level 3. Deeper levels usually only pay once you reach a higher rank. Real plans use their own rates and rules, and many pay in points rather than dollars.

Two things fall out of the picture. Overrides only exist if your downline sells, so your team’s customers matter as much as yours. And each level needs more people than the one above it, which is why only a small share of any company ever reaches the top ranks.

Personal volume (PV)

The sales credited to you each month, in dollars or points. Most plans set a PV minimum to stay “active” and qualify for commissions. Ask whether your own purchases count toward it, and how much.

Downline and levels

Everyone you recruit is your first level. Their recruits are your second level, and so on. The FTC defines a downline as “the network of their recruits, and recruits of those recruits, and so on.”

Group volume

The combined sales of you and your downline. Rank rules usually need a group volume target as well as your PV, sometimes split across several “legs” so one strong recruit can’t carry you.

Ranks

Titles tied to volume and team targets. Higher ranks unlock bigger percentages or deeper levels. Ask how many people actually hold each rank; the income disclosure statement usually shows it.

Overrides

A percentage of your downline’s sales paid to you, separate from your own commission. Overrides are what make a plan “multilevel.” They usually shrink as levels get deeper.

Qualifying purchases

Buying product just to hit a volume target. The FTC calls the pressure to do this “inventory loading” and treats it as a warning sign. Buying what you genuinely use is different from buying to keep a rank.

What people earn

The honest earnings picture.

The top ranks are real, but they're rare. The best evidence of what a typical participant makes is a company's own income disclosure statement, and the regulators who have read dozens of them.

In September 2024, FTC staff published a review of income disclosure statements from 70 multi-level marketers. They found that many participants received no payments at all, and that the vast majority received $1,000 or less a year, under $84 a month, before any expenses. Most statements also left out people who earned nothing and didn’t subtract what participants spent.

The FTC’s business guidance puts it plainly: “Most MLM participants earn little to no money.” Where that’s true, the guidance says the disclosure should clearly show it.

This doesn’t mean nobody does well. Consultants who treat it as a sales business, with real customers who reorder, can earn steady part-time income. But the median participant is not the person on stage at the convention, and you should plan around the median.

We keep the full numbers, with sources, on Direct Sales Industry Statistics. For where the line falls between a legitimate MLM and an illegal one, read Direct Sales vs Pyramid Schemes.

Most people who join legitimate MLMs make little or no money. Some of them lose money.

Federal Trade Commission, consumer guidance on MLMs

FTC figures: FTC staff report on 70 MLM income disclosure statements (Sept. 2024). Quotations: FTC, Multi-Level Marketing Businesses and Pyramid Schemes (consumer advice, July 2022) and FTC, Business Guidance Concerning Multi-Level Marketing (2024).

Before you join

Seven things to check before you buy a kit.

These come from the FTC's own advice and from what experienced consultants wish they'd asked. If a recruiter can't answer them, that's an answer too.

Read the income disclosure statement
Look for the median, not the top rank. Check whether it counts everyone who joined or only “active” people, and whether it shows earnings before or after expenses.
Get the compensation plan in writing
Find the commission on your own sales, the PV minimum, and the volume you’d need for the first rank that pays overrides.
Add up every cost
Starter kit, samples, monthly website or app fees, shipping, event tickets, mileage. A year of costs, not just day one.
Ask about returns and buyback
Members of the Direct Selling Association agree to buy back resalable inventory at no less than 90% of your cost within 12 months of purchase. Ask any company, member or not, for its policy.
Check who buys the product
Would people outside the company pay this price for it? If most sales go to consultants, the money is coming from recruiting.
Talk to people who left
Current consultants can tell you what works. Former ones can tell you what it cost them. The FTC suggests talking to both.
Take the paperwork home
The FTC recommends reviewing the contract with someone you trust before you sign. A good company won’t rush you.

Buyback terms from the Direct Selling Association, Code of Ethics: repurchase of marketable inventory “within twelve (12) months from the salesperson’s date of purchase” at “not less than 90 percent of the salesperson’s original net cost.” Applies to DSA member companies only.

If you join

Build it like a sales business, not a recruiting race.

Customers first

Your income should make sense from your own customer sales alone. Overrides are a bonus on top. Track who buys, how often they reorder, and what they paid, and grow that list every month.

Recruit honestly

Share the opportunity with people who already like the product. Show them the income disclosure and the real costs. A recruit who joins with clear expectations stays longer and sells more.

Train, then step back

When someone joins, help with their first customers and their first month of numbers. Teach the compliance basics too: no income promises and no health claims beyond what the company approves.

Track your numbers like any small business owner. Note what each lead source costs and what it brings in, keep receipts for mileage and supplies, and check every quarter whether you’re profitable after expenses. If you’re buying product to keep a rank rather than to fill orders, stop and look hard at the plan.

Want help reaching customers? Our guides to direct sales marketing methods and recruiting honestly go deeper.

Compare companies before you commit.

Startup costs, commission ranges and real reviews for the direct sales and network marketing companies in our directory, side by side.

Compare companies Next: MLM vs pyramid schemes

Keep reading

More getting started guides

Getting startedChoosing a Direct Sales CompanyProduct, pay plan, costs and culture: a scorecard for picking the right company.Getting startedEstablished vs New CompaniesThe trade-offs between joining a household name and getting in early.Getting startedParty Plan CompaniesHow party plan businesses work and how to compare them.

New to direct sales? Start with What is Direct Sales?, Direct Sales 101 and Direct Sales vs Pyramid Schemes, or browse all articles.

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