No doubt many people looking for opportunities to work from home have heard of MLMs. What are they, and can they work for you?

Short for multilevel marketing, MLMs are sales businesses based on a pyramid or network marketing scheme. Simply put: You sign up with a company; you sell its product(s) using its pitch, training tools, etc.; some of your sales commissions go to you and some to the company; you recruit salespeople, move higher up the management chain and get more commissions. You also have to pay start up fees, and most companies require you to buy inventory on your own and then sell it, which can result in a significant personal cash outlay.

"When you add up the first costs, you could be looking at $4,600, and $3,200 or more per year in ongoing costs," explains Scott Larsen, an engineer with an MBA who lives in Charleston, South Carolina. In 1995, Larsen looked into working for Amway, the best-known business of this kind. Amway is under attack by many former "distributors," as its salespeople are called, for deceptive business practices, including misrepresenting start up costs, overhead costs, required time commitments and potential profits.

The potential to make money working in a legitimate MLM is there, but you have to be a good salesperson and a good recruiter. Remember, the entire business is based on selling a product and moving up the management chain. "You need to get retail sales and retail markup," says Larsen. "It’s true that the overhead costs of an Amway business are very small. But the personal sales are almost always less than the overhead expenses."

The only way to succeed is to go up high enough in the pyramid. The subject of whether MLMs are fair to distributors, viable business opportunities or even legal enterprises is a very hot one. There are just as many MLM success stories as there are MLM failures and lawsuits against established MLM businesses.

Remember, also, to judge an MLM opportunity based on its value to you. This can be difficult if a friend or associate wants to enroll you as a sales representative in his or her business, but this is about business not friendship.

Janet Caffrey, a Quixtar [an online division of Amway] independent business owner since September 1999 who was previously an Amway distributor for three years, values the flexibility afforded by the network marketing business model. After brief success with her Amway business, Caffrey stopped working to train for the U.S. Olympic horseback riding team. "What’s really nice is that while I went and did that, the business continued to grow. My profits went up and more people got into my business, because I had people who I’d gotten in who were getting other people into the business."

Before you make up your mind as to whether an MLM business is right for you, be sure to look at both sides of the story.

The following are some resources that cover both angles, so you can decide for yourself whether this is something you are interested in.

Pro-MLM Web sites

There are tons -- this is just a smattering.

MLM.com

America’s MLM Consultants

MLM Success Tips

Advice against MLMs

"60 Minutes" feature -- unofficial transcript; there is no official one

"Shaking the Money Tree" (article)