By action | September 30, 2008
Is your MLM business a pyramid scheme?
Considering an MLM opportunity? Be careful. It may well be a legitimate MLM business. Or it may be a pyramid scheme.
MLM (multi-level marketing, a.k.a. Network Marketing) is an attractive business model to many people. An MLM Business offers the opportunity to become involved in a system for distributing products or services to consumers. Unlike the person starting a business from scratch, an MLM Business participant has the support of a MLM company that supplies the products and sometimes offers training as well.
As an MLM Business participant, you make your money by selling the MLM products to other MLM Business participants. If they’re not already a member of your MLM company, you sign them up. Besides earning money off your own sales, you also earn a percentage of the income generated by the distributors that you’ve brought into the MLM Business (your downline). Often there are bonuses for selling particular amounts of MLM product or signing up a certain number of new members.
Sounds good, doesn’t it? And being part of a well-run MLM business can be a lot like being a member of a large extended family.
Unfortunately, not every MLM Business opportunity is a legitimate business opportunity. Many pyramid schemes, frauds designed to part the unwary from their money, are disguised as MLM Business opportunities.
Like MLM, pyramid schemes depend on recruiting people to become distributors of a product or service. Like MLM, the pyramid scheme offers the opportunity to make money by signing up more recruits and by accomplishing certain levels of achievement.
It can be very difficult for the person looking for a business opportunity to tell the difference between a legitimate MLM business opportunity and a pyramid scheme at a glance. How do you tell whether it’s a legitimate business opportunity or a scam?
The big difference between a legitimate MLM business and a pyramid scheme is in the business’ operations. The entire purpose of a pyramid scheme is to get your money and then use you to recruit other suckers (ahem – distributors, associates, representatives etc.). The entire purpose of an MLM business is to move product or services. The theory behind a legitimate MLM business is that the larger the network of distributors, the more product the business will be able to sell.
Use these questions as an acid test if you’re in the least doubt as to whether the opportunity you’re considering is a MLM business or a pyramid scheme:
1) Are you required to "invest" a large amount of money up front to become a distributor? This investment request may be disguised as an inventory charge. Legitimate MLM businesses do NOT require large start up costs.
2) If you do have to pay for inventory, will the company buy back unsold inventory? Legitimate MLM companies will offer and stick to inventory buy-backs for at least 80% of what you paid.
3) Is there any mention of or attention paid to a market for the product or service? MLM depends on establishing a market for the company’s products. If the company doesn’t seem to have any interest in the consumer demand for its products, don’t sign up.
4) Is there more emphasis on recruitment than on selling the product or service? Remember, the difference between an MLM business and a pyramid scheme is in the focus. The pyramid scheme focuses on fast profits from signing people up and getting their money. If recruitment seems to be the focus of the plan, run. These next two questions will help you determine what the focus of the company is:
5) Is the plan designed so that you make more money by recruiting new members rather than through sales that you make yourself?
6) Are you offered commissions for recruiting new members?
As always, when you’re investigating a potential business opportunity, you’ll want to gather all the information you can about the MLM company’s products and operations.
Get (and read) written copies of the company’s sales literature, business plan and/or marketing plan. Talk to other people who have experience with the MLM company and the products, to determine whether the products are actually being sold and if they are of high quality. Check with the Better Business Bureau to see if there have been any complaints about the company. And listen carefully when you’re at that MLM business recruitment meeting. Inflated claims for the amazing amounts of money you’re going to make should set your alarm bells ringing.
Being part of a successful MLM company can be both profitable and fun, but unfortunately, some purported MLM opportunities are actually pyramid schemes designed to flatten both your wallet and your dream of running a business.
If you are currently in an MLM business and you want to build a larger downline then I highly recommend my ‘Resume Recruiting’ system. CLICK HERE for more information on this system.
Also, if you want to recruit people who have already been in an MLM business then you need to recruit using downline reports. You can CLICK HERE to go to their website and get a report.
I look forward to seeing you at the top,
PS be one of the first 3 people to post a comment and get a free ‘MLM Business Tutorial’ valued at $37 emailed to you for free. POST YOUR COMMENT NOW 🙂
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