LampeBergers hits the spot yet again

Comparing Legitimate Multi-Level Marketing
with
Illegal Pyramid Schemes

Are There Profits In Pyramid Schemes?

Don't Bank On It

Are you under the impression that multi-level marketing plans are all pyramid schemes? Well, they're not.

Many people consider all MLMs to be "pyramids" - but they fail to make the distinction between "illegal" and "legal" pryamids, considering anything that is based upon a pyramid shape to be illegal - forgetting that their own job, the government, their church, and virtually every organization that they belong to or know of is top-down oriented and shaped as a pyramid.

Legitimate multi-level-marketing plans are a way to sell real goods or services through distributors. These plans usually show that if you sign up to be a distributor, you will receive commissions - not only on your sales of the plan's goods or services, but also on the sales of the people you recruit to join the distributors. One of the keys is that there are actually tangible products and services moving through the network, rather than just the building of the network or "building mailing lists" or "sending recipes" or "sending jokes," etc., such as chain letters usually have you do.

Pyramid schemes have a similar structure, but a completely different focus. They concentrate on the commissions you could earn just for recruiting new distributors, and generally ignore the marketing and selling of products or services. The Federal Trade Commission requires a minimum of 10 non-distributor customers per month to be serviced by each distributor after a certain period - without these customers, it is an illegal pyramid.

Most countries outlaw pyramiding. The reason: Plans that pay commissions for recruiting new distributors inevitably collapse when new distributors can't be recruited. When a plan collapses, most people - except perhaps those at the very top of the pyramid - lose their money.

Here are tips to help you avoid losing money to an illegal pyramid scheme or a fraudulent multi-level marketing plan:

1. Avoid plans with "Headhunter Fees" - any plan that offers commissions just for recruiting additional distributors. It is illegal to pay for simply signing others up.
2. Avoid plans with "Front Loading" - plans that ask new distributors to spend money on high-priced inventory. These plans can collapse quickly - and also may be illegal pyramids in disguise. The requirement of a minor purchase of a set of initial business materials (order forms, catalogs, etc.) does not fall into this category.
3. Avoid plans that are "Free to Join" - Use a little common sense - why in the world would anyone be offering to set you up in a business that costs them money and you absolutely nothing? There are hidden costs always around the corner in these "free" businesses, once they have snared you in. There is a saying that many go by (falsely) of "if you have to buy the kit, it ain't legit" - that is absolutely the worst possible indicator of legitimacy. Any legitimate business is going to cost something to start. NO business of value is free to start - even a child's Kool-Aid stand costs the parents the sugar, drink mix and cups that it takes to make and sell the drinks.
4. Avoid plans that claim that you "don't have to work hard" - although MLM is a different style of business than standard retail storefront type business , it is nonetheless hard work (in a different manner) to build your business - any claims to the contrary should raise red flags as to the veracity of anything else the claimant is telling you.
5. Avoid plans that claim you will always make money because your downline will always grow - plans that claim you'll make money through continued growth of your "downline" - the commissions on sales made by new distributors you recruit - instead of through sales you make yourself. No one can guarantee your downline business growth - ever. Again, it is your efforts that will cause this to happen or not happen - no other guarantees should be respected.
6. Avoid "Snake Oil" plans - plans that promise enormous earnings or claim to sell miracle products. Just because a promoter of a plan makes a claim doesn't mean it's true! Ask the plan's promoter to back up the claims with hard evidence - then verify that evidence to the best of your ability.
7. Avoid Shills - "decoy" references that the promoter pays to describe fictional success in earning money through the plan. Anyone making claims should be verified as to veracity - if the plan is legitimate, no false claims will be made... although there are some unscrupulous MLM'ers will make false claims about legitimate MLM opportunities to try to make them sound more enticing. Learn to separate the bogus "distributor" (a person) from a bogus opportunity (a company) and don't transfer the onus of the bad person onto the good company - there are bad apples in every business, MLM or other, who will attempt to deceive you. In this case, if the company looks good, but the "distributor" doesn't, find a legitimate distributor (call the company and ask for the names of several distributors in your area and the call them all) and check it out further.
8. Avoid the "Matrix" type MLM - the plan that only pays you on X number of distributors wide and Y number of distributors deep. These plans are self-limiting on the amount of money you will make - anything outside of that "matrix" is lost money and effort.
9. Avoid "Instant" decisions - don't pay or sign any contracts in an "opportunity meeting" or any other high-pressure situation. Take your time to think over a decision to join. Check it out thoroughly first. If it is a good opportunity today, it will be a good opportunity next week, especially after you have had time to check it out more thoroughly. If the person wanting to get you involved avoids giving you time, or wants you to make a decision right then and there, beware! A legitimate offer will encourage thorough research, and even point you to third party sources to get it.
10. Avoid the "Groundfloor Opportunity" snare - plans that hawk themselves as "Just as good as ABC Company only better - now you have a Ground Floor Opportunity."  Legitimate MLMs have the same opportunity for success no matter where or when you get in, and always allow you to make more money than your sponsor if you work at it more than they do. Plans that have been around a long time have been around a long time for a reason - they have proven products and methods that work, and others who have made mistakes you can learn from so that you won't have to. There are legitimate MLM opportunities that have been around almost 4 decades.
11. Avoid the "One Product" company - when a company has only one product or service to market, it is vulnerable. Look for a company that is diversified enough to withstand the loss of a single product or even an entire product line. We all know that the media loves hyperbole, controversy, and spectacular stories over the truth any time. If you take a hit in the media when you only have one product, you are history - whether that story was true or not. There have been actual cases of companies put out of business literally overnight after bad publicity which was later proved false.
12. Avoid the "Here's your kit, now go and do it" MLM - legitimate MLMs almost always have some sort of a training program or support groups with proven track records. Mentorship is an important principle in all areas of life, and business (especially MLM, which by definition is a different type of business) is no exception. Find the training groups and ask questions, question, and more questions.
13. Don't just take the word of the person trying to get you involved - do your homework! Check with your local Better Business Bureau and state Attorney General about any plan you're considering, especially if the claims about your potential earnings or the product sound too good to be true.

http://www.stopspam.org/faqs/mlm_vs_pyr.html

Comments

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