MLM vs pyramid scheme 10 Signs a Business Is an MLM Scheme

Insert Image Are you considering a business opportunity that involves selling products to family and friends and recruiting other people to do the same? That kind of business is called multi-level marketing (MLM) or network marketing. Some MLMs are illegal pyramid schemes. People who become involved in an illegal pyramid scheme may not realize they’ve joined a fraudulent venture, and typically lose everything they invest. Some also end up deeply in debt. Here’s what you should know about MLMs and pyramid schemes, along with what you should do before joining an MLM program.What are MLMs and How Do They Work?MLM companies sell their products or services through person-to-person sales. That means you’re selling directly to other people, maybe from your home, a customer’s home, or online. You can find more information in this article: What is an mlm? If you join an MLM program, the company may refer to you as an independent “distributor,” “participant,” or “contractor.” Most MLMs say you can make money two ways:by selling the MLM’s products yourself to “retail” customers who are not involved in the MLM, and by recruiting new distributors and earning commissions based on what they buy and their sales to retail customers.Your recruits, the people they recruit, and so on, become your sales network, or “downline.” If the MLM is not a pyramid scheme, it will pay you based on your sales to retail customers, without having to recruit new distributors.What’s a Pyramid Scheme and How Do You Spot One?Pyramid schemes are scams. They can look remarkably like legitimate MLM business opportunities, but if you become a distributor for a pyramid scheme, it can cost you and your recruits – often your family and friends – substantial time and money. The promoters of a pyramid scheme may try to recruit you with pitches about what you’ll earn. They may say you can change your life – quit your job and even get rich – by selling the company’s products. That’s a lie. Your income would be based mostly on how many people you recruit, not how much product you sell. Pyramid schemes are set up to encourage recruitment to keep a constant stream of new distributors – and their money – flowing into the business. Often in a pyramid scheme, you’ll be encouraged or even required to buy a certain amount of product at regular intervals, even if you already have more inventory than you can use or sell. You may even have to buy products before you’re eligible to be paid or get certain bonuses. You also may have to pay repeated fees for other items, like training sessions or expensive marketing materials. In addition, the company may say you can earn lavish rewards, like prizes, bonuses, exotic vacations, and luxury cars. However, it often turns out that you have to meet certain product purchase, recruitment, training, or other goals to qualify for the rewards, and only a handful of distributors ever qualify. Eventually, most distributors find that no matter how hard they work, they can’t sell enough inventory

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