Is This Business Offer
A Pyramid Scheme?
So you think the latest business opportunity you received in your e-mail might be a pyramid scheme? But how do you really know?
According to the
Direct Selling Education Foundation,
there are ways to tell the difference between a
company or other legitimate business and the "wolf in sheep's clothing" disguised as a MLM.
First, pyramid schemes seek to make money from you, while MLM and most businesses seek to make money with you as you build your business.
Before signing up with any company do your homework.
Ask these three questions:
1. How much are you required to pay to become a distributor?
The start up fee in multi-level companies is generally low because they want to make it easy and inexpensive for you to start selling. Most schemes make all of their profit from signing up new recruits.
2. Will the company buy back unsold inventory?
Legitimate companies which require inventory purchases will usually buy back unsold products if you decide to quit the business.
3. Are the companies products sold to consumers?
If the answer is no, stay away!
--and other methods of retailing--depends on selling to consumers and establishing a market. An illegal pyramid is not concerned with sales to end users of the product. Profits are made on sales to new recruits who are told they must buy the products to participate.
Many legitimate business opportunities still exist, however, red flags should go off every time a new offer lands in the in box of your e-mail address. The sheer volume of potential customers--or victims--that exist online and the speed with which a message can be spread online makes the internet the perfect vehicle for today's pyramid schemes.
Here are five tips to help protect yourself from a bad investment.
1. Take your time.
A good opportunity to build a business in a multi-level structure will not disappear overnight. If you are told to get in on the ground floor or risk being left out in the cold, BEWARE!
2. Ask questions.
About the company and its officers, about the products, the start up fee, the company's buy-back policy, and the average earnings of active distributors.
3. Get written copies of all available company literature.
4. Consult with others who have had experience with the company and its products.
Check to see if the products are actually being sold to consumers.
5. Investigate and verify all information.
Do not assume that official looking documents or websites are either accurate or complete.
These tips are from the Direct Selling Education Foundation.
One last point I would like to make is simply this. Please don't mistake a legitimate MLM as a pyramid scheme just because of its hierarchal structure. Almost every business that employs more than two people is shaped like a pyramid.
The discussion here is on the manipulation of an opportunity. Many people have failed in
but failure in a MLM alone does not qualify the company as an illegal pyramid.
This website grew out of the need to help people find legitimate businesses, whether they be Multi-level or otherwise, and information to run those businesses effectively and successfully.
The Direct Selling Education Foundation
are two places you can research any company or business opportunity that you feel may be an illegal pyramid scheme.
As always, feel free to share any experiences that you have had with MLM or pyramid schemes. Whatever you can share, be it good or bad, could help someone else seeking information to make the right business decision.
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