Many people confuse multi level marketing with pyramid schemes. However, multi level marketing is a legal business practice whereas pyramid schemes can be illegal and at best, are unethical. Without careful research, it can be difficult to tell the difference between legitimate work from home opportunities and pyramid schemes where only the recruiter will make money.
Spot a Pyramid Scheme
Those involved in pyramid schemes rarely have an array of products or services to sell and the commission if they do is very low. Ask the recruiter about the products that will be sold and the specific commission structure that accompanies sales. Request to see a catalog of products and to speak with customers who have purchased but not signed up to be a recruiter.
Pyramid scheme income is derived from recruiting additional people into the scheme. The top levels will earn very well where those who joined later will most likely lose their investment. In multi-level marketing, there is often a maximum level that the recruiter will earn from when recruiting new people. In pyramid schemes, the levels may be never ending with recruiters able to earn from every new level recruited.
The upfront investment for pyramid schemes is often large and does not include receiving products (such as a starter kit) in exchange for the investment. In multi-level marketing, the registration fee often includes a sampling of products to make demonstrations easier. Party attendees can try out some of the products before buying. With pyramid schemes, the registration fee often only leads to membership in the organization or access to a catalog of reduced price products.
The recruiters for pyramid schemes will focus on recruiting others in their sales pitch and will focus very little, if at all, on the actual business of selling a product or service. Most of the pitch will surround how to make money on recruits brought into the business rather than on the commission structure for selling products.
While the Direct Selling Association does not have a complete list of legitimate businesses, it is a start and can assist in finding true multi-level marketing opportunities. Also check with the Better Business Bureau before making an investment and talk with others who have participated, particularly those who are no longer active. If the business opportunity meets the criteria mentioned above, it is likely a pyramid scheme and should be avoided.
Stacey Abler - Stacey Abler is a freelance writer and entrepreneur who lives near Atlanta, Georgia. She has successfully operated several businesses ...
