If you are considering starting a home based business in the Network Marketing / Multilevel Marketing (MLM) opportunity take care and do thorough research before investing your time and money. It may be a legitimate business however it could also be a pyramid scheme, an illegal scam to relieve you of your hard earned money.
Genuine, legitimate MLM businesses provide a very attractive proposition for people to distribute products to consumers and get paid for their word of mouth advertising.
As an independent distributor for a Network Marketing company you have the support and training from the company and your sponsor who have a vested interest in helping you to succeed.
How MLM/Network Marketing Companies Work
As an Independent Distributor/Consultant your company provides you with products at wholesale prices that you can retail and make money. This is no different to traditional businesses where you buy products at wholesale prices and sell at retail prices to earn money.
However unlike traditional business your MLM company also gives you the opportunity to recruit others (build a team) and when they sell products you earn an override on the products they sell. It becomes in your interest to help your new team members succeed as your income is directly connected to their success and the amount of product that is moved through your team.
In addition to the incomes your MLM company may also give you incentives for sponsoring a certain number of people within a given period or certain amount of product sales to earn bonuses like cars, lifestyle holidays as well as extra cash.
Sounds great doesn’t it? With a good MLM company you feel like part of a large extended family.
Let’s look at illegal Pyramid Schemes
Sadly, not every MLM/Network Marketing opportunity is a legitimate business opportunity. There are people who mis-use the MLM structure as scams to defraud unwary people of their money.
Legitimate MLM companies depend on recruiting people to distribute products or services to the consumers.
Illegal Pyramid Schemes depend on offering the opportunity to make money by recruiting people and reaching certain levels of achievement.
The BIG difference between MLM and Pyramid Schemes if that with Legal MLM companies you get paid for the movement of products to the consumers unlike with Pyramid schemes you get paid for recruiting others with no REAL product.
MLM is legal method of product distribution and Pyramid scheme is illegal and punishable by imprisonment.
However for new people looking at a business opportunity it can be very difficult to tell the difference between a legal MLM company and an illegal pyramid scam.
So how can you differentiate between a legal MLM company and an illegal pyramid scam?
Very simply look at the way the business operates. The purpose of an illegal pyramid scam is to take your money and then use you to recruit others. The purpose of a legal MLM company is to distribute large volume of products to the consumers by creating a large network of distributors.
Here are some questions to help you identify a legal MLM company from an illegal pyramid scam.
- Your start up costs with a legitimate MLM company will not be high. Be careful if you are required to invest large amount of money up-front to become a distributor. This investment may be disguised in various forms.
- If you invest in some products will the MLM company buy back unsold products? Legitimate MLM companies generally buy back unsold products for at least 80% of the price paid.
Does the company focus on product and market for the product? Legitimate MLM companies depend on establishing a market for the products. Illegal Pyramid schemes don’t have much interest in consumer demand for the products. If you feel this from a company don’t sign up.
Where is the main focus of the company? On recruiting or selling the products/services? Pyramid schemes main focus is on fast profits from signing up people. If you feel recruitment if the main focus of the opportunity then don’t sign up.
How can you determine the main focus of the company?
Look carefully at the company’s compensation plan – do you make more money by recruiting other distributors or from the sales you make? If you make more money by recruiting others this is a classic sign of a pyramid scam.
Do you get commissions just for recruiting others even when there is no product movement? In a pyramid scheme the number of people you recruit is more important than the movement of products.
To protect yourself read the blog post Choosing A Network Marketing Company – Questions To Ask Before Joining
Network Marketing/Multilevel Marketing business opportunities provide a great vehicle for people to start their home based business with low capital outlay and with unlimited income potential based on the effort there are prepared to put into the business.
These days with technology MLM companies provides systems and platforms allowing you take advantage and build a global business from home. This can be very profitable and fun!
Til next time.
Sincerely,
Moni Arora
Moni Arora’s Blog
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