MLM and Illegal Pyramid Schemes
The big difference between MLM and a pyramid scheme is in the way the business operates.
Unlike MLM, Pyramid Schemes Have Only One Purpose
The entire purpose of a pyramid scheme is to get your money and then use you to recruit other suckers (ahem - distributors).
The entire purpose of MLM is to promote products or services and they and their agents earn their money from that.
These next two questions will help you determine what the focus of the company is:
- Is the plan designed so that you make more money by recruiting new members rather than through sales that you make yourself? This is the signature of a pyramid scheme operation.
- Are you offered commissions for recruiting new members? Another pyramid scheme trademark. It's the number of people who are willing to sign up that matters in a pyramid scheme, not the products or services being offered.
Pyramid Scheme vs. MLM: How to Protect Yourself
As always, when you're investigating a potential business opportunity, you'll want to gather all the information you can about the MLM company's products and operations.
Get (and read) written copies of the company's sales literature, business plan and/or marketing plan and make sure that they disclose their management and ownership.
Talk to other people who have experience with the multilevel marketing company and the products to determine whether the products are actually being sold and if they are of high quality.
Search online to see if there have been any complaints about the company. (using keywords like scam, reviews or fraud after name)
And listen carefully when you're at that MLM recruitment meeting. Inflated claims for the amazing amounts of money you're going to make should set your alarm bells ringing.
Being part of a successful multilevel marketing company can be both profitable and fun, but unfortunately, some purported MLM opportunities are actually just cons designed to flatten both your wallet and your dream of running a business.
