You’re in business to earn money – but it can be hard to tell what’s a real multilevel marketing offer and what’s a pyramid scheme. Even though with some multilevel marketing organizations you might earn some money, they always involve risk.
- Know the difference between multilevel marketing and a pyramid scheme. In network or multilevel marketing, distributors sell products directly to other people and recruit new distributors. The money you make should come from sales, not from recruiting. In a pyramid scheme, the money you make is based on the number of people you recruit and your sales to them. Pyramid schemes are illegal because most of the people involved lose money.
- Investigate before you sign papers or pay money. Ask your sponsor to tell you -- in writing -- how you will be paid, your potential expenses (including samples, training, and marketing materials), and the refund policy on unused products.
- Ask current and former distributors:
- What are your annual sales of the product? What percentage of sales was to distributors?
- What were your expenses, including costs for training and buying products?
- How much did you make last year (income and bonuses minus expenses)?
- What percentage of the money you made came from recruiting other people and selling them inventory to get started?
- How long have you been in the business?
- How long did it take before you earned money?
- How many people have you recruited?
- Search online to see the company’s (and its product’s) reputation. Use the company’s name and words like “review,” “complaint,” “pyramid,” or “scam.”
- Are the products quality items and priced competitively?
- If it’s a fitness, health, or beauty product, what do health professionals say about it?
- Does the product have “miracle” ingredients? If so, walk away. Many are unproven, useless, and – sometimes – dangerous.
- Look for the signs of a pyramid scheme. Do distributors sell more product to other distributors than to the public? Do they make more money from recruiting new distributors than they do from selling product?