How To Tell A Legitimate Multi-Level Marketing Opportunity From A Pyramid Scheme?
How can you tell the difference between a multi-level marketing opportunity and an illegal pyramid scheme? What do you need to know about both before you invest?
Multi-level marketing is a system of retailing in which independent businessmen and women (distributors) sell consumer products, usually in customer's homes. You can set your own hours and earn money based on your efforts and ability to sell consumer products or services supplied to you, the distributor, by an established multi-level marketing company. The same company who will encourage you to build and manage your own sales force by recruiting, motivating, supplying and training others to sell the products or services. You compensation is based on a percentage of what your sales force sells. Managing such a large network can be lucrative, but it is hard work and can become a full-time job.
"Pyramid" schemes, on the other hand, concentrate mainly on the supposed quick profits to be earned by selling the right to recruit others. The merchandise or service to be sold is largely ignored, and so is the market. A smooth-talking organizer may try to convince you that the plan is an exciting short cut to riches. The emphasis of the meeting being on the fact that all you have to do, aside from investing your money in the program, is to get others to invest. The plan focuses more on the recruiting of others than on selling the product or service. In order for everyone to profit in a pyramid scheme, there would have to be a never-ending supply of potential, and willing, participants. Obviously, there is not. When the supply runs out, the pyramid collapses, and most participants lose their investment.
Pyramid schemes are illegal throughout the United States, yet it is difficult to prosecute. Check with your Better Business Bureau for a reliability report on any company in which you are thinking about investing. Your attorney general may be able to advise you of some possible recourse, if you suddenly find yourself a victim in these "get rich quick" schemes.