How to Discover the Difference Between a Multilevel Marketing and a Pyramid Scheme

Pyramid Schemes seek to make money from you (and quickly). Multilevel marketing companies seek to make money with you as you build your business (and theirs) selling consumer products. Before you sign up with a company, investigate carefully. A good way to begin is to ask you these 3 questions:

1) How much are you required to pay to become a distributor? If the start-up cost is substantial, be careful! The start-up fee in multilevel companies is generally small (usually for a sales kit sold at or below company cost. These companies want to make it easy an inexpensive for you to start selling. But Pyramid schemes, on the other hand, make nearly all of their profit on signing up new recruits. Therefore, the cost to become a distributor is usually high. Caution, Pyramid schemes often disguise entry fees as part of the price charged for required purchases of training, computer services, product inventory etc. These purchases may not even be expensive or required, but there will be considerable pressure to "take full advantage of the opportunity".

2) Will the company buy back unsold inventory? If you could be stuck with unsold inventory beware! Legitimate companies which require inventory purchases will usually buy back unsold products, if you decide to quit the business. Some state laws and the DSA Code of Ethics require buy-backs for at least 90% of your original cost.

3) Are the companies products sold to consumers? If the answer is no, or not many, Stay away! This is a key element. Multilevel marketing (like other methods of retailing) depends on selling to consumers and establish in a market. This requires quality products, competitively priced. Pyramid schemes,on the other hand, are not concerned with sales to end users of the product. Profits are made on volume sales to new recruits, who buy the products. Not because they are useful or attractively priced, but because they must buy them to participate. Inventory purchases should never be more than you can realistically expect to sell or use yourself.

Warning Signs of Fraud: Pressure to sign a contract quickly and agree to pay a large sum of money before sales claims can be investigated or legal advice obtained. Promises of extraordinarily high or guaranteed profits. And claims that profits can be achieved easily. A required initial fee which greatly exceeds the fair marked value of any products, kits or training. A large fee payable before you receives anything in return. Evasive answers by the salesperson or unwillingness to give disclosure documents required by law. These are only warning signs of the most obvious frauds. An independent investigation is necessary in any case. A fraudulent salesperson may be prepared with glib assurances and authentic-looking documents.Remember,if it`s worth your money,it`s worth you time to investigate.

How to protect yourself from a bad investment. Take your time, don`t let anyone rush you. A good opportunity to build a business in a multilevel structure will not disappear overnight.People who say`s "get in on the ground floor" are implying that people joining later will be left out in the cold. Beware. Ask questions, about a company and its officers. About the products- their costs,fair marked value, source of supply, and potential market in your area. Ask questions about the start-up fee (including required purchases). Ask questions about the companies guaranteed buy-back of required purchases and ask about the average earnings of active distributors. And finally don`t accept anything online that makes no sense in the real world.

Seed Newsvine

Bookmark this article in your preferred program

Comments

Add Comment

Popular Articles in this cathegory

This article is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.