Mlm Business Opportunities Vs. Pyramid Schemes

by TowerGirl

Mlm Business Opportunities Vs. Pyramid Schemes

The line between legitimate MLM business opportunities and pyramid schemes is a fine one. In fact, thanks to the internet business boom, it’s gotten harder and harder for the work from home professional to distinguish between legitimate income opportunities and scams.

So before you hand over your life savings for the promise of the lifestyle of your dreams, it’s wise to spend a few moments and educate yourself about these two business opportunities. Both offer the promise of more income if you recruit others to the business, but there are subtle differences between the two that could help you distinguish between a lawful company and a scam.

The Cost to Invest

A legitimate MLM company offers very low start-up costs, usually only a few hundred dollars to invest. This is the beauty of the MLM company for the typical home based professional; it costs little to join. Pyramid schemes often have large start-up costs that actually include just part of your inventory or your entire inventory.

Inventory Policies

Scammers will not buy back your unsold inventory; you have to eat the costs of anything that doesn’t sell. This takes a huge chunk out of your bottom line and forces you to sell very conservatively. A legitimate company offers a generous buyback policy, usually amounting to around 80% of the stock’s value.

Emphasis on Selling vs. Emphasis on Recruiting

Within a lawful MLM company, the emphasis remains on the products and services you sell. This is because you want to build a loyal customer base that keeps returning to buy your products. This creates long term wealth. Pyramid schemes do not really emphasize the product; they are highly concerned with recruiting others to the company and do not focus on long-term client building at all.

How the Money Is Made

Do you earn more for recruiting than you do for selling? If so, then you are likely dealing with a pyramid scheme. Legitimate companies may offer a bonus system or some kind of downline for your recruitments, but your bread and butter still come from your own sales. If you earn a huge amount of money for recruiting others, then you are looking at a pyramid scheme.

Complaints Pending Against the Company

Always do your research before signing on with a company, and make sure there are no complaints filed against them with the Better Business Bureau. You can also do a quick Google search to see if anyone has been complaining about the company online via message boards or other outlets. If the company seems to have a lot of bad press, beware–chances are, it was a pyramid scheme gone bad.