What is MLM About – Is It A Scam?
MLM – Scam or Real Business Opportunity
I am sure we have all heard the question, What is MLM about and Is MLM a Scam or a real business opportunity? I have personally asked this very question and have come to the conclusion that it all depends. Many will say that ALL MLM’s are scams but I tend to disagree. As with anything in life, you must educate yourself so you can then make an informed decision about any company – MLM’s are no different.
What is MLM
MLM stands for multi level marketing and is often associated with pyramid/ponzi schemes. This is a bit misleading as not all MLM companies are bad. This is an area where you definitely must do your research before considering joining this type of business.
Multi Level Marketing essentially pays you for any sales that you make as well as the sales of those that join under you (also referred to as a downline). Depending on the company, the payment for sales made from those in your downline will vary, meaning you will make money if someone joins under you as well as if someone then joins under that person and so on.
You will also receive payment for the sale of a service or a product. This should be the focus of any good business model. The service or product being provided should offer real value to its customers and not simply a cover to avoid being labeled a pyramid scheme. This is where things become tricky when trying to determine the “good” ones from the “bad” ones and why so many simply advise staying away from MLM’s altogether.
The Bad vs The Good
Many MLM companies have come and gone because they have been shut down for illegal business practices or simply went out of business. It is illegal for any MLM to simply promote the recruitment of people. There must also be a product or a service being provided. The company must be able to sustain itself if the recruitment of people should slow down. The good companies will outlast the test of time where the bad ones will not.
Amway is a company that has been around for a very long time and is one of the first to be investigated by the FTC (FTC vs Amway) for illegal business practices; however, the suit ended up in the win column for Amway. The conclusion was that they are by definition not a pyramid/ponzi scheme because they have legitimate products to sell and they do not focus on recruiting as the main ingredient to their business model. As a result, many MLM’s have sprung up since then and have basically mirrored what they have done.
Unfortunately you will see many MLM companies walking a very thin line when it comes to providing a legitimate service or product, and those are the ones you need to watch out for because they are simply hiding behind a loophole when it comes to the law. The bottom line is this, there are just too many of the bad ones and it is difficult for all of them to be caught and investigated in a timely manner. This is why the consumer must do research before even considering a MLM as a business opportunity.
There are plenty of resources available to determine if a MLM company is currently being reviewed for illegal business practices or if any have been banned from certain countries. My thought is this, if a company has been banned from any country, then stay away. It is a huge red flag even if your country has not caught on yet. You do not want to be promoting something that is considered illegal anywhere. Your reputation is on the line and you cannot put a price on that.
Great site for up to date information on MLM’s. The good, the bad, and the ugly!
Review the FTC’s website for additional tips as to what you should look for when trying to determine if a company is legitimate or if there are red flags indicating you should look elsewhere.
If you have a complaint or an issue regarding an MLM company, report it to the FTC.
Don’t stop at the point of determining whether or not there is a product or service being provided. You must also ask yourself an important question, is this really legit? Does anyone even need this and is it worth charging for?
It is obvious that some have simply copied a business model, put there name on it, added a price to it and labeled it a viable service; however, if I can get the very same thing somewhere else for free, then it is not valuable plain and simple.
What to Look For
They have stood the test of time and are still going strong
There is a legitimate product(s) tha has proven to be of value to customers
Prices are not over inflated
The company has been able to sustain itself on a product or service even after all the recruiting hype has slowed down
There is no product or viable service being provided
There is a large fee to join the business
You are promised that you can make a lot of money without doing a lot of work
You are encouraged to make purchases to advance your status rather than making sales
You need a doctorate in order to understand the comp plan
You make more money from recruiting than you do from selling products
Does it Make sense? Don’t get sucked into all the hype of making millions that you forget to ask yourself this very important question.
High pressure to join! Take your time to look things over and if you get slack for doing so, then consider another company.
Company is listed on a watch list or has already been banned in other countries
A plethora of complaints and bad reviews
I hope this post will shed some light on whether or not an MLM is right for you. I do not think they are all scams, but I do think you need to do some serious research and use caution to make an informed decision before deciding to join one.
What has been your experience with MLM companies? Please share, would love to hear what others have experienced. As always, all comments are welcome.