What is Multi-Level Marketing and How to Tell  if it's a Scam

 Many people dream of quitting their day job to work from home and make big bucks through multi-level marketing, but it’s not as easy as it looks. Before you hand over your cash, learn how to tell if it’s a scam or legit with this guide on what is multi-level marketing and how to tell if it’s a scam . You’ll get an honest breakdown of the business, tips on how to avoid pyramid schemes, and some useful resources that can help you set up your own MLM company in no time!

Myths About MLM

Many people believe that multi-level marketing companies are scams. The truth is that some of them are, but not all of them. That said, most legitimate MLM companies do operate in a very different way than other businesses.

 They focus on getting new distributors who will sell products directly (and exclusively) to their network of friends, family members, and co-workers--usually via social media platforms like Facebook or Pinterest. So while you don't make money selling products directly to consumers like you would with brick and mortar business models like Mary Kay or Avon, there are plenty of people at every income level finding success through their home-based businesses; they just usually work hard at it every day for months before making any significant income.

Safety Concerns

If something sounds too good to be true, it probably is. It’s a good idea to double check that your distributor has been in business for several years, has been in good standing with their local Chamber of Commerce or Better Business Bureau, hasn’t had any consumer complaints filed against them, or otherwise been accused of fraudulent activity.

 Even better, start by asking family and friends—they may have worked with independent reps who had great things to say about their experience.

Benefits of MLM

It provides freedom for you to build your own business on your own terms. That means no boss telling you what hours to work, what products you should sell, how much to sell them for or when you can go on vacation. 

It means no office politics. It’s just you, with all of your energy focused on driving your business forward and growing your income as quickly as possible, without being held back by any expense or non-revenue related time commitment.

Drawbacks of MLM

MLM schemes aren’t just pyramid schemes. Pyramid schemes are illegal because they promise unrealistic returns, whereas MLMs tend to promote themselves as legitimate businesses in disguise. Some popular multi-level marketing companies, however, like Amway, do offer some pretty big payouts.

Who is Affiliated with MLM

MLM companies appeal to people who want to start their own business and are willing to recruit new members. It seems simple, right? Just sign up some friends, neighbors, or co-workers. Have them bring in others, and you’ll make money off their efforts. Sounds easy right? Not so fast! MLMs work differently than most traditional businesses do.

Types of MLMs

The first thing to know about multi-level marketing (MLM) is that there are different types of MLMs.

 Each type has its own risk factors, strengths, and rewards. The most common types are Direct sales – These companies sell products directly to consumers through in-home parties or networking at events like trade shows or expos. They’re able to offer lower prices because they don’t have to pay for wholesalers or retail space.

 Pyramid schemes – Pyramid schemes use money from new recruits to pay off early members and investors. They encourage members who can’t afford to buy products themselves with what they call internal consumption, which means buying more inventory than you need for personal use so you can qualify for commissions on future sales by selling them externally—and hopefully at a higher price point than you paid.

The pyramid scheme phenomenon

                                                      Pyramid schemes, also known as multi-level marketing (MLM) or network marketing, are business organizations where an individual can make money by recruiting new participants into a pool of other investors. Here’s how they work: A person puts up some capital (usually minimal, often not much more than what was required for membership). Each time that person recruits someone new, he receives a commission on those new members’ investments. The recruiters at each level of recruitment receive their commissions as well — creating multiple layers in a pyramid shape at which point commissions are received by everyone above them. Pyramid schemes are illegal in many countries including Canada, Australia and most of Europe.

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