Many people have found success in direct selling for companies which use a multi-level compensation plan. Unfortunately, not all opportunities are legitimate, and it’s easy to get caught up in the enthusiasm and big promises of a pyramid scheme posing as a trustworthy company. So how do you tell the difference? BBB provides consumers with information to help determine whether or not a company is legitimate.
What is a Multilevel Marketing Plan?
Multilevel Marketing is a method to sell goods and services through other distributors. These plans promise that if you sign up as a distributor, you will receive commissions from sales you make, as well as sales of the people you have recruited as your distributors.
On the contrary, a pyramid scheme’s commissions are primarily based on the number of distributors recruited, and the sales are made to these distributors, rather than consumers. There is usually a sign-up fee, and rarely is there a legitimate product or service.
The difference between these two plans can seem unclear, but there is one key distinction – MLM’s are legitimate, and pyramid schemes are illegal, so it’s very important to do your homework.
“It’s easy to get caught up in the enthusiasm and big promises, but remember, there are no short cuts to success”, said Mechele Agbayani Mills, President and CEO of BBB Serving Central East Texas. “Keep a level head and evaluate all opportunities objectively. If you feel pressured to make a decision with which you are not comfortable or if the opportunity sounds too good to be true, just walk away.”
1. Does the compensation come primarily from recruiting others?Are profits made mainly by membership fees or bonuses as opposed to the sale of this product?
2. Does the product or service seem too good to be true, and is it priced at an expensive rate?
3. Is there a startup cost which includes training materials, or are you required to invest a lot of money without receiving a valuable product?
4. Do you feel pressured to join, and is it difficult to reach anyone when you have questions about the business?
5. Are there promises of large profits for minimal work and little experience?
If you answered “yes” to any of these questions, you are potentially at risk for being involved with a pyramid scheme. While a Multilevel Marketing Plan can be a legitimate and exciting new venture, the bottom line is, do your research as you consider an MLM opportunity. It could be a pyramid in disguise.
Keep in mind, a legitimate company will portray an honest picture of the opportunity, including the possible risks, rewards, and challenges. A pyramid schemer, however, will enthusiastically sell you on the promise of making tons of money with little effort. Successful direct sellers treat the experience like running a small business.
For more tips on how to be a savvy consumer, go to www.bbb.org. To report a fraud or scam, call the BBB Hotline: (903) 581-5888.