How to Avoid Multi-Level Marketing Scams

Multi-level marketing businesses are prolific in
North America. New companies crop up every year as
others fade away into the background. A few old
standbys remain year after year but all are
tainted with rumors and fears of becoming involved
in an illegal pyramid scheme or being taken
advantage of by a scam artist. Knowing what to
look for can help you determine if the MLM
business you are considering is a legitimate one.

What is a Multi-Level Marketing Business?

A multi-level marketing home-based business
involves the direct selling of products or
services through the recommendations or
endorsements of independent business
representatives and building a team of fellow
entrepreneurs to do the same.

If you are the business owner, you receive a
commission on all direct sales. The difference
between a traditional business and a multi-level
marketing business is that these individual
business owners also recruit other people to start
their own MLM business selling the same products
and recruiting their own team. The businesses all
have uplines and downlines, with each business
sponsoring the birth of new businesses, their
downline, which become the existing business
owner’s team members.

The uplines also receive a commission from the
products that those in their downline sell. The
more people you get to sign up, the greater the
commission. This plan forms a type of residual
income that can continue for a time without the
upline business owner selling any further
products.

True multi-level marketing businesses are
legitimate, legal money making opportunities and
always involve direct sales of products and/or
services. They are not pyramid schemes that take
advantage of the businesses on the bottom rung, in
fact, legit multi-level marketing business owners
help new businesses by investing time, guidance,
training and often financial resources to ensure
the success of the new business owner. An illegal
pyramid scheme always pays the upline more than
the downline. One simple test for the legality of
an MLM is that if the downline works harder than
their upline then they will surpass the uplines’
income level.

Some scams require a new business owner to invest
large sums of money up front while promising large
profits with little to no selling of products.
Others simply collect the sign up cash and leave
the new business owner to fend for themselves. A
legitimate initial financial investment should be
directly proportional to the cost of the products
or services you will be promoting. Anything above
and beyond this figure should throw up a red flag
to the potential business owner.

Many people are turned off by multi-level
marketing businesses simply because they involve
selling products and services. These contacts may
be unwilling to venture into a business of their
own, but they may purchase products from an
individual business and provide them with
invaluable contact information of other people who
may be interested in purchasing products,
referring others or beginning their own
multi-level marketing business. These ‘customer
only’ contacts are an important part of an MLM
business.

Spotting a legitimate multi-level marketing
business versus a scam is easier if you understand
the basic qualities that set a true MLM
opportunity apart from an illegal scam.

Legitimate multi-level marketing business owners
operate independently of the parent company, but
have support from those who will profit from their
product sales.

True multi-level marketing businesses sell
products that are already manufactured and have a
marketing plan in place.

The business does not promise unlimited wealth for
little or no effort.

The commission structure pays on both
product/service sales AND downline development.

The company has been in business longer than two
years and has a proven track record of success.

Investing in your own multi-level marketing
home-based business can be a wise financial
decision for some people, but it is important to
avoid becoming involved in illegal scams. If the
company’s goals are realistic and the fees are
proportionate to the cost of the products being
sold, the company is most likely a legitimate
multi-level marketing opportunity.

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