Saturday, February 09, 2008

Avoiding Multilevel Marketing Scam

Multilevel marketing can bring a shudder to the most hardened business student, with its reputation so deeply ingrained with such illegal activities as pyramid businesses and Ponzi schemes. Of course, on the surface, multilevel marketing can be a powerful money making enterprise, one which fully operates within the confines of the law. But it is the shady businesses that work in such a similar fashion to the legal versions of the program that doom its reputation. Still, there are some clear ways to make sure the MLM business you may want to get involved with is legitimate.

One of the first things that separates a legal, on the level MLM company from one that is illegal or at the very least, unethical, is the emphasis of selling product over the emphasis on recruiting new distributors. Those companies that put more of a focus on the latter are invariably best stayed away from. In these systems, often times there is such non salability to the products or the market is already so saturated, there is little chance for individual success. Thus, direction and priority turns to simply signing up more distributors and of course the cycle continues.

Companies that make their primary profit from the fees associated with signing up new recruits are the very definition of pyramid schemes and they are illegal under the current laws of the FTC. It can be very difficult to tell the difference but one important factor is what it costs to join the business. If the business requires that a new recruit pay in more than they could likely ever sell, than it is easily identified as an illegal scheme. Of course, this can be difficult to detect as well, particularly when the sales pitch is likely to be airtight and very inspirational.

If you are thinking of getting involved with an MLM company, make sure you do your research and carefully decide whether or not the potential for profit is there. If the company has shown that most of its profits come in the way of product sales, make sure the majority of these sales are not to the distributors themselves. This will help you to steer clear of the illegal and unethical schemes and give you the best fighting chance to make money.

Obinna Heche: Los Angeles- California

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