Multilevel Marketing (MLM) and the MLM Pyramid (Pyramid Schemes)

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Multi Level Marketing (MLM) and a Pyramid Scheme, what is the difference? Are they both scams? Are they both legitimate?

The major difference between a Multi Level Marketing (MLM) program and a Pyramid Scheme is how the "opportunity" is laid out. The ultimate goal of a Scam is you have to pay a fee and then recruit other people to pay that same fee. With MLM you are trying to sell product. The basic principle of Multi Level Marketing is that the more people you have selling the product the more product will be sold and more money will be made.

How to Tell if it is Multi Level Marketing or a Pyramid Scheme:

1) If they are asking for a large money investment they are probably a Pyramid Scheme. Legitimate Multi Level Marketing businesses will not want a large financial investment because they want to recruit as many people as possible to sell the product. Unlike Pyramid Schemes were all they really want is your sign up fee.

With most legitimate Multi Level Marketing programs you do have to buy some inventory up front. This is understandable on the assumption you have to have some of the product to be able to sell it. The company is not going to send out product for free under the hopes you are going to be serious about the opportunity and sell.  If you are not serious (which is 90% of people who sign up for MLM programs) they would be throwing money out the window.

If you do have to purchase inventory make sure that there is a buy back program of unpurchased product. A legitimate Multi Level Marketing company will buy back unused product at a certain percentage of what you paid.

2) Does the company that you are going to be working for have sales support and marketing efforts? If a company is really serious about there product being sold that type of support will exist. If the company doesn't seem to have any type of marketing or sales process they probably aren't to concerned about the product selling and you should not sign up.

3) Is there more emphasis on recruitment than on selling the product or service? Remember, the difference between MLM and a Scam Pyramid is in the focus. The Scam Pyramid focuses on revenue from signing people up and getting their money. If recruitment seems to be the focus of the plan, run.

4) Is the plan designed so that you make more money by recruiting new members rather than through sales that you make yourself?

As always, when you're investigating a potential business opportunity, you'll want to gather all the information you can about the MLM company's products and operations.

Read copies of the company's sales literature, business plan and/or marketing plan. Talk to other people who have experience with the MLM company and the products, to determine whether the products are actually being sold and if they are of high quality. Check with the Better Business Bureau to see if there have been any complaints about the company. And listen carefully when you're at that MLM recruitment meeting. Inflated claims for the amazing amounts of money you're going to make should set your alarm bells ringing.

Being part of a successful MLM company can be both profitable and fun, but unfortunately, some purported MLM opportunities are actually Scam Pyramids designed to flatten both your wallet and your dream of running a business.

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