Is the Network Marketing Business Model (MLM) a Pyramid Scheme?

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My perspective on the age old question.

pyramid of people standing on each other's shouldersConsider the pyramid’s shape & structure:

  • It is smallest at the top making the most money (CEO/owner)
  • The larger the structure (corporation)
  • The more bricks that are needed (managers/departments)
  • The more bricks needed the more foundation required (employees)

Isn’t that a perfect example of the more  traditional corporate workplace?  A typical JOB? (Journey Of the Broke). Can you ever become the CEO???

What are some reasons the industry gets such a bad rap?

  • Some people don’t want to do the hard work required for success.
  • Many want immediate results & blame the MLM for their results.
  • Those folks shortchanging the process & resort to fraudulent activities of deception for personal gain.
  • It all comes back to the dark side of human nature. (greed & ego)

A Pyramid Scheme is sometimes called Ponzi scheme.

According to Wikipedia… Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation.

The MLM or Network Marketing Industry is a legitimate & legal business model.

You are the CEO.inverted pyramid made of various colored blocks

  • You decide your commitment level.
  • You can’t be successful until you help others become successful.
  • You can choose your company location & move it any where, anytime.
  • You decide when to work more to get a raise.
  • You decide when to take a vacation or sick day (without penalty)

What to watch out for from How Stuff Works  

Amway stresses that the main difference between a legitimate MLM business model and a pyramid scheme is that a legitimate MLM is focused on selling products, not recruiting more salespeople. In a legitimate MLM, it should be possible to make money by simply selling products directly to customers. With that main criterion in mind, here are some other ways to identify product-based pyramid schemes:

  • Pyramid schemes offer money for simply recruiting people. This money can come as a commission from the sale of a starter kit or as a recruiting “bonus.”
  • Avoid any MLM that puts much more emphasis on recruiting salespeople than selling the actual product.
  • Pyramid schemes charge steep startup costs for joining, including mandatory training, a starter kit and a non-refundable membership fee.
  • Beware of any MLM that allows five or more levels of distributors to collect commissions on a single sale.
  • Make sure that the products being sold have real value and a competitive price. Are they reputable brands? Have the manufacturers been involved in recent lawsuits?
  • Avoid MLMs that only sell lists of sales leads to other MLM salespeople. This is most likely outdated information that has made the MLM rounds several times before.
  • Avoid signing up for an MLM as part of a high-pressure motivational event. Consider the information carefully and take it home to think about it.
  • Be wary of anyone who tries to sell you on an MLM by flaunting their personal wealth. Realize that many of the people who claim to have made millions through MLM have actually made their money selling books and videos on how to make millions through MLMs.
  • Bottom line: If it sounds too good to be true, then it probably is.

I’ve been involved in the industry in a small way for 20+ years due to personal choice & previous circumstances.  The current economic conditions create the ultimate opportunity to become the CEO of YOU.Inc. 

Here is an interesting article on the statistics & trends, click here.

Now I am part of a couple teams that provide up-to date tips, tools & resources to help you build your network in any niche’ or any MLM or no MLM.  Yes, I represent a company but you may not be interested in the same things as I am.

Feel free to join my list & I’ll help you or point you to someone who can.  Thank you for stopping by!


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