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How To Distinguish The Pyramid Scheme Of Multilevel Marketing

If you’re looking for a way to earn some extra cash, you may be wondering if the sales opportunity isn’t too good to be true. Knowing the difference between legal multi-level marketing and illegal pyramid schemes can help you make safe decisions when considering this job.

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How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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Find out when the company was founded. The top 25 MLMs have been around for 10 years and over 20 MLMs are legal, but beware of companies that are less than 10 years old. Because pyramid schemes are illegal, CEOs typically close their doors as soon as they make significant profits.

How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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Do a web search for your business. You can find many unbiased sources on the Internet with opinions on companies. To go directly to user feedback, add keywords like “Scam”, “Reputation” or “Notice “. While pyramid schemes can hire online sellers to generate fake reviews (another illegal practice), you should look for both positive and negative reviews.

The Better Business Bureau (BBB) ​​is a great place to start. A nonprofit organization that handles corporate complaints and resolves issues of illegal or unethical conduct.

Another great resource is the Federal Trade Commission website, which has information on companies charged or fined for illegal business practices.

How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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Look at the company structure. With so many self-motivated followers, MLM can look more like a board on the surface. However, MLM uses this system as an alternative to larger advertising budgets. Rather, this task is performed by field salespeople who tell others about their products. If a company emphasized the role of managers in recruiting “lower-ranking” new employees rather than the role of salespeople, it would likely be a pyramid scheme.

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Downline . MLM can also be confusing because it gives sellers the ability to move into supervisory roles.

How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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See Rewards. MLM monetizes sales rather than donations from new members. They want to hire and retain better salespeople, so they reward them well. Level charts shed light on lower level reward details to show you how much you can earn after leveling up. You pay to give your salesperson a real profit, as well as the real average annual salary of a non-CEO entry-level employee.

An MLM strategy is to create a large number of sellers to distribute the project and significantly increase the sales force. In addition to the billing made by the recruits, the promoter receives a commission for the sale of the product.

How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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Learn more about our refund policy. Pyramid schemes that have or claim to have real products should investigate whether those products are fraudulent. One way to do this is to see if you can expect a full refund for an unused product. Pyramid schemes often result in people who have bought bundles of worthless products finding out they are not for sale. Then, when people contact the company, they mention a “no return” policy in the contract.

How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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Find out how they promote you. People move up a hierarchy based on the number of recruits they have recruited. MLM promotes people based on the number of sales or similar performance criteria. If it can be promoted without an official date, it’s probably a pyramid scheme.

Business model search

How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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See economic model. MLM must be very clear. Vendors are recruited to sell products in bulk to people outside the company. Pyramid schemes rely on promises and buzzwords to disguise the fact that there is no legitimate business model. Its real model does not encourage many people to buy it.

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The MLM business model must be easy to understand. For example, they may have a successful line of health products. Products like shampoos often make a strong impression on consumers because they are inexpensive to mass produce. Use this method to see how your business is making money.

The business model of hierarchical graphs is confusing. They often include fanciful promises to revolutionize their industries or provide “miracle products”. More importantly, it emphasizes the hiring and promotion process rather than the product itself. You won’t be attracted until you understand how the business makes money.

How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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Research the products they sell. This is the greatest giveaway of the pyramid scheme. They often don’t even mention the products you’re going to sell, they just talk about hiring and making money offline. The products they sell are often ridiculous, unsaleable, and are actually chosen for their charm by selling rather than using. MLM offers useful everyday products that have been sold both in store and online for decades.

Some examples of bogus pyramid schemes are “miracle cures,” unknown health products with seemingly high prices, or low-cost, high-return investment opportunities.

How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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Find out how employees earn money. Pyramid schemes often offer products with lower margins. You must earn real money by recruiting new members. These details may not be obvious to anyone outside the company, so you should use these other criteria to make your decision. The product may not be a free gift.

For example, let’s say you have a pyramid scheme to sell cheap DVDs. It looks like a legitimate product. But how much profit do you expect to make on each unit? It can be hard to tell. Apart from that, if you have high rewards for recruiting members, look for other signs of hierarchy.

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How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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Watch your cash flow. Is the business sustainable? A stable business depends on cycles of production, marketing and sales. Money goes in and out. If your money seems to come only from people inside and not outside of your business, you’re not self-sufficient.

How to Distinguish Between a Pyramid Scheme and Multi‐Level Marketing
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Find out what your contribution is. Carrying a popular cosmetic bag can be a safe investment. If you have the option to contract with someone else, it is most likely a pyramid scheme. It should be a viable business opportunity for everyone from downline to executive.

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