MLM is often also known as network marketing, matrix marketing and multilevel marketing. Generally used as a way to sell goods through distributors, it is also used as means to scam people out of their money.
People are sucked into these schemes by means of promising them a lot of money if they recruit (sponsor) others into their team. Due to some of the commission plans some of these payouts can reach thousands of dollars.
A team is a downline, or also known as the levels of the structure. Often compared to an resembling a pyramid, mlm has fought and will continue to do so the general consent that in fact it is nothing else than a pyramid.
Interestingly enough, a plan that offers commissions for sponsoring others is outlawed by most states in the U.S. let alone in other countries. And here is where the whole mlm thing becomes interesting; many companies disguise themselves as above board mlms when in reality they are nothing but shoddy pyramid schemes.
According to the state laws multilevel marketing plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors!
This is very strong and should be so, since pyramids will eventually collapse, leaving behind a field of shattered dreams and thousands who lost their lifes savings.
The only ones who ever win in a pyramid scheme are those people at the top. The early risers.
But before you think you can be sneaky and opt in early when the next scheme is presented to you, think again. Many of these collapsed pyramids end up in court and it could be your neck that will be tightened if you happen to be one of the early risers.
So how do we analyze
The United States Federal Trade Commission cannot tell you whether a particular multilevel marketing plan is legal. They can also not give you any advice as to join any such plan. The decision process is left entirely up to you and here is where most problems start.
Many people simply dont have the judgement, nor the skills to make such an important decision. This is partially due to the state of mind in which most people join mlm schemes (they are often desperate to make money) or else they have been grossly misinformed.
Besides using a healthy dose of common sense and a sound frame of mind you can look at the following pointers to help guide you toward the right mlm. These hints are provided by the FTC:
- Try to avoid plans that includes commissions for recruiting distributors. They may hide an illegal pyramid scheme.
- Also, beware of plans that ask new distributors to purchase expensive inventory. These plans might be thinly disguised pyramids and can collapse rather fast.
- Be cautious of plans that claim you will make money through continued growth of your downline or team. A real mlm or multi level marketing company should be paying you for the sales of products instead.
- Beware very wary of plans that promise fantastic earnings or claim to sell miracle products. Here is the clincher: just because a promoter of a plan makes a claim doesnt mean its true! Ask the promoter of the plan to substantiate claims with hard evidence.
- Beware of shills: decoy references paid by a plans promoter to describe their fictional success in earning money through the plan. These are usually also the people who claim to have earned a ton of money at the next company gathering. It pays to keep a very alert mind and scrutinize the participants very carefully.
- Avoid to sign any contract in a high pressured environment. These could be opportunity meetings or other events. Instead insist on taking your time to think over a decision to join. Talk it over with your spouse, a knowledgeable friend or an accountant or lawyer.
- Do your homework! Check with your local Better Business Bureau and state Attorney General about any mlm plan youre considering.
Especially when the claims about the product or your potential earnings seem too good to be true.