What is the difference between a pyramid scheme and an MLM? How can you tell if you are making a wise investment or if you are just throwing your hard earned money away?
When you are looking to start your own business it can be very hard to tell the difference. Once you start searching for a business, your email will be inundated with all kinds of great offers. "Make $5000.00 a month. GUARANTEED!" "Your down line is growing; join now to reap the benefits." You might find it hard to resist when they are showing you "proof" and "guaranteeing" you will not lose any money.
The bottom line is, if they want you to put up money, recruit others and promise you riches with no product to sell and no hard work involved, it is probably not a good idea to join.
Pyramid schemes are set up as just that, a pyramid. Someone at the top gets 10 people to put up money, he gets all that money. His ten recruits each get 10 people to put up money, they get part of that money and the guy at the top gets part of that money and those 10 get 10 more people to put up money and so on and so forth. You would have to have BILLIONS of people involved for everyone to make money and what about the last people who join? Where do they make money? Who did the guy at the top give his money to? Often these schemes are set up as "clubs" or organizations and they make their programs look really inviting with nothing to lose.
The key to keeping yourself and your money safe is to look at the program and analyze it. Lets say you find a company that looks good, and the investment is only $100.00. What do you get in return for your money? Does the company offer a product or a service? Are you encouraged to sell the product or service or is their main focus on recruiting other prospects?
This is the big difference between a pyramid scheme and an MLM (multi-level marketing). An MLM has a solid product and your focus is on selling it. A pyramid scheme has no tangible product or service and your focus is on recruiting others to join.
In a good MLM company you will be encouraged to focus mainly on selling their product to make money. Most MLM's do require money for start up costs. Start up costs can range from nothing to hundreds of dollars. You typically do get something in return, a start up kit which generally includes manuals, brochures, order forms and possibly samples.
When you join an MLM you are running your own business. You have the name and reputation of the company behind you and you have an up line for support. You will probably be encouraged to recruit others into your team but that should be secondary and with most good MLM's it is not a requirement. How you build your business should be up to you.
To find out more about pyramid schemes visit http://www.pyramidschemealert.org/home.htm
This site also features some very well known companies who have had lawsuits filed against them. In all fairness to these companies please read the entire article. Some companies have had lawsuits filed against them but changed their marketing strategies in order to comply with laws currently in effect. This makes the company legitimate and you should not be afraid to join if it is a product or service you feel passionately about.
Do lots of research. Check with the Better Business Bureau to find out if they have had complaints. www.bbb.org
Another place I check frequently is the www.ripoffreport.com. This is a great site where people from all over can report their bad experiences with any company. www.ripoffreport.com
As always, the number one way to protect yourself from any scheme or scam: If it sounds too good to be true, it probably is and dont believe everything you read on the internet.