The economy is recovering slowly, but it's still pretty rough. As people try to balance low wages, tight schedules, and family obligations, multi-level marketing companies are experiencing something of a golden age. Odds are, you know someone on Facebook who's constantly trying to talk you into trying Jamberry or Shakeology or Vemma (well, at least until last week). Something about it seems a little off to you, but you're not sure what that something is.
These multi-level marketing companies are structured very similarly to a pyramid scheme - a "company" where money is made not be selling products, but by drawing new resellers into the company. Only the people at the top make money in a pyramid scheme, and while many countries don't distinguish an MLM from a pyramid scheme, the United States does. Unfortunately, there's some legal gray area in between the two. The good news is, there are some red flags to look out for. You can protect yourself if you step away from the hype and look at the situation with clear eyes.
Find out where the company is located.
This seems like a joke, but it's not. There are some exceptions - Amway has gotten into legal trouble for being pyramid-scheme-esque, and it's based out of Maryland - but most companies that toe the line between MLM and pyramid scheme are based out of Arizona or Utah, where the laws about pyramid schemes are the most relaxed. Vemma, which was recently shut down by the government for being a pyramid scheme, was based out of Tempe Arizona. Plexus, Forever Living, and a whole host of others come from there, as well. It doesn't mean the company is, legally, a pyramid scheme. But it does mean they've put themselves in a position to get away with more. That isn't an accident.
Do the research.
Going to the forum for the company courting you and looking at all the happy customers talking about how selling nail extensions enabled them to pay off their house doesn't count as "research." Google the name of the company and look for FTC complaints, FDA citations, anything where they've gotten in trouble. To dig deeper, Google the name of the company along with "pyramid scheme" to see what other people are saying. That company is going to try their hardest to make sure that what they want you to see dominates the front page of your search. Look for the dirt on purpose.
Ask, "Are they asking me to spend money up front?"
Every business has start-up costs, and every business has inventory expenditures. Not every business has minimum order thresholds, "membership tiers," and vendor education that you have to pay to experience. Take a look at what they're asking you to spend money on and evaluate whether this company is making their revenue off of product, or off of people like you.
Do some honest math.
The company wants you to buy the product up front. They may also want you to pay for a membership tier. There may be supply fees. Maybe they only allow you to purchase your website directly from them. Take a look at the complete cost of doing business with these people. Figure out how much you'll have to sell before you break even. How much more you'll have to sell to make your car payment, your house payment. Ask yourself if it's really worth the time, or if there are better ways to make money.
Are they insisting they're not a pyramid scheme?
Companies that aren't pyramid schemes usually don't have to spend time denying that they're a pyramid scheme. Because they don't get accused of it. Just throwing that out there.
Recognize the futility.
You only know so many people. Eventually you're going to recruit all of them - because that's where the REAL money is made, after all - or you're going to drive them out of your life by incessantly prattling about whatever it is you're selling. Either way, you're not going to have any "loyal customers," because the loyal customers turn into distributors themselves. That's the entire point.
If you must do it, treat it like a real business.
Don't hold house parties. Don't harass your friends on Facebook. As the above point mentions, you only have so many friends, and as soon as you start harassing them about a product - however great you feel it is - you're going to have fewer friends. If you simply have to sell Nutrilite or whatever, then get a kiosk at the mall, or a booth at the local flea market, or whatever you have to do to actually get your product out into the world. Regardless of what the company tells you, selling your product at work like Girl Scout Cookies isn't effective for getting off the ground.
Find something else to do.
Remember when you were young and optimistic and full of creative spark? What was it you liked to do? Maybe you knit. Maybe you wrote music. Maybe you're really good at organizing filing cabinets. Whatever it is, there are places where you can do that thing, and make money off of it. Sell crafts on Etsy. Sell professional services on Fiverr. If you're going to go to all the time, trouble, and expense of having an entrepreneurial career, why not focus it on something you actually care about, instead of something that a company is asking you to pay them to hawk on their behalf?
