I have joined Multi-Level Marketing Companies in the past. I can honestly say it is not for me. The presentations I was exposed to really sounded great. I wanted to do it. However, I found out in each case I am just not cut out for what it demands. You may have questions on exactly what MLM (Multi-Level Marketing or Network Marketing) actually
is and is not. You may be someone like me that asks are all MLM Companies Scams? A close look exposes the truth.
There is so many money making scams on the internet and Multi-Level Marketing is a business model that is everywhere. It is good to do your due diligence and find out the truth for yourself.
It is true that some MLM Companies may come very close to being scams in my opinion. Some may, in fact, be scams. It is best to do your homework before getting into one.
Are MLM Companies good?
The statistics according to Robert Fitzpatrick, show that most people (99%) who get into multi level marketing do not make any money. They are not “good” in fact, in my opinion, they are bad, really really bad as only the ones at the top make any money.
Robert FitzPatrick is an expert in examining and revealing deception and fraud in bogus home-based businesses. He is an author, teacher and internationally recognized authority in multi-level marketing schemes and pyramid sales fraud. He is a catalyst and leader in the international effort to end the pervasive fraud in the multi-level marketing business
They may be out to scam you out of your money. However, are they? At first glance, if 99% of people who join lose money or just do not make any money, then I would think most people should not join one.
Even though at first glance if 99% of people who join an MLM Company do not make any money and the majority of people should not join one, that does not mean it is necessarily a scam.
I find that there are scams out there because a lot of people looking to make extra income online want an easy way to do it without putting in the work required. They want to “get rich quick“.
However, whatever way you go about making money, it is never without work. Some MLM companies do have some things in common with scammers in that they “sell” you on the idea of how easy it is to get rich if you just join them.
They may use the same tactics like how great the product is and it will sell itself, or that you can make a lot of money really quick in fact you can “get rich quick“.
The MLM companies that use these tactics may not be a “scam” company but may, in fact, use scam-like tactics to get you to sign up as their goal is to recruit new members.
In August of 2016, the FTC International Monthly reported that “Herbalife International of America and two affiliated companies have agreed to fully restructure their U.S. business operations and pay $200 million to compensate consumers to settle FTC charges. The FTC alleged that the companies deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products. But the truth, as alleged in the FTC complaint, is that the overwhelming majority of distributors who pursue the business opportunity earn little or no money. The FTC also charged that the multi-level marketing company’s compensation structure was unfair because it rewards distributors for recruiting others to join and purchase products in order to advance in the marketing program, rather than in response to actual retail demand for the product, causing substantial economic injury to many of its distributors.”
I would say please do your research. There are those who are cut out for what it takes to become successful in MLM. The fact is that most who join do not have what it takes to make it to the top 1%.
Are MLM Companies Legal?
If you go to the FTC website, you will find that “not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s probably not. It could be a pyramid scheme. Pyramid schemes are MLM-2 illegal, and the vast majority of participants lose money.”
If you read the quote above closely, you may have caught “it MAY be a legitimate multilevel marketing plan.” It is either a legitimate multilevel marketing plan or a Pyramid scheme.
To break it down, according to the FTC, there is a product and the money you make is based on sales of the product to the public not how many recruits you acquire.
MLM or Network Marketing VS Pyramid Scheme
The difference between MLM and a Pyramid Scheme can be very hazy. Robert Fitzpatrick is considered a leading expert on Pyramid Schemes states in an interview by CNBC states :
“The math is a distortion, a manipulation of what they call exponential expansion. Exponential expansion is two times two times two times two. And almost all of these schemes tell you that you can make money by just recruiting three or four, five, let’s say, five. Then you let the five do their five. That gives you 25. That’s the exponential expansion. That’s the trick of the whole thing. What they don’t show you is that you can only do that 13 cycles. And you would exceed the population of the earth. So it can’t work. But even as long as it works, the vast majority are always in the bottom positions, which have not yet and never will, in most cases, extend the chain so that they can get their money. And so it always dooms the vast majority and it can never keep going, so it’s unsustainable. “
There is the problem for these so called legitimate MLM’s of “saturation”. MLM’s absurd claim to “perpetual growth” has always been a lie according to Rob.
These companies where your income is based on recruitment rather than product sales are pyramid schemes plain and simple.
The FTC International Monthly also reports that Herbalife must restructure their compensation plan –
“In addition to imposing a $200 million consumer redress judgment, the settlement mandates a new compensation structure in which success depends on whether participants sell Herbalife products, not on whether they buy products. It requires Herbalife to tie distributor rewards to verifiable retail product sales and stop misleading consumers about potential earnings. More information about the Herbalife settlement is available in the Commission’s public statement and in blogs for consumers and business.”
As you can see you must be very careful if you are considering joining an MLM company as even well-known companies may be using not so legitimate marketing practices.
If you are thinking about joining an MLM or Network Marketing Company
I am very skeptical when it comes to MLM. However, I have researched and have come to the conclusion that some can and do make it work for them. I do believe that the majority of people who join an MLM do not make any money and more times than not they lose money.
I posed the question “What do you think of Multi-Level Marketing? Is it a scam?” to the community at Wealthy Affiliate (of which I am a member) and you can read the comments and testimonials here. I was pleased to hear that there are in fact people who do make money in MLM. However, most do not make any money and in fact, lose money.
If you are thinking about joining an MLM I would urge you to do some research into the company before you sign on the dotted line. Make a pact with yourself not to get lured by the hype too quickly. The “Opportunity Meeting is designed to
prey on your emotions.
Always sleep on any decision. While you sleep your mind will process the information and you will most times awake with a new perspective and most times a “gut feeling”. I don’t know about you but when I ignore my gut feeling, I almost always regret it.
Here are some guidelines to think about before “signing up”:
- Find out everything you can from your Sponsor about the compensation plan
- the compensation structure
- your potential expenses
- support for claims about how much money you can make
- the name and contact information of someone at the company who can answer your questions
- How good is the product? Does it overpriced? Are claims supported by independent reviewers?
- Does it fit in with your talents, goals, and abilities?
If your profit is made from how many recruits you sign up under you and not product sales to the public, avoid it as it could be a Pyramid Scheme and therefore a scam.
According to the FTC here are the questions you should ask to be safe:
- What are your annual sales of the product?
- How much product did you sell to distributors?
- What percentage of your sales were made to distributors?
- What were your expenses last year, including money you spent on training and buying products?
- How much money did you make last year — that is, your income and bonuses, less your expenses?
- How much time did you spend last year on the business?
- How long have you been in the business?
- How many people have you recruited?
- What percentage of the money you’ve made — income and bonuses less your expenses — came from recruiting other distributors and selling them inventory or other items to get started?
MLM or Network Marketing Companies are everywhere. If you are considering joining one It is very important that you know the difference between a Legit MLM Company and a scam like a Pyramid Scheme.
As with just about anything, there is good and there is bad when it comes to the Network Marketing Companies and even the Legit companies that have been around for a while can use scam techniques by misleading potential recruits.
To be safe, be sure to critique any MLM Company thoroughly before considering joining. Check out the company and how good the product is and everything about the compensation plan.
As 99% of people who join MLM or Network Marketing Companies do not make money and most lose money, take your time and maybe join a company like Wealthy Affiliate University where you can learn everything regarding online marketing and how to build a business for the long term.
I hope the answer to the question “Are all MLM Companies scams?” A close look exposes the truth has brought to light some interesting insights for you. I hope you make the right decision if you join one. Be careful and know if you are cut out to what it entails. Most are not cut out for MLM. However, everyone has a passion or something they are interested in. Take your passion and build a business. Get started building your business and get some special bonuses. Just click the button below.
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