What every person should know about multi-level marketing before signing up
Most people would like to make money on their own terms and by being their own boss. You need not go far to see promises to get rich or make thousands of dollars a month by doing little work or with no experience. However, the majority of the time, these promises are nothing more than scams.
What is multi-level marketing?
One promise to make money that all people should be aware of is multi-level marketing. With multi-level marketing arrangements, businesses recruit salespeople to sell certain products, which can be anything from energy drinks to diet pills to makeup to videos. Money is made not only by sales, but by additional commission made when people recruit more people for their downline, which is a group of people comprised of a recruiter, direct recruit, the recruiter's recruits, and so on. There can be multiple levels, with the highest being paid the most.
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What is a pyramid scheme?
What's tricky about multi-level marketing is that it can be difficult to distinguish between a legitimate opportunity and a pyramid scheme. A pyramid or Ponzi scheme is actually illegal. A pyramid scheme is when a person, the recruiter, recruits someone who is required to pay a certain amount of money to the recruiter. That person then supposedly makes his or her money back by recruiting more people, each of whom are also required to "invest." The more people that are recruited, the more money you are supposed to make.
This is fraudulent because the cycle in itself can't be sustained. This is particularly true for people at the bottom of the pyramid, who can't recruit the number of people needed to pay off all the recruits on the top. Roughly 90% of people who get involved in pyramid schemes lose their money.
Is multi-level marketing legitimate?
Legitimate multi-level marketing companies do exist, but there are a few things you need to look for in order to distinguish them from illegal pyramid schemes:
Multi-level marketing sells a legitimate, useful product. A pyramid scheme, on the other hand, tends to sell something outdated or inherently useless. Often, this can take the form of mailing lists, some form of reports, or email addresses.
Multi-level marketing makes money from products, not recruits. As a recruit in multi-level marketing. Recruits make money from the actual sales of the product, not the recruits of more people. Multi-level marketing will encourage you to recruit, but you will still be able to make money just by selling if you choose to do that and bypass recruiting altogether.
Multi-level marketing doesn't require "sign-up" fees. With legitimate companies, you can't make money from recruiting alone; your recruits must sell in order for you to make money. This way, they make money as well, unlike pyramid schemes, in which people at the bottom lose money.
Legitimate multi-level marketing will still require money upfront. New multi-level marketing recruits are often required to purchase their own training and marketing materials. However, this is generally regulated in that members have to sell 70% of their current inventory before they can get more.
Multi-level marketing businesses do have the potential for salespeople to make money. However, it's very important to do your research in order to distinguish a legitimate business from an illegal pyramid scheme.
