Network Marketing: PYRAMID SCHEME or LEGITIMATE BUSINESS MODEL?

“Is this one of those pyramid schemes?” is a question most involved in network marketing are often faced with. Honestly, I am still taken aback whenever this question comes up. Took me sometime to get used to it, now it is a part of my experience. I must say it is a legitimate question which has the right to be posed.

However, pyramid schemes are different from legitimate network marketing companies. One is illegal and the other is not. A Pyramid scheme or scam is an illegal, non-sustainable business model involving the exchange of money without a tangible product.  Folks involved in these are con-men who make money from bringing others in without a product.

With Network Marketing (MLM), there’s always a tangible product or service for which distributors are compensated when sales are made, as discussed previously in Network Marketing – the Ultimate Money Making Machine. MLM is a legitimate business model, involving entrepreneurs or distributors who have been licensed to represent the company and provide the product or service. You probably know folks who have sold Tupperware, beauty products, nutritional supplements, knives, telecommunications services, etc and made an honest living.

The similarity between pyramid schemes and legitimate MLM companies is only in the fact that they both use a multilevel compensation system.

Over the years, pyramid schemes have disguised and presented themselves under the umbrella of legitimate network marketing companies to hide from law enforcement and have given the industry a bad name.

The last thing you want to do is become involved in a multilevel system that is in reality a scam. How can you tell the difference? Remember, the first thing you want to ask for is the product or service being offered. What is it you will be getting paid for? With most pyramid schemes, the product being sold is the business opportunity. Make sure you keep your eyes open and your thinking faculties working!  Companies that are members of the direct selling association, and other mlm associations are usually legit.

The Structure of a pyramid

“Is this one of those pyramid businesses?” they ask.

“I don’t mean to answer a question with a question, but what do you mean by ‘pyramid’?” I often reply.

 

Continue reading in my book: HOW TO WORK FOR YOURSELF: Discover The Success Principles I Learned From Being Self-Employed For 20 Years

 

3 Comments

  1. I can’t think of any organization which is not structured like a pyramid. By the way, John Wooden went even further to structure the principles of success in the form of a pyramid in his “Pyramid of Success” which is still relevant in business today. Thanks for the brilliant post.

  2. People deserve wealthy life and home loans or small business loan will make it much better. Just because freedom depends on money state.

  3. This is a wonderful post. Really, what isn’t a pyramid?

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