What Multi-Level Marketing Businesses Don't Tell You

Many of us have had a friend or acquaintance approach us with "an incredible, ground floor business opportunity." Your first reaction is, perhaps, excitement, who doesn't want a chance to earn more money and be financially independent? Then you are told you can only hear about this opportunity at a gathering at their home or via a conference phone call or a meeting of others involved in this "opportunity". By now don't be surprised if you begin to get an uneasy gut feeling that there is some kind of hidden agenda or deception. Is this a multi level marketing company? Suppose it is. Should you get involved and should trust your instincts?

This is the approach used by many multi-level marketing companies; chances are you have been approached about becoming involved with them. Sometimes it is really difficult to say no to a friend or relative that has "invited" you to attend after all they would be involved in a shady situation. When you get there it is almost always someone presenting who is practiced at giving a presentation, offering you the chance to become very well off, or even rich. Beware; there are reasons why you should not get involved.

1. Very few people make money. In fact you are likely to loose more than you can afford. Especially if they ask you to buy a starter kit, products, membership fee, or anything along those lines.

2. You may end up losing friends and respect for yourself.

3. These organizations are not sustainable. They will collapse.

MLM Products are overpriced and underwhelming.

Does it really matter what the product is? For most of these organizations, the product is only incidental to the real profit making dynamic. For anyone who has ever wondered why, if the product is so great, isn't sold in retail stores or on an internet website? The answer is because it isn't the product they are promoting. These products cover a broad range of items for example, vitamins or nutritional products, make-up, cell phone, clothing. Auto-products, security systems, the list of products go on and on. Nobody wants to join a multi-level marketing organization to sell the product. The product may be good or useful (as are a million other products), but it is the "cover" for the money making part of the program.

Most of us really do know that the money making comes from a business structure that has been called a "pyramid." Except they never admit to being a pyramid scheme, because those are illegal. They will usually deny that they are organized in that way. These companies circumvent these laws by insisting you tell some product instead of just recruiting people to join you in this business venture. As long as they have something to sell it isn't technically considered a pyramid.

Matrix? Pyramid? It's all the same.

You soon see that the way to make money doing this is to convince ten people (or any other number) that everyone is going to want what you are selling, even if they aren't buying it now in the marketplace. Even if they are buying it they will tell you that the product or service is "superior" or "revolutionary." Then the each of the people that you have recruited need to convince ten other people until there is an organization that looks like a matrix (also known as the pyramid.) As long as you sell to a few people along the way it is legal. The idea is that you earn a percentage of the profits off all of the people down the line. Die hard multi-level marketers are reluctant to acknowledge that in just three levels of people you have 1,000 people.

How long before there is market saturation? They will tell you that many people drop out and are not successful. They are right. They have a 98% drop out rate. You may be among the many that aren't successful. Although they insist this won't be you, because you're different. During "the pitch," anyone can make it work. "It's the opportunity of a lifetime." "Just look at the math." But mention the inevitable saturation and the losses this is going to cause for everyone, and then you'll hear "Of course it would never really work like that." "Most will fail, but not you Mr./Ms. Recruit. You are a winner."

There organizations are doomed to fail because of the structure involved; you cannot keep recruiting at the rate necessary and not run out of customers and people to recruit. After all, if everyone is a "distributor," to whom do you sell the product to? One of the frequent things you will hear is that the new program is going to be better because of the people running it have been successful in other multi-level marketing companies, ask yourself why they are starting something new. The reason is that the house of cards has collapsed and they must start a new company and they will bring you along for the ride.

Why some people make money and other's don't. You won't!

Let's look at how mulit-level marketing companies operate. By their very long design, the people who are at the top of the organization make money whenever someone is "hired," because there is always a "buy in" of products or a right to the territory. So these people always make money whether you are successful or not. They, of course, initially want you to be successful at bringing in other people. They even build a scam within the scam by selling you advertising materials to sell their products. They sign you up for training programs that cost money as well. The only person who really uses the products is the "distributor" who was told to buy a lot of product and has his home filled up with more than he can ever use.

The multi-level marketing organization becomes exploitative, and many high level multi-level marketing promoters have been shut down, the "executives" sent to jail for selling the fraud of impossible success to others. Other larger multi-level marketing companies have survived by hiring large batteries of attorneys to ward off federal prosecutors, even bragging about the funds they have in reserve for this purpose. These people are con artists, and are able to persuade you to believe it will work for you.

The unfortunate "distributor" at the bottom is the loser, which is most likely you. Once this becomes apparent beyond all the hype, slick video tapes and motivational pep-talks, good people start to get a bad taste in their mouths about the whole situation. People involved in these schemes may loose money they can ill afford to lose and run up sky high credit card bills. The really bad thing about becoming involved with multi-level marketing companies is how you may end up feeling about yourself when the credit cards are maxed out and it still isn't working.

If you do get out and recruit your friends and relatives they will lose money by becoming involved and the guilt will be all over you. You will feel sorry for getting involved in this and dragging them down with you. This will affect your relationships with friends and family. You will start to avoid people and be afraid to answer your phone because the people you recruited want to know why it isn't working.

Is anyone watching out for you? The Federal Trade Commission is.

If after all of this, you still think it might be for you, check out what the Federal Trade Commission office has to say about this. They have investigated many of the multi-level marketing companies and they have prosecuted some of them. But they are becoming very good at working on the fringes of the law and you must be careful about getting yourself mixed up into this.

The FTC suggests that you use common sense, and consider these seven tips when you make your decision:

1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.

2. Beware of plans that ask new distributors to purchase expensive inventor. These plans can collapse quickly and also may be thinly disguised pyramids.

3. Be cautious of plans that claim you will male money through continued growth of your own "down line" These commissions on sales are made by new distributors you recruit, rather than through sales of products you make yourself.

4. Beware of plans that claim to sell miracle products or promise enormous earnings. Just because a promoter of a plan makes a claim doesn't mean it's true! Ask the promoter of the plan to substantiate claims with hard evidence.

5. Beware of Shills or decoy references paid by a plain's promoter to describe their fictional success in earning money through the plan.

6. Don't pay or sign any contracts in an "opportunity meeting" or any other high pressure situation. Insist on taking your time to think over a decision to join. Talk it over with your spouse, a knowledgeable friend, an accountant, or lawyer.

7. Do your homework! Check with your local Better Business Bureau and state Attorney General about any plan you're considering - especially when the claims about the product or your potential earnings seem too good to be true.

The Iowa Attorney Generals office also encourages people who have been taken advantage of to call and report what has happened. They probably can't get your money back but they can collect data to caution others. They have a web site with information similar to the Federal Trade Commission and specifics on how Iowa law applies to these operations.

For the sake of your time, your money, your friends, and your self esteem, don't be taken in by these con artists. Please know that many others have tried and failed and if you succeed, you do it on the backs of others.