Pyramid Scheme-Avoid Pyramids (Not the Egyptian Kind)

tweetmeme_style = 'compact';tweetmeme_source = 'articlerich';How Can an MLM Pyramid Scheme be Legal?

A legal MLM pyramid scheme? Sounds oxymoronic, right? Funny how the word MORON kind of pops out. Most MLM companies are banking on it. Moronic distributors is what the network marketing companies want. It's too bad because some MLM companies are really great and offer many people a legitimate opportunity to own their own business. If you research a company and it is part of the Direct Selling Association, you assume it is a legal company because IT IS. Network marketing companies will meet bare minimum legal requirements to claim they are direct selling companies. But the company structure is a pyramid. Let's take a look at the explanation of a pyramid scheme.

The Definition of a Pyramid Scheme

The description of a pyramid scheme, according to Wikipedia, is a business model that is non-sustainable and primarily involves the exchange of money for enrolling other individuals into the scheme, frequently without any product or service being delivered. An MLM company can legally proclaim itself a direct selling company just by presenting a product or service that a consumer would buy even if a commission is not received. Why wouldn't the company pay a distributor more for selling than recruiting? And how does one discover the scheme?

It's All About the Payout

The answer to inquiry number one is the sign up money is required to pay existing distributors. The company is generating some revenue from sales, but not enough to pay existing marketers. So the company motivates the existing marketers to do intense recruiting by giving higher payouts on new distributor sign ups. The money paid by the new marketer to get involved in the MLM company is given to his/her sponsor.

The second question has a very uncomplicated answer. To expose the scheme you must STUDY the compensation plan...PRIOR TO handing over your hard-earned money. The network marketing company is a legal pyramid scheme if most of the compensation is paid as a result of recruiting instead of selling products and services. Getting involved with a legal pyramid scheme will put you along side the 99.7% of network marketers that don't make money. The variety of compensation plan the company has doesn't matter. You CAN make decent money in any one of these compensation structures...IF the majority of the compensation is from actual sales. It's much harder to control a downline team fallout rate of 80-90% (typical in the network marketing industry) than it is to influence sales. So, if the largest part of your compensation comes from sponsoring, your sponsoring efforts will have to outpace your fallout rate.

Don't Run from Network Marketing

Does any of the above strike a cord? Have you experienced a legal MLM pyramid scheme first hand? Don't beat yourself up too much. I have too! I'm sure we're not the only ones. It stands to reason why the MLM success rate is low. But now that you've read this article, you have a tool in your resource box to make a smarter choice next time. The opportunity afforded by network marketing is matchless. Don't let the bad apples spoil the entire bunch.