With the ability to reach out to dozens, or even hundreds or thousands, of people at a time through email and social media, it may seem like everybody you know is in business for themselves and selling something. You may get invites to parties selling jewelry, clothing, makeup, kitchen gadgets, or health supplements or be added to Facebook groups for “pop-up shops.”
Many of these businesses are multilevel marketing plans – people make money through their own sales as well as the sales of people who they recruit to their sales teams.
Multilevel marketing is legal, but there can be a fine line between these businesses and illegal pyramid or Ponzi schemes. The main difference is that with multilevel marketing, your income is based on actual product sales (by you and your recruits), while with a pyramid scheme, your income is based on you signing up other distributors. A Ponzi scheme is similar to a pyramid scheme but focuses on fake investment opportunities instead of sales.
Make sure you do your research before joining a multilevel marketing business. Here are some things to think about:
What will you be selling? Find out what you will be selling and compare prices and quality with other products. Make sure that any marketing materials you will be using are truthful and that there is evidence to support claims about the products.
Learn about the company. Look into the company’s track record and reputation. Look for a business review and complaints at bbb.org. Do an internet search with the name of the company and words like scam or complaint. You can also search for news articles related to the company.
Understand the plan. Make sure you are clear on all terms and conditions of the plan including pay and expenses. Remember that as you recruit other distributors, you are responsible for any claims you make about how much money they can earn, so be sure any claims are backed up with evidence. Get all information in writing.
Ask for the name and contact information of someone at the company who can answer your questions. Ask them things like: How many people are on your team? How long have you been in the business? How much money did you make last year? What were your expenses last year? How much product did you sell to customers and how much to distributors? What percentage of the money you’ve made came from recruiting other distributors and selling them inventory or other items to get started?
For more information
Check out BBB’s Money HQ for more tips related to finance, money, and debt.
