Your MLM is a Scam!

Discussion in 'General Advice' started by FFVictor, Feb 14, 2010.

  1. FFVictor

    FFVictor New Member

    How many times have you heard that? This statement might be one of the biggest obstacles to overcome when building a MLM or a Home Based Business. The negative stigma associated with this opinion has continued to plague the industry. Even though many companies such as Amway and Mary Kay have been successful for many years, most traditional business minded thinkers view all MLMs as scams. Many times it is difficult to introduce new people to this industry with such a negative persona. So how do we as associates and distributors handle these naysayers? One answer may help: education.

    There are a couple of very key elements that are indicators of a legitimate MLM company. If these fundamentals are not in place, you can probably expect that company will not be in operation for a long time. Some of these elements may even be purposely manipulated and hidden by the company; that even you as a distributor may not recognize them. Being able to identify these signs are truly the only way you are going to protect yourself from getting involved with a negative company and loosing your money to a scam. So you may have to dig a little deeper into the business plan and the company as a whole to see the red flags.

    The number one, and probably the most important aspect; is the company must bring a product or service into the marketplace that is retailable. These products or services have to reach the end user (customer) through efforts of a direct sales representative. The commission paid for this transaction is based on the result of the sale or volume of the sale, rather than the efforts of the sale itself. A telling sign of the retailable products and services is if no one but the distributors buys those products or services, then the presumption is they are not retailable. Also, there must be 1099s issued by the company to these independent contractors for these sales.

    The payments and compensation plan opens many questions regarding a legitimate MLM. There are many factors to consider when looking for the right opportunity. The company's comp plan needs to be designed to reward representatives for the sales of the product or service. Personal sales consumption and sponsoring a new distributor comes into question as well. What separates all of these issues is the bonus or compensation must be based on the sales volume of the transaction; weather it is retail volume, personal volume or volume created and consumed by the second (new) distributer.

    One of he biggest reasons our industry has gotten a lot of the negative attention over the years is the practice of sponsoring. The MLM and Network Marketing Home Based Business industry is one of few who use this practice to develop an individuals own business. There are so many outsiders that don't understand this concept and quite frankly; think it's a dirty scam in itself. Have you every heard them say, "well it's only the people on the top that make any money." This concept has always troubled the traditional thinkers because they are stuck on the fact that you can make money from your personal sponsors and their efforts. So being able to differentiate between the legitimate practices is extremely important.

    When sponsoring a new distributor, that same new distributor must have the exact same rights and income opportunity as you do. So there is no automatic advantage to joining a MLM before another representative. With that, there cannot be a ranking or level advantage by means of a higher initiation fee for joining the MLM. If a rep paid a higher fee to be placed on a higher level of the "pyramid"; and in turn was able to receive greater commission percentages, solely based on their higher position; it is illegal.

    You have to find out if money can be made in the company without sponsoring. There must be a place in the comp plan for the reps that do not sponsor. The sponsoring of another rep must be optional. If the only way a rep can make money is to bring to the company more reps, the comp plan is fatally flawed. Also, no reward or compensation can be made to the sponsor for the sole act of recruiting. Such rewards are called "headhunting fees" and are barred by law.

    There are a lot of factors to consider when choosing a MLM company and introducing the opportunity to others. You are not going to persuade everyone. You are not going to convince everyone. But be aware of the red flags and do your homework when researching a particular company. You have to be educated of the pitfalls. You have to be prepared for some of the obstacles that may be in your way of reaching your goal. When someone calls your MLM a scam, you can respond with the facts. This information in your back pocket may help a little. The worse that can happen is you may appear a little more professional and perhaps you might impress a prospect with your knowledge. Who knows, maybe one day you can change the mind of a naysayer.

    Legal information obtained by Business Associate Advisory.
    Gerry Nehra. Nehra & Waak, Attorneys at Law.

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  2. mtran2000

    mtran2000 New Member

    I think MLM gets a bad rap because of the following reasons

    1) There have been several companies shut down as they were pyramid schemes. Hurts the whole industry when that happens.

    2) Too much deception with MLM. I bet a lot on here have been lured to to meetings where you don't know what it is about until you get there.

    3) Dishonest sponsors who are faking it until they make it and promising people they sign up things they can't deliver.

    4) Over priced average products.

    5) Unstable companies How many come out the gate with a lot of hype and are gone within 2 years and leave a lot burned members that either have to start over building a down line are done with MLM forever.

    There are some very good MLM companies out there but also too many that are not in for the long haul and literally take the money and run.

  3. mountainmom5

    mountainmom5 Gold Member

    mtran2000: 2) Too much deception with MLM. I bet a lot on here have been lured to to meetings where you don't know what it is about until you get there.

    3) Dishonest sponsors who are faking it until they make it and promising people they sign up things they can't deliver.
    These two reasons are the biggest ones in my experience.
  4. FreeCashMan

    FreeCashMan Well-Known Member

    Granted there are scams by design by the designer of the biz. However, all to often many call scam because they paid money to start the biz and simply didn't really commit to working the business to get results.

    Everyone wants instant home business success, especially with the internet where people think the net is the answer for instant riches.

    To succeed with network marketing you simple need access to training and support that will help you "make it" as long as you commit and stay consistent in your efforts.
  5. mtran2000

    mtran2000 New Member

    MLM's are usually built on two platforms.

    1) Product based with a hot new item. Weight loss products are popular.

    2) Opportunity based. People join strictly to make money and the product is secondary.

    I prefer a product based opportunity because I feel there will be better down line retention. Opportunity only seekers if they don't make money in a relatively short time drop out and move onto next thing.

  6. talfighel

    talfighel Silver Member

    While MLM is not a scam at all and is a very legitimate business opportunity, people will always say that it is a scam. Usually these are the same people who were in an opportunity and thought that after they talk to 2 people then would get rich quick.

    When someone comes to you, even online, and tells you that you and your company and this whole MLM industry is a scam then there is one thing to do with these people.

    IGNORE THEM and move on.

  7. MakingMoney

    MakingMoney New Member

    I talk to a lot of people who are looking to make money online / from home / and with network marketing...

    One of the misconceptions many of these people have is that someone else is going to build their business for them. All they have to do is sign up and "spillover" will make them rich.

    One of the most common questions I hear is "How are you going to make me money?"

    This lottery ticket mentality -- if I sign up under the right guru, I'll be all set -- is what causes program jumping and instability.

    Network marketing has three major components

    1. Networking
    2. Working
    3. Marketing

    To your massive success,

  8. VictoriaNTC

    VictoriaNTC Silver Member

    There is value in just doing your own thing without worrying about it too.

    Be honest, helpful and deliver on your promises and things should work out.
  9. talfighel

    talfighel Silver Member

    MakingMoney: One of the misconceptions many of these people have is that someone else is going to build their business for them. All they have to do is sign up and "spillover" will make them rich.
    Another one is that people when they see this business think that everyone who they know and everyone who they will contact will join them. Not a problem.

    But when rejections come, this discourages them to move on and they quit.

  10. Matt Zenittini

    Matt Zenittini Silver Member

    MakingMoney: One of the misconceptions many of these people have is that someone else is going to build their business for them. All they have to do is sign up and "spillover" will make them rich.
    If you are lucky enough to be recruited at the top of a hitters downline you will=].

  11. Simple way to avoid MLM scams, just ask yourself one simple question, would I purchase this companies products or services if not for the income opportunity? If you can honestly, and I mean honestly answer yes, then it probably is safe to say it is not a scam.

    On the other hand, you would not purchase the products or services promoted, then how can you honestly expect everyone you know will be customers. It doesn't work that way, and for good reason, most people are not sales people, so to expect people to sell the average MLM deal to others when they themselves would not be involved without the income opportunity says it all, and why 97% fail in industry.

    I have come to the conclusion that the spillover fairy is dead, and if she ever did bless anyone, it was the good luck fairy, similar to winning the lottery. Sure, it is possible you can recruit a winner, but lets be real, most professional networkers will only sign up under the so called heavy hitters, so think lottery the next time you are hyped on the income side of MLM before the value.

    Sadly, most MLM's offer zero value, so the only chance you have if no value is seen in products or services is to target truly exclusive products or services, and these too are difficult to find, and I should know, this is what I focus on and target, value or exclusive offerings, and there are very few which meet my recession proof attributes, so good luck. MLM was suppose to be a lower cost distribution system, yet it rarely turns out to be less, in fact, name any company where you can prove your product is less than found elsewhere? This could be an interesting seach for most.

    Success to all,
  12. John Park

    John Park New Member

    Why MLM's usually get a bad rap is because a lot of people that join them don't have the knowledge of how to promote the MLM. The other thing is they don't know how to take care of their down line. If they don't teach them and keep up with them then they will probably not make any money and they will quit on them.
  13. 1life1fire

    1life1fire New Member

    If I see that a "website" is offering a great product or service that I can buy and use for myself because it will end up benefiting me, my own online business, my website, or benefit me in general... then it doesn't matter to me if there's a "MLM" attached to it.

    I've learned to only purchase something if it's going to help my business!

    People get into MLM's after reading a webpage thinking that their going to suddenly over night become financially wealthy and be able to quit their job tomorrow. That is the entire "Pitch" of the MLM industry... no matter what product they are selling.

    Then after they spend their hard earned money on the product and website, then spend tons of cash and time promoting their "affiliate link" hoping that thousands of people will sign up into their downline...

    When that doesn't work as they envisioned it... They quit and they get bitter and they blame the website owners and ad copy .... crying "SCAM"!!!!

    When in reality... they never learned how to effectively advertise.

    When they see their "hit counter" in their back-office that says... after promoting for 30-60 days... says 2,539 hits .... and not 1 single sign up. That's what is frustrating.

    However... believe me when I say... even an average of 1,000 unique visitors on a daily basis to your web page .... is very minimal when it comes to the internet.
  14. FFVictor

    FFVictor New Member

    Thank you gang for all you replies! A lot of great points were made here.

    Most of the people that get involved in MLMs know the kinds of risks involved and the type of business it is. They know there are no guarantees. They just didn't realize it was going to be so hard and didn't have the knowledge required to work in this field; so most of them failed.

    It's been my experience that the people that cry "scam" are those that do not know how to look for the legitimate companies and got burned; not the people that just didn't make it. Generally speaking, I think the true scams are the bogus companies. It is not the MLM / Network Marketing business, the reps upline, their training or amount of money they lost. Even though those are all factors and can definitely compound the situation; I don't think they are the main reason people view the industry as a scam.

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