We’ve all heard the old adage,” if it sounds too good to be true, it probably is,” but are MLM’s really a scam?  MLM is an acronym for multilevel marketing and used broadly, it describes a business model that uses a multi-tiered hierarchy for its compensation plan.  Many people assume that an MLM is a pyramid scheme because of the compensation structure, however pyramid schemes are illegal and MLM’s are not.  In a pyramid scheme, individuals purchase in to the business with the promise that they will reap some reward or benefit without ever receiving any product or service.  In an MLM business, individuals usually purchase a distributorship and sell products to consumers and then recruit or sponsor others in to the business to do the same.  Some of the most successful businesses are MLM’s, they are legitimate and legal. 

Many people are skeptical of MLM’s because they may have heard stories of someone that bought in to a distributorship and then made nothing.  If someone is looking for a “get rich quick” scenario, then chances are, an MLM is not the right business to get in.  However, there are many great MLM companies out there that have allowed people that are driven to be successful reap great rewards.

 A legitimate MLM company must provide goods or services to consumers and most do this through sponsoring distributors to sell their products.  An illegal scam, or pyramid, would be when you buy in to the company with the promise to only get paid when you sponsor or bring others in.  In an MLM, individuals become distributors or independent representatives for the parent company.  They then sell the products to their own customers and earn compensation or commission on the goods sold.  The more customers an individual sells to, the greater their financial success.  The multilevel component, however, means that you can also tell others about the business opportunity and bring them in as distributors under you.  This is called your downline.   Although compensation plans vary among MLM’s, most offer to pay you additional commissions on the sales to customers that your downline recruits make. 

MLM businesses operate legally in all 50 states and more than 100 countries worldwide.  There are numerous legitimate MLM companies in existence and a great potential for individuals to earn income via an MLM.  If you are considering becoming a distributor or independent representative in an MLM business, the key is to research the company thoroughly.  If the company sells a product that you believe in and that you believe you can sell to others, then it might be the perfect business decision for you.  If however, you are looking at a way to make some fast cash with no effort, beware.  You must be willing to sell the product first and foremost.  Even if you don’t consider yourself a salesperson, if you feel good about the product, it will be easy to share it with others.  You can then grow your business exponentially by recruiting other like-minded individuals that believe in the product and are willing to build their own customer base.

There are companies out there that present themselves as MLM businesses that are not.   It is important that consumer products be an integral part of the business first and foremost and you will know that the MLM is not a scam.   Find a company with a great product that you feel great about.  Don’t expect to get rich quick, but expect to love what you are selling and to love telling others about it.  If it promises to make you rich overnight, it’s probably doomed to fail.  There are few businesses that will solve your money woes overnight.  The road to success requires work.  However, legitimate MLM’s may very well be a great path to get you there.

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    This entry was posted on Tuesday, July 12th, 2011 at 9:00 am and is filed under Home-based Business, MLM, Network Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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