5 Ways to Tell Legal MLM from Scam

There are two obvious benefits of being self-employed: first, you have a pleasantly flexible schedule that can be arranged the way you like; second, there’s no manager who monitors and assesses your performance. However, building up a successful and profitable business from scratch is not that easy. For this reason, many people choose to join businesses that allow individuals much work independence — multi-level marketing (MLM) companies.

In addition to the benefits mentioned above, MLM and direct selling schemes promise big financial returns to their individual marketers. For the employees who seek job independence, this is too good an opportunity to miss. While it can be a realistic source of sufficient income, the chances are that the company turns to be a scam. Let`s explore the difference between legitimate and illegitimate work from home.

Recruiting or Sales. The entrepreneurs engaged in social selling generate their income from distributing products themselves and from the sales of people they’ve attracted to the company. Legal business opportunities focus on selling, whereas scams stress recruiting. This is the difference. Pyramid schemes will encourage its members to bring in new team members, which can eventually cause overcrowding and the company’s failure. 

Initial costs. Legal business opportunities don’t ask to invest a lot to get started. Remember: they earn profit via distributors that sell, not with distributors that join. 

That’s why this is so costly to affiliate with such companies. Also, they will put pressure on you to pay more: for additional training, for basic office supplies and a great deal of their products, all at once.  

Training to sell or recruit. At MLM and direct selling scams, they provide participants with techniques to attract more ‘team members’, to sell to family and friends, and to bring them in too. No qualified support or advice are actually offered. Legal businesses train networkers to sell, not to recruit their aim is to build on the selling expertise of the distributors through seminars, workshops, courses, group and individual training.

Buy-back policy. Representatives of multi-level marketing companies may be unable to sell all the items they’ve purchased. To deal with such cases, MLMs should have a buy-back policy introduced. Herbalife, for example, repurchases products from a resigning member who is left with unsold inventory. Members of the Direct Selling Associations (DSA) in both the UK and the USA must honour the repurchase policy. This requires the company to buy back any unused inventory from independent distributors at 90% or more of the original cost. Scams don’t offer a buy-back opportunity, and pyramid schemes sometimes don’t have any inventory to sell at all.

Quality of products. Pyramid schemes and legitimate MLMs are distinguished by the quality of products they deliver. Scam companies offer ridiculous goods or low-quality products that can barely be sold. When persuading somebody to join, pyramid scheme representatives may not even talk about the products they are selling. For them, the money earned from recruiting is the most powerful argument. Legal multi-level marketing companies distribute products of high quality, which are useful and in demand, as they rely primarily on sales, rather than on engaging independent entrepreneurs.