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What You Should Know About Pyramid Schemes 

(Source: World Federation of Direct Selling Associations) 

Multilevel Marketing - Legitimate income opportunities

Multilevel marketing/Network Marketing is a popular way of retailing in which consumer products are sold, not in stores by sales clerks, but by independent businessmen and women (distributors), usually in customers' homes. As a distributor you can set your own hours and earn money by selling consumer products supplied by an established company.

In a multilevel structure you can also build and manage your own sales force by recruiting, motivating, supplying and training others to sell those products. Your compensation then includes a percentage of the sales of your entire sales group as well as earnings on your own sales to retail customers. This opportunity has made multilevel marketing an attractive way of starting a business with comparatively little money.

How to tell the difference between a legitimate business and a disguised pyramid scheme

Pyramid schemes seek to make money from you (and quickly). Multilevel marketing companies seek to make money with you as you build your business (and theirs) selling consumer products. Before you sign up with a company, investigate carefully. A good way to begin is to ask yourself these three questions:

1. How much are you required to pay to become a distributor?

2. Will the company buy back unsold inventory?

3. Are the company's products sold to consumers?

1. Start Up Cost? IF THE COST IS SUBSTANTIAL, BE CAREFUL! The start-up fee in multilevel companies is generally small (usually for a sales kit sold at or below company cost). These companies want to make it easy and inexpensive for you to start selling.

Pyramid schemes, on the other hand, make nearly all of their profit on signing up new recruits. Therefore, the cost to become a distributor is usually high. CAUTION: PYRAMIDS OFTEN DISGUISE ENTRY FEES AS PART OF THE PRICE CHARGED FOR REQUIRED PURCHASES OF TRAINING, COMPUTER SERVICES, PRODUCT INVENTORY, etc. These purchases may not even be expensive or "required," but there will be considerable pressure to "take full advantage of the opportunity."

2. Buy-Back of Inventory? IF YOU COULD BE STUCK WITH UNSOLD INVENTORY, BEWARE! Legitimate companies which require inventory purchases will usually "buy back" unsold products if you decide to quit the business. Some state laws and the USA DSA Code of Ethics require buy-backs for at least 90% of your original cost.

3. Sales to Consumers? IF THE ANSWER IS NO (OR NOT MANY), STAY AWAY! This is a key element. Multilevel marketing (like other methods of retailing) depends on selling to consumers and establishing a market. This requires quality products, competitively priced. Pyramid schemes, on the other hand, are not concerned with sales to end users of the product. Profits are made on volume sales to new recruits, who buy the products, not because they are useful or attractively priced, but because they must buy them to participate. Inventory purchases should never be more than you can realistically expect to sell.

MLM Guidelines

MLM or Multi-Level Marketing is a way to help individuals generate income on a flexible part-time or full-time basis by building their own business.

There are many companies that offer MLM businesses, but few are based on time-honored business practices, and exemplify long-term stability. Forever Living Products has been in business for 28 years and has demonstrated the quality of their products and success of their business plan with over 7.5 million distributors worldwide.

We offer you the following list to help guide you in what to look for in an MLM:

 

Signs of a Great MLM
  • Quality Product - A strong product line is one of the most important aspects of the business varied with a common feel. It is extremely difficult to be credible when selling a water filter, and then a minute later, a pair of shoes. A company should have quality products that are remembered long after any price or volume incentives are offered. Look for a market leader with a proven quality track record.

  • No Pass-Ups - Nobody in your downline will ever be promoted to a position above you. If a distributor in your downline excels in sales, they will automatically bump you up to the next level when they receive a promotion. Look for a marketing plan that is designed to reward you for introducing Superstars to your business.

  • No Demotions - A distributor may not be demoted due to inactivity of sales. Once they have been promoted to a certain level, they will remain at that level. A good marketing plan allows you to relax if you need to.

  • Bonuses Paid on the Retail Cost of the Product - The bonuses should be paid on the retail costs of the product, not on the wholesale distributor prices. This means more cash back to the distributor.

  • Proven Financial Stability - Steady, solid growth is always the sign of a good MLM. It is often helpful to look for the diversification of the company's holdings. Also, refer to the company's sales chart to view growth, sales figures and project future trends. Also, view the sales history over the entire duration of the company.

  • 5-year Minimum Industry Experience - A reputable MLM should have at least five years experience and solid growth throughout the company's existence. A well-established MLM will make it past the first crucial 18 months with solid management, a strong business plan, motivated distributors and quality products

  • Multiple Income Opportunities- With a variety of income opportunities offered to the distributor, comes the advantage of working on your own schedule, working part or full time and working from home. A key advantage to being involved in an MLM is the fact that you can enjoy multiple opportunities to earn money. When looking for a good MLM, find one that offers profit sharing, leadership and royalty bonuses.

  • Consumable Products - Consumable products are ideal for an MLM business, as you can easily build a base of loyal customers wanting to regularly purchase replacement products. An active consumer base is the key to an effective MLM business. This can only be built on quality consumable products. For example, it is very difficult to represent a business that sells home security alarms.

  • Extensive Support Network - An extensive support network is crucial in the success of your business with an MLM. From a distributor support center to training seminars and incentives, the distributor should be offered a variety of opportunities to better build their business. Your success directly affects the success of the company; therefore their support system should represent this idea.

  • International Presence - A company that is established around the world shows growth, reliability and quality products. This also refers to the multiple year track record of the company. Most companies that venture internationally are stable and have ample industry experience.

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           Forever Living Products Toronto

           Updated: 09/17/12.

 

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