Pyramid Scheme
The pyramid
scheme epidemic has become an increasing problem in the United States
and around the world
with millions of people affected and billions of dollars lost.
Sometimes hard to distinguish, pyramid schemes are simply
fraudulent compensation
plans
disguised as MLM business models.
Because of the many downfalls of such organizations it's common to
associate these types of scams with the multi level marketing industry.
Here are several major
differences.
What Sets Them Apart?
Well first off, pyramid schemes are illegal. In a pyramid the prime focus is on recruiting. In these types of scams
a product or
service is almost never sold. A recruiter entices you to join a lucrative opportunity for a fee.
You're then promised a profit on your investment simply by recruiting
others into the organization.
For example, let's say Bob convinces you to join his "one in a lifetime
opportunity". Bob tells you there's a on-time fee of $200.00 to get
started. You pay Bob the money and chances are he'll profit half and the rest
goes to his sponsor. In some case the recruiter will profit all the
$200.00. Bob will then give you everything you need to start marketing
for new recruits.
The more # of newcomers
you sign on, the higher up on the pyramid you
move. The
problem with this type of scam is that once new distributors quit
(which make up the base) or new participants are no longer recruited,
the pyramid
can no longer sustain
itself and ultimately collapses.
Everyone on the pyramid looses expect a the few who are on the top. If
Bob happens to one of them he will have gain everything while others
below him loose it all.
Pyramid schemes simply take your money by recruiting you and then
expect you to do the same to others. In most cases no product or
service is
ever sold. If there is a product, chances are it has little or no
value. The fee you pay is simply used to reward your sponsor and the
one running the scam.
MLM on the other hand provides a product or service. Consultants known
as distributors
directly sell the product to consumers. It is through these sales
consultants make commissions. In
MLM you don't necessary have to recruit new distributors to
make money.
Pyramids
recruit, while MLM promotes
and sell
valued products.
In a pyramid you
become dependant on the recruiting efforts
of
others. In MLM you become dependant on the commissions from YOUR OWN
retail sales efforts.
Avoid and Protect Yourself
From
Falling Victim
Below
are several clues that can help you detect a pyramid
scheme before falling victim.
- Exaggerated income claims
-
Feeling pushed into a
decision
- No extensive background on the company
- Multiple complaints with the Better Business Bureau (BBB)
- No product or service being sold
- Bulk purchase orders required
First off, no legitemaite business can ever guarantee
any return
on investment (ROI). So if you are ever promised a return on
your
investment,
this
is your sign to simply walk away.
I have found that people who land in this type of scam are
usually the ones
looking to get rich quick (GRQ) opportunity. In the real world there's
no
such thing. No
matter what opportunity
you decide to join, no one ever becomes an overnight success.
Remember you always want to investigate any opportunity or income claim
prior to making any kind of financial investment.
If you are unsure on what to look for in a reputable company take a
look at the
top network marketing companies
I recommend.
You can also use DSA.org and NPRO's.com for further research.
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