MLM Scheme Or MLM Star, The Difference
Sometimes it is not so easy to tell a good MLM program from an MLM scheme. Funny, but in the past two years there have been a lot of ponzi or pyramid schemes in the online world. Those based in the United States are usually shut down by the FTC but it may take a few years. In the mean time, unknowing participants are shelling out anywhere from $100 to $100,000 to participate; often losing everything they have ever saved.
An MLM scheme does not have to be illegal, but may sound better than it actually is. How do you know if a MLM program is worth your time and or money?
Is the MLM program legal or is it truly an MLM scheme?
Make sure to read what the Federal Trade Commission (FTC) has to say about the legality of an MLM program, or what makes an MLM illegal. The major difference in my opinion is whether commissions are paid on sales of product or if they are paid for distributor sign ups. The program should be avoided if any part of the commission is generated when a new distributor signs up.
However, distributors can buy products, and commissions can be paid on the sale of products to distributors. If product purchases are required to remain a distributor, then the situation becomes more dicey.
What is the overall margin in the MLM program?
The MLM product’s overall margin should be very generous, say in the 50 – 60% range. Most of that margin should be paid on direct sales of the product to consumers or discounts given to distributors.
The products should also be priced competitively with what you might find at the store for a similar quality item. If the suggested retail price is too high, this program might not be right for you.
Would you buy the products as a consumer?
Price is one factor you might consider as a consumer. Quality is another. If you were a shopper, would you buy your product over all other choices? Or is your product similar in quality and price to other items you might find? That would be the minimum standard.
It becomes a tough to sell products or recruit if the products are overpriced or if the quality is not quite there.
Are the products consumable?
Food and cleaning products are popular in MLM programs because you use them up and buy more. Similarly, diet shakes or vitamins also get used up. Consumable products are almost a must because you need your distributors to buy month after month.
What are the yearly or ongoing fees involved in the MLM program?
A big issue in MLM programs is the fees. A yearly fee is often required to remain involved. Web services are usually additional. Catalogs and flyers, shipping fees, minimum order amounts, and so forth often add to the costs of being a distributor. Make sure you understand all the fees.
Is the MLM opportunity a hot, new one or has it been around a few years?
This is an issue because a hot new MLM opportunity is more risky than an older established MLM program. But, a hot new MLM also has more upside risk. So, you could find yourself making a lot of money right away, but then have problems later on with legality, product issues, logistics, or any number of other things.
I have been involved with both kinds of MLM programs and I much prefer the older, established MLM program.
Is anybody successful? Are the most successful distributors successful within the MLM program?
There are two parts to this question: Is there anybody in the company successful? If they are successful, is it mostly from commissions paid by the company? Sometimes distributors make money from other avenues than the MLM company’s commissions. Make sure those that are successful are being paid well by the MLM company.
Have you ever been involved with an MLM scheme?
- Legal Principles of Multi-Level Marketing – MLM Law
- Multi-Level Marketing – Federal Trade Commission
- Do Multi-Level Marketing Companies Differ From Pyramid Schemes – HighYa
- How To Choose The Right Network Marketing Company To Join – MyTopBusinessIdeas