Spot a Pyramid Scheme

As a man, we expect you to be smart. That includes not getting duped into some pyramid scheme. You may remember on The Office when Michael tries to recruit his co-workers to sell calling cards. Pyramid schemes are being disguised and re-invented every day. We expect you to know how to spot one.



Before we go into how to spot a pyramid scheme, understand this:

There are only two things that will happen if you get involved -

1. You will piss off a lot of your close family/friends
2. You will NOT make any real money
   

[USA Today] has this to say about pyramid schemes:

"It's going to sound really good. You're going to be tempted. Should you give in to temptation?

In a word: NO. Stop and read this first!

Let me explain how MLM or network marketing works and how it differs from regular sales or a regular business.

•Single-level sales: You go out and sell a product or service and you either get paid for your time, or more typically, get a commission on the amount of product or services you sell directly to customers.

•Multi-level programs: You go out and recruit other participants. You make money not only on the sales you make but on the sales of those you recruit...

Here's what the FTC advises: "If a plan offers to pay commissions for recruiting new distributors, watch out! Most states outlaw this practice, which is known as 'pyramiding.' State laws against pyramiding say that a multilevel marketing plan should only pay commissions for retail sales of goods or services, not for recruiting new distributors."

Even if a program isn't fraudulent, from a business point-of-view, MLM programs share the same fundamental flaws, including:

•Recruiting competitors. No one in legitimate business wants competitors. In MLM programs, your goal is to get lots of others selling the same product or service. In real businesses, you'd pay for exclusive territories. In MLM, you recruit competitors from among those nearest to you — in your church, neighborhood, friends – your best sales targets.

•Pay to be a customer. You'll buy products or services you sell as well as training materials. Overwhelmingly MLM revenue comes from those recruited to be 'business owners' within a program. I view most MLM programs as thinly-disguised schemes to find customers, not build businesses.

•You'll face pressure. Expect to be required – or pressured – to buy samples, marketing materials, training courses and tapes, attend seminars, and more. You're very likely to spend far more than you'll ever bring in from sales.

•You turn your friends and family into "prospects." MLM programs typically suggest you sell to – and recruit – people you know well. Do you really want to be constantly beseeching those closest to you?"

PyramidSchemeAlert.org Is a website is dedicated to uncovering the truth about all pyramid schemes. I did a search for a well-known "super fruit" company and came up with these results :


-- The top 1% (0.77% or 1 out of each 130) received 65% of all the commissions. These commissions came out of the pockets of those at the bottom.

-- The bottom 91% of the entire company sales force, received no company payments at all!

-- Of the 9% who did receive a commission check, the bottom 99% of them earned on average only $59 a week, before product costs and all business expenses.

-- The average income of the bottom 99% of all Monavie distributors was $3.75 a week before all product costs and business expenses.

These amazing company figures need to be repeated! 91% earned zero. Of the 9% that earned something, 99% of them earned only $59 a week on average, before all product costs and business expenses.