If the MLM says your revenue will explode with almost no effort

As mentioned previously, not all companies marketing their products through MLM style systems are scams.

If they are trying to hook you by talking about exploding revenue, little to no work, passive income and other terminology that make it appear as if all you have to do is sign up, pay the minimum fee and the dollars will start rolling in, then avoid it. No business, MLM included, is easy in this sense. You might have a passion for one type of work over another, and enjoy this but not that, but no system is going to be passive or have exploding revenue.

It is going to be a lot of work to build up your network and distributor system. If they try to sell you on their system saying their is almost nothing involved, stay away

Identifying a potential MLM scam

One of the ways to identify what might be an MLM scam is look at how long they have been in business.

This method will not be truly definitive, but if the company is only a year or two old it should raise warning lights.

Most of these MLM companies shut down after a year or two. If the company is only a year or two old, I would recommend you look really hard at it before deciding to join. Some companies are successful, and are not scams, and last a long time. If you see the company has been around 10, 15, 20 years, etc. they are likely to be ok and not a scam.

MLM scams: not all are scams

Not all MLM programs are scams. Just because you might have been burned by one in the past, doesnt mean now that someone is offering you another MLM program it too is a scam.

Some MLMs might be decent programs. Check each one, as is relevant to you, out on its own merits.

Just don't fall for the scams.

MLM scams: charging for training

MLM scams often get new participants to pay lots of money for training programs.

Normally when you begin working for a company, if training is necessary, they will generally train you as is needed. On their dime.

With MLMs, sometimes the training is part of the sign up package, but other times they charge new recruits lots of money for the training.

The training given might not even be worth anything, or it might be decent. Regardless, if they are charging you for training, there is something wrong.

MLM Scams? Product? Who cares about the product?

MLM Scams

Who cares about the product?

Try to pay attention, when the guy is trying to sell you on joining the team for whatever MLM is the flavor of the day, to whether or not he says much about the product.

Chances are that if he doesn't want to talk about the product, it is likely a classic MLM in which nobody but the people at the top make any serious money.

The guy selling me on the MLM has tried to avoid talking about the product at all costs. He won't say a word about it, other than to say the product is great, and even when I specifically asked about the product (not what it is - that is mentioned, but how it is sold, who buys it, etc.) he avoided the topic. His main response is that we are not getting into this business in order to sell product. "We are not Avon Ladies" he said a number of times. The focus of these guys is signing people up who will sign more people up, who will sign more people up.

This might last a while, but at the end of the day if nobody is buying product except for the members buying the minimum amounts to keep their monthly balance to stay on as "business partners", the business will not last. This is the type of model in which you, the little guy, will almost defintiely not make any decent money, but only the people at the top do.

So try to get him to talk about product. How can anybody getting into a business not be interested in how the product sells, who the market for it is, and the like? Only if it is a scam.

MLM Scams: Dropout rate

Consider the dropout rate

Has the guy recruiting you told you about the dropout rate? What about when you asked or mentioned it - did he give you the number then or did he leave it vague?

While they are quick to show you how much the top earners made, because those numbers look impressive to the potential recruit, they will rarely tell you the dropout rate.

The reason they don't tell you this is because the dropout rate is very high. For most MLMs, the dropout rate approaches 95% over ten years. At five years, it fluctuates between 90%-95%.

Why go into it when you know you have a 95% chance of dropping out a failure? All the money and energy you invest is almost definitely going to be wasted.

MLM: Identifying the scam

Identification

Not all MLMs are necessarily scams. How do you know if the one trying to recruit you is a scam or not?

There are two easy ways to make the initial identification that will be almost always accurate.

1. If you would not pay that much money for those products in real life, if not for the minimum buy-in.
2. If the income is stopped when you stop recruiting new "business partners"

If these things happen, and you should ask the guy trying to recruit you, "what happens if I stop bringing in new recruits?", you know it is almost definitely 100% a scam.

who is doing the scamming in MLM scams

The guy trying to get you to sign on to the particular MLM is probably not part of any scam. He, or she, is not the one scamming you. This person really believes that the company is good, the product is good, he and you both have a great opportunity to make great money with this direct marketing approach, etc.

The truth is that he is as much of a victim of the scam as you are (or, I should say, as you would be if you would sign up). He just doesn't know it yet.

Of course, this is not to say that nobody ever makes any money in these MLM scams. That is not true. Some people do - just the chances are stacked extremely well against you. More on that later.

The MLM scam is based on them getting lots of people to sign in to the program, each spending at least the minimum monthly purchase, plus whatever training expenses they throw in along the way. That money gets divided among the people along the chain going up. The problem is the people who sign up more often than not stop being involved int he company very quickly, as they exhaust their network of friends and relatives trying to sign them all up.

After that, they have spent a decent amount of money on minimum monthly purchases plus fees, and now see no prospect in sight for future income. They generally drop out of the program, having lost the money that was put into it.

why you won't make any money with MLMs

MLMs and Pyramids are based generally on signing people up to sign other people up to sign other people up, etc.

There will also usually be a minimum amount of product you have to purchase each month, and sometimes other packages you have to spend money on. More often than not, these products are not things you would normally be spending your money on, if not for being involved in this business.

The way they make money is by any money you spend, or sell, is divided among the people in the chain higher up than you - the person who signed you up, the person who signed him up, etc. at different percentages. Of course, if you sign other people up, you will be making money off of them.

At th end of the day, you are only making money because someone is buying a product they usually don't want. They are only spending money on it because they have to to be part of the program. At a certain point most people stop, as they see they are not successful at signing people up and not making any money. They will realize this is a product they don't really like or need, and will stop buying it.

Your future success in the MLM is dependent on signing up people who will be seriously motivated to use the product and to sign up others people who are also motivated. This is why most people make no money, or worse - many people lose money - in MLMs.

you know you are dealing with a pyramid scheme

You know you are dealing with a pyramid scheme, or the version called MLM, when they refuse to tell you anything about it.

The guy is trying to convince me to sign up. He is being very vague, talking about product development, business development, international or even global marketing. Yet he won't say a single word about what the company or product is.

Why is that?

I think the reason is that they need to get you into the room with the presentation. If you hear something that sounds like MLM on the phone, 99.9% of the people will drop it like a hot potato. If they actually get you to sit in front of the presentation, and be impressed by all their bells and whistles, their chances of nailing you increase slightly.

So even though I figure out what he is talking about because I have heard this exact pitch before, and I let him know by saying "Oh, this sounds like Agel" or "Hey - is this NuSkin?", he still refuses to answer any of my questions. His only chance is to get me in the chair in front of the presentation. Anything less than the full presentation means he has absolutely no chance. And he knows it.

MLM "opportunities"

phone rings. Hello? "Hi. This is so and so. Remember me? Yeah, it has been a while since we spoke and saw each other last. Anyway, I have decided to take my financial future back into my own hands. I am working towards being able to quit my job and work for myself making decent money. I thought of you as someone who also might wan to take your financial future back into your own hands."

This is how the conversation almost always starts. The name of the company, or even what they do or what type of business it is, never comes up in the first or usually even second conversation.

Welcome to the world of Multi-Level Marketing, or MLM, businesses.