Pyramid Scheme or Scam?


We have all heard about it, you probably have been invited to at least one or have been forced to attend a “meeting” at one point or another but does it really work? Is it a Scheme or a Scam?

One good thing I can tell you is that most of the Pyramid or Multi Level Marketing companies that you have been invited to check out are legal. At least most that are based here in the United States, that is because of all the regulations we have here. If a company is illegally running a pyramid system, one victim can easily report that company which may lead to an investigation and immediately be wiped off. This is where people’s natural instinct for greed plays to our favor because anyone who starts or runs a pyramid scheme wants to make money and wants the company to be sustainable and most of all legal. So you can be rest assured that companies try their best to stay within the law.

What is a Pyramid Scheme or a Multi Level Marketing anyway?

It is your basic word of mouth marketing. Where in you like a product so much that you would like to buy more of it at a discount price. In order to buy in bulk you would have to pay to be a member or a distributor. Now since you love it so much, you tell your friends and family about it, maybe even give them a sample. If it turns out that they liked it as much as you do, well since you are already a distributor, not only can you buy the product for your own consumption, you can also sell it and get some commission. And let say the person you sold the product to, loved it as much as you do and wants to do what you did, be a distributor to get discounted prices and sell it at the same time. Now that person signs up as your recruit and you get a commission out of their sales as well. Then that person want to make more commissions as well so they follow your example and recruits. Imagine doing that to everyone you know and if all goes well, you get a whole team of people selling the product that you love and get a commission out of all your recruit and their recruits sales.

Sound decent and a viable option to making money right? That is the ideal principle behind a Pyramid Scheme, a scheme, a plan or an arrangement that puts the founder of the company at the top of the Pyramid. Which is rightly so, because that person had the courage to run with the idea and product in the first place, took the risk and started the business. Now everyone else who wants to join in has to put up their start up cost to gets a portion of the commission. And there has to be a product that people can sell from which the bulk of their commissions should come from. That seems fair right?

That basically what makes it legal when the company actually sells a product but being legal does not mean it is not a scam. What makes it a scam is when recruits, meaning everyone else other than the founders of the company have to jump through hoops to get a commission out of their own sales or their recruits. If people who sign up can hardly get a commission out the product sales but rather earns their money by the number of recruits they have in a month, then that is where it becomes a scam. No different from a Ponzi Scheme. Where in people are asked to invest money with the promise of making their money back with interest but turns out the company is just moving money around and is not really invested in any platform. Another way they scam people is by putting quotas on the number of product sales to qualify for commissions. Meaning you do not get any commission out of your sales unless you have reached the quota for that month. So the company makes money while you have none. Leaving you with their usual consolation script saying that you don’t have to worry because everything you spent is tax deductible.

So is joining a Multi Level Marketing or a Pyramid Scheme based company a feasible way to make money? Yes. Plenty have done it, especially if you are a people person but be sure of one thing, most of these companies fall under the scam category, wherein people make more on recruiting than actual product sales. They will call it “bonus” or “target goals” or whatever term they could think off but bottom line is, recruiting is their business and selling the “dream” is their product. The dream of making money, residual income, getting out of debt, or buying your parents a home or a car. Most of these companies are technically legit because they have a product to sell, unfortunately most of the time those products are overpriced because they need to add in commissions on top of the actual suggested retail price and the usual profit margins. Some companies find unique products that are hard to find anywhere else which gives them the advantage. There are some that do sell quality goods that is why it actually make sense to sign up just to get a discount for your own consumption but those types of products are rare, most can be bought cheaper elsewhere.

So just be aware of what you are getting into and set your expectations accordingly. If you are good at recruiting then by all means, play the system, get those so called bonuses, make your money then get out. My rule of thumb when it comes to multi level marketing is, if I am dishing out more money than I earn from sales, then it is a no go for me.

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