Multilevel Marketing (MLM) Basics Article 

Pros and Cons-   Before you invest in a MLM you should know the difference between MLM (Multi Level Marketing) and pyramid schemes. There are some legitimate MLM business opportunities out there. Unfortunately, many are simply pyramid schemes in sheep's clothing. I would like to take a few minutes of your time to give you some information that will help you determine if the MLM you are interested in is for real or just another pyramid scheme.

Legitimate MLM's are legal in the US and Canada but pyramid schemes are not. That is the first major difference. The second major difference is the purpose of the company. Pyramid schemes are focused only on recruiting you to get your money and then using you to recruit others to get their money. They want to make quick profits and move on because they know it will not last forever. Legitimate MLM's, however, are more focused on product or service movement. Their theory is that the more distributors they have the more products they are selling.

Below is a simple list of criteria you can use to determine if the business is a legitimate MLM or simply a pyramid scheme.

1. If you are required to invest a large amount of money up front in order to participate as a distributor then this is a sure sign of a pyramid scheme. Legitimate MLM's do not require huge start up costs to be a member. Make sure you check out what the up front investment actually gets you. Sometimes pyramid schemes will disguise these charges as inventory charges.
2. Does the company pay any attention to a market for their product? If the company never defines a market or just labels it as opportunity seekers then you better be worried. MLM's define and depend on a certain market to sell their product. Herbalife would be an example of a legitimate MLM they would define their market as people looking for diet or wellness plans and people interested in healthy eating habits or fitness. If consumer demand for their product is not a high priority for the company then stay away.
3. Will you have to pay for inventory? If so is the company willing to buy back any unused product? Legitimate MLM companies will be willing to buy back unused inventory even if is at a percentage of the value of the original cost. So make sure they have a buy-back plan. Those companies they do not I would shy away from.
4. This is the number one way to tell a pyramid scheme from a legitimate MLM business. Does the company pay more attention to recruitment than it does to marketing their products? Real businesses are in the business to sell a product or service! This should be a real red flag. If the representative you are dealing with does not or will not talk about product sales then watch out.
5. Is the pay structure designed to pay more for recruitment than product sales? Again, businesses are in the business of selling something more than just hype.
6. Finally, are you offered commission for recruiting new members? A legitimate MLM company does not pay commissions for recruitment. Your incentive to recruit is so you can make commissions on the sales the people under you make.

Recommended?  Yes, if you are looking into a MLM I hope this has helped. I would suggest that you find out everything you can about the company; research them online, talk to people that are currently involved or that have been involved in the past. Ask the company representative to get you copies of their sales literature, business, and marketing plans. Finally, before you make the decision check them out with the Better Business Bureau to see if they have any complaints.