“Make Money 24 Hours a Day”
The headlines are certainly enticing, especially in today’s troubled economic climate. The idea of making money right away without any special skills or major investment appeals to the immediate need, while the promise of residual income appeals to the desire to not end up in your current financial position ever again. And some highly reputable companies have been built on this marketing & distribution structure…
Avon, Mary Kay, Excel Communications, and more. But then there’s the downside… “Do I really want to pitch this to all my friends?” “Can I actually make money at it?” “How do I know it’s not a scam?”
If you’re considering an MLM, CDM, or network marketing opportunity, ask these six questions to determine whether a network, multi-level, or consumer direct marketing is worth your while (and your money).
Who is your upline?
Take it all the way to the top. What do you know about the person who introduced you to the opportunity? Can you trust what they tell you? Are they willing to divulge exactly how much they’ve been making? And what about the founders of the company (assuming it’s a newer company)? Have they been successful and reputable in their previous businesses? Investigate your entire upline just like you would a business partner you’d never met before.
What is the product?
Is it something that would sell well in a retail store or via other traditional marketing and distribution channels?
When will you start actually making money?
Don’t fall for the line that it takes months or even years to show a profit.
You should be able to recoup any investment and start earning income within just a few weeks if there’s really demand for the product. Making a living at it is another story. You need to be able to work it part-time in addition to other steadier income sources. Will you realistically be able to do that with this company?
Where is the product being promoted and where can you promote it?
Is the company doing advertising and publicity of its own to help create demand for the product? And what restrictions are there on where and how you can promote it (advertising, websites, etc.). There’s not a right or wrong answer to that question – a wide open policy is more flexible for you, but for everyone else, too. If you’re prepared to be highly competitive, that’s fine, but if not, you may prefer to work with a company whose policy is more restrictive.
How were you recruited?
Were you recruited primarily as a customer, with just a mention of “income opportunity”, or was the primary pitch about the business opportunity? The ethical way to build a downline is to sign people up as customers first, and then if they like the product, they’ll be drawn to become a rep. A hard-sell on signing up as a rep right at the outset should send up a red flag for you.
Why are you doing this?
This is perhaps the most important question of all. If you’re doing it because you think it’s going to help you out of a cash crunch, forget it. If you’re doing it because you think you’re going to be rich in a year, well, it’s fine to have a vision but don’t bank on it. On the other hand, if you really believe in the product, that gives you the best likelihood of success with it.
There are no absolute right and wrong answers to these questions. The point is to make sure that you’re going into it with your eyes wide open. Many people have made a lot of money in network marketing, MLM, and consumer direct marketing, but many more have ended up wasting a whole lot of time and money chasing a pipe dream.
You can ensure your success best by being sure you’re getting into the right opportunity in the first place.
FTC Multilevel Marketing MLM
There are multi-level marketing plans – and then there are pyramid schemes. Before signing on the dotted line, study the company’s track record, ask lots of questions, and seek out independent opinions about the business.
In multilevel or network marketing, individuals sell products to the public — often by word of mouth and direct sales. Typically, distributors earn commissions, not only for their own sales, but also for sales made by the people they recruit.
Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s probably not. It could be a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money.
If you’re considering buying into a multilevel marketing plan, get the details.
Consider the Products
Many companies that market their products through distributors sell quality items at competitive prices. But some offer goods that are overpriced, have questionable merits, or are downright unsafe to use.
Find out what will you be selling. Are similar products on the market? Is the product priced competitively? Is it safe? Can your sponsor — the distributor who is recruiting you — support the claims about the product’s performance?
Almost any product or service could be sold through multilevel marketing, including health, beauty, and fitness products that aren’t available on store shelves. Apply a healthy dose of skepticism before buying or selling products advertised as having “miracle” ingredients or guaranteed results. Many of these “quick cures” are unproven, fraudulently marketed, and useless. In fact, they could be dangerous. You may want to check with a health professional before using them — or selling them.
If you decide to buy into the program and promote the products, you must be sure your marketing materials are truthful and that there’s solid evidence to back up the claims you make about the products. Before you repeat any claims the company has made, verify that there’s competent and reliable research to back them up. That’s the standard the FTC uses when evaluating advertising claims.
Learn More About the Company
Find — and study — the company’s track record. Do an internet search with the name of the company and words like review, scam, or complaint. Look through several pages of search results. You also may want to look for articles about the company in newspapers, magazines, or online. Find out:
- how long the company has been in business
- whether it has a positive reputation for customer satisfaction
- what the buzz is about the company and its product on blogs and websites
- whether the company has been sued for deceptive business practices
- Check with your state Attorney General for complaints about any company you’re considering, although a lack of complaints doesn’t guarantee that a company is legitimate.
Evaluate the Plan
Don’t pay or sign a contract in an “opportunity meeting.” Take your time to think over your decision. Your investment requires real money, so don’t rush into it without doing some research first.
- Ask your sponsor for the terms and conditions of the plan, including:
- the compensation structure
- your potential expenses
- support for claims about how much money you can make
- the name and contact information of someone at the company who can answer your questions
Get this information in writing. Avoid any plan where the reward for recruiting new distributors is more than it is for selling products to the public. That’s a time-tested and traditional tip-off to a pyramid scheme.
Keep in mind that when you recruit new distributors, you are responsible for the claims you make about how much money they can earn. Be honest, and be realistic. If your promises fall through, you could be held liable, even if you are simply repeating claims you read in a company brochure or heard from another distributor.
If you don’t understand something, ask for more information until it is absolutely clear to you. Your sponsor and other distributors should be willing to answer your questions. Remember that your sponsor (and others above your sponsor’s level) will make money if you join the program. So take your time, and resist pressure to join. Be aware of shills — fake references paid by the company or distributor to pretend they were successful earning money through the plan.
Find out about refunds.
Get the company’s refund policy in writing. Make sure it includes information about returning any unused products, including restrictions and penalties. It may seem like you’re minimizing your risk if you can return products for a reimbursement, but policies vary on whether you’ll get a full refund — and how long it may take. Many plans require you to buy training or marketing materials, or pay for seminars if you want to get product discounts or create your own network of distributors. Find out how much time and money other distributors spent on training, marketing materials, and seminars when they joined the plan, and whether the plan requires you to participate in periodic training. What happens if you opt out of the training?
Ask a friend or adviser to read the materials.
You may want to consult with an accountant, a lawyer, or someone else you trust who is not affiliated with the plan to review the terms of compensation, determine whether the plan can back up its claims about the amount of money you can make, and analyze the information you’ve been given.
Think about whether this kind of work suits your talents and goals.
Ask yourself whether you would enjoy selling products to the public. Find out how many hours a week your sponsor and other distributors spent on the business when they joined and how much time they spend now. Remember that no matter how good the product and how solid the plan, you’ll need to invest sweat equity and money for your investment to pay off. Consider the other demands of the business — for example, going to training, recruiting new distributors, managing paperwork, recording inventory, and shipping products.
Ask your sponsor and other distributors tough questions, and dig for details. Don’t consider it nosy or intrusive: you are on a mission to check out a potential business deal that will require your money and your time.
Their responses can help you detect false claims about the amount of money you may make and whether the business is a pyramid scheme. Here are some questions to ask before making any decisions:
- How many people have you recruited?
- How long have you been in the business?
- How much time did you spend last year on the business?
- How much money did you make last year — that is, your income and bonuses, less your expenses?
- What were your expenses last year, including money you spent on training and buying products?
- What percentage of your sales were made to distributors?
- How much product did you sell to distributors?
- What are your annual sales of the product?
- What percentage of the money you’ve made — income and bonuses less your expenses — came from recruiting other distributors and selling them inventory or other items to get started?
It’s important to get a complete picture of how the plan works: not just how much money distributors make, but also how much time and money they spend on the plan, how long it takes before they’re earning money, and how big a downline is needed to make money. One sign of a pyramid scheme is if distributors sell more product to other distributors than to the public — or if they make more money from recruiting than they do from selling.