How to spot an MLM scam.

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The reality is direct sales (of which networking marketing and MLM are a part of) is a viable way to start a home business quickly and affordably. But like all other facets of life, there are shysters and it’s up to you to research and do your due diligence when investigating an opportunity. The challenge for you, is to know the signs of a scam.

Before Going into an MLM scheme take note of the following:

Outrageous & Unfounded Product Claims.

Wild claims is seen most in health and wellness companies in which reps boast that their products cure ailments or work miracles. Outlandish hype is a red flag in any industry, including direct sales. A successful business is founded on quality products. If the company you’re considering joining has bizarre products or products that seem too good to be true, use caution.

High-Pressure Sales Tactics.

The most common high-pressure tactic is the lure of getting in on the ground floor. But in direct sales, a good opportunity is a good opportunity no matter when you get in. In fact, you’re safer to go with a company that has been around for more than five years (the longer the better) than a start up.

Any effort a representative makes to prevent you from studying the company, talking to others, or “sleeping on it” isn’t someone you want to work with. 

Uneccessary Pressure To Buy and stock inventory.

What you want to watch out for are fee-based “fast track” programs or pressure to have inventory that requires additional investment. Due to this practice, the law now requires MLM companies to buy back inventory, but that doesn’t mean you want to be saddled with debt before you start and truly understand the business.

Having a few popular products on hand can be nice, but don’t fill your garage with products unless you know for sure, based on your experience in the business, that you can sell them.

Poor Company Communication

Don’t be afraid to ask hard questions. If you don’t get solid answers or are chastised for not being a positive thinker or believing in the company, consider it a red flag.

In order to be successful at any business, you need strong support and solid training. The law requires MLM companies give you a slew of information, details about the compensation plan and financial information about average income earned by reps.

Deceptive advertising practices.

Some MLM reps will promote their business as a “job” or use other description​s to lure prospects. MLM isn’t a job, it’s a business. Any MLM rep promoting “employment” is using deception and isn’t someone you want to work with.

Other deceptive (and often illegal) practices include making income guarantees or suggesting you’ll make money doing very little work. 

 No or low-quality product or service

There are many red flags that should warn you away from a business or financial opportunity, but the biggest is a lack of a product. Programs that push recruiting over the sales of a product or service might be a pyramid scheme. If a company isn’t focused on acquiring more customers to buy its products, but rather it’s interested entirely in “building a team” or membership of sales reps, consider it a red flag.

The foundation of any good MLM business is about getting products and service to end consumers. While building a team can be a part of that, income is based on goods sold by the team, not in the recruiting itself. 

Author: Austine