Introduction
Network marketing or multi-level marketing (MLM) is one of the most feared and questioned options for starting a home business. The truth is that direct sales (of which network marketing and multi-level marketing are part) is a viable way to start a home business quickly and at a reasonable cost. But like all aspects of life, there are unethical individuals, and it is important for you to research and do your due diligence when investigating a business opportunity.
1. Lack of Product or Service or Low-Quality Product
There are many red flags that should warn you about a business or financial opportunity, but the biggest one is the lack of a product. Programs that focus on recruitment rather than selling a product or service may be a pyramid scheme. If the company is not interested in bringing in more customers to buy its products but is entirely focused on “building a team” or membership of sales representatives, consider that a red flag.
2. Exaggerated and Unsubstantiated Claims
Wild claims are most obvious in health and wellness companies where representatives boast that their products cure illnesses or work miracles. Over-the-top advertising is a red flag in any industry, including direct sales.
3. High-Pressure Sales Tactics
One of the most common high-pressure tactics is attracting people to join at the outset. But in direct sales, a good opportunity is a good opportunity regardless of when you join. In fact, greater security lies in joining a company that has been around for over five years (the longer, the better) rather than joining a new company.
4. Pressure to Purchase and Stock Inventory
All multi-level marketing companies will have some startup costs. You cannot buy a McDonald’s franchise without investing money, and the same goes for direct sales, though it is much less expensive. What you should avoid are programs that require you to pay a fee for a “fast track” or pressure you to own inventory that requires additional investment. Due to this practice, laws now require MLM companies to buy back returned inventory, but that doesn’t mean you want to be saddled with debt before you really understand the business.
5. Poor Communication from the Company
Don’t be afraid to ask tough questions. If you don’t get strong answers or are reprimanded for not being a positive thinker or a believer in the company, consider that a red flag. To succeed in any business, you need strong support and solid training. MLM companies are required to provide you with a range of information, including details about the compensation plan and financial information about the average income that representatives earn. Study this and ask questions. If the representative is hesitant to answer your questions or dismisses your concerns, they are not someone you want to work with. A legitimate company wants you to be informed.
6. Ongoing Expensive Training Costs or Other Business Items
Some Amway representatives faced issues due to selling the tapes they created and sold. Most representative teams and companies have free training either locally or online. While they may also have additional training (like audio or video) that you can purchase, there should not be pressure to do so. Furthermore, most companies host an annual conference, which can be fun and beneficial, but it costs a lot to attend. If the company is regularly pressuring you to pay for training costs, that’s another red flag.
7.
Poor Rating from the Better Business Bureau
Frankly, this is a tough indicator because the Better Business Bureau regularly rates work-at-home opportunities low simply because they are involved in work-at-home, not based on any investigation. However, you can find out if there are complaints and how the company has addressed them. If the company responds and resolves issues (all businesses in all industries will have customer service problems), that’s a good sign. However, if they fail to respond or provide assistance, that’s a red flag.
8. Misleading Advertising Practices
Some MLM representatives may promote their business as a “job” or use another description to attract prospects. Multi-level marketing is not a job; it’s a business. Any MLM representative who promotes “employment” is using deception and is not someone you want to work with. Other misleading practices (often illegal) include making income guarantees or implying that you will make money by doing very little work.
9. Vague “Job” Interview
Another issue that has garnered criticism for companies like Amway and others is how they lure representatives to attend a “meeting” to hear about how to “leverage time and money.” Many representatives and companies know that people are skeptical and have many misconceptions about MLM, so they use deception to entice prospects to listen to their pitch. However, legitimate companies do not allow their names to be advertised. This practice means representatives must find a way to lure people to learn more about them without naming the company, which seems suspicious. The important thing to remember is to trust your instincts. Good representatives from legitimate companies that are restricted from using the company name in their promotion can give you an idea of the business, including the company name, when speaking to you in person or over the phone, and be clear that it is a business. Anything else should be suspicious.
10. Unstable Feelings
Mindy Lilyquist, a home-based business expert who fell victim to MLM, said she felt uneasy about the work from the start. “From day one, I failed to acknowledge the biggest sign that something was wrong – my gut,” she said. “I felt unstable from the moment I stepped into my supposed interview to the moment I lost my connection to the company. In hindsight, other representatives were also showing signs of instability.” The lesson here is not to ignore your intuition. If it doesn’t feel right, whether there’s a scam or not, it’s not right for you. If you feel pressured or manipulated, it’s definitely not right for you.
Other Things to Consider
While some of these ten items are signs of a scam, some, like the feeling of instability, don’t necessarily indicate a scam but suggest that the work-at-home opportunity is not right for you. You can avoid many pitfalls and build a successful direct business by investigating the company and choosing a product or service you can stand behind and believe in the product, company, and system.
If it’s too late and you think you’ve been scammed, you can try some things to recover your money, including contacting your bank and reporting the company to the Secretary of State in your state. You can also file a complaint with the Federal Trade Commission.
Source: https://www.thebalancemoney.com/business-is-an-mlm-scam-1794756
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