Millions of people have found success in direct selling for companies using a multi-level compensation plan. Unfortunately, not all opportunities are legitimate and it’s easy to get caught up in the enthusiasm and big promises of a pyramid scheme posing as a trustworthy company. So how do you tell the difference? Answer the following questions:
Is the start-up cost reasonable? A legitimate company will generally offer a startup kit that includes product samples, catalogs, order forms and other essentials that you need to get started selling. The median cost of a kit is $99, but can range from free to several hundred dollars depending on the type of product being sold. A pyramid scheme on the other hand will often require a large upfront investment of several thousand dollars for which you get little more than the right to recruit others.
Does your compensation come from selling products and services or from recruiting others? The money-making potential in a legitimate multi-level marketing company will rely primarily on selling products – be it from your own sales or the sales made by your recruits. In a pyramid scheme money is made by the recruiter from the fees paid by new recruits, regardless of whether they sell anything. Additionally, be sure products and services are being sold to the ultimate consumer of those products instead of passing large quantities of product from seller to seller.
Will the company buy back sales kits and unsold inventory? Most direct selling companies do not require large inventory purchases, but if one does, be sure to check out the buyback policy. All Direct Selling Association member companies are required to repurchase, at no less than 90 percent of the purchase price, any marketable inventory and sales aids purchased in the past 12 months if you (more…)