Are You In A Pyramid Scheme?

CaptureIt’s 10:00 at night and I am in my kitchen measuring, testing and packaging spa products. It is the latest addition to my essential oils business, providing a level of prestige to my high-valued customers by providing them with handmade spa products. Sugar scrubs, bath salts, lavender face mists, and anti-aging wrinkle serum all packaged up in professional packaging and labels with elegance.

It has been seven years since I first started my essential oils business, which now brings in six figures in sales. If you would have told me back then that it would grow to the size it is today I would have told you it was impossible. If you would ask me what is one thing you think has allowed you to succeed I would say time, not giving up.

When I started the business I was well aware of network marketing because my father had many of these businesses growing up. From the first instant photo processing to a new food line we were always right in the middle of the sales and as a kid I always found it all exciting. I still remember watching my dad develop his first roll of film in the new machine that could develop photos instantly!

I think that network marketing is a perfect place to start to see if you can succeed as an entrepreneur. Now you don’t have to create your product but you do have to be creative about building a business and that is an amazing challenge. But for many of you, you did not grow up with an understanding of these companies and it can sometimes not only make you wonder if something is a scam but how you know who to trust. Who is going to be able to teach you how to succeed?

First there are a few laws to know about networking marketing and one of them I have seen broken more times than not. And it is important to understand that the difference between a Pyramid Scheme and an actual legal business is simply “how” you earn money.

Tip #1 Avoid Pyramid Schemes: There are multi-level marketing plans and then there are pyramid schemes. What makes the difference between two is how the business runs ethically.  According to the Federal Trade Commission if you make money on your sales to the public and have retail customers it is legit. But if you make money based on the number of people you recruit in a “membership” and your sales to them it is not. According to the FTC this is actually an illegal process. Bottom line if distributors sell more product to other distributors than to the public or if they make more money from recruiting then they do from selling the product retail it is a pyramid scheme. The company can be legit, but if people are operating the business this way it is illegal.

Tip #2 Assess the Opportunity: It is important to ask questions that will allow you to correctly assess the opportunity. The truth is that like any business it should take you a lot of work to create a decent revenue and overnight success is not the norm. I want to mention that many people will start a business because they can win trips or vehicles but really your focus should be long term. Can you succeed with the product long term?

Tip #3 Ask the Right Questions: Here are some additional questions that I would recommend asking before you start a network marketing business that will help you get a true understanding of the business. I would also recommend googling the company name and look for complaints.

  • 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? (ask to see their down-line report to prove it)
  • 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?

So how do you know you can trust someone to teach you how to succeed if you know the company is legit and it is not a pyramid scheme? You want to choose someone who has a track record of success. I personally have sent my people to Dani Johnson because she is reputable, she became a millionaire in the business, has been around a long time and she knows her stuff and her training is free online and more advance material you can purchase. If people can’t make the effort to go listen to her then I know they are not serious. I do not waste my time on training, but focusing on my customers .

If someone tells you that it is easy, that you can make money overnight and they try to push it on you, don’t listen to them. The fact is that those who are educated in building a network marketing business understand that their time is best spent with those who are serious about the product or about starting their own business. They understand that if they have to motivate you to use the product or service then they always will have to.

I hope this blog helps anyone out there who is thinking about starting a business in network marketing. I think that sometimes people don’t always know who to ask and what the rules really are and it’s important to understand. But I will share with you that when you do find a business you love and want to grow, there is nothing quite like growing it over time to actually be something amazing and something you are proud of. I love my business and I am glad I invested in it for seven years.

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