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How to Spot an MLM Scam

October 17, 2013 , 1 Author

There is one form of marketing that is still a little bit controversial – multi-level marketing, also known as MLM. MLMs have a bit of a bad name, and although there are many legitimate MLM opportunities, there are also many scams. But what is an MLM opportunity? How does it differ to an illegal pyramid scheme? Learn more about MLM and how to spot MLM scams below.

Want to make some money? But where do you start? First, you have to figure out what it is what you actually want to do. If you know that you love pets, for example, you could go into selling pet supplies or offering up training advice. Love makeup? Work at a beauty counter or sell makeup directly. If you don’t know what you want to do, though, you need to learn.  If all you want to do is make lots of money and get rich quick, but you don’t have a passion or something that excites you, you need to find one – otherwise you’ll never make any money, regardless of what the MLM ads might tell you. If you fit into the second category, keep in mind that MLM scams will probably be very, very attractive to you, so you need to know how to spot them.

MLM scams will usually start with a shouty advert, saying something like “Just a month after seeing the offer for the first time, I’d already made $3000 and swapped my car. Want to know how you can do the same?” The chances of that actually happening are very, very slim, but to pull you in even further, you’ll see things like interviews with successful and happy affiliates (most likely actors), cashed checks and fabulous homes and cars, all acquired with the help of an MLM opportunity.

Another way to spot MLM scams is the lack of a product. When an MLM opportunity is a scam – or verging on an illegal pyramid scheme – you’ll make your money by recruiting others to your downline. Then, they make money by recruiting others – and all the system involves is recruiting more and more people to the scheme, with each person simply making money from the fee they charge to join the scheme. When an MLM opportunity is genuine, there will always be a product. Many, many, many MLM opportunities exist with fantastic products that are sold directly to the public. The difference is that the products are the main focus of the business and people involved in the scheme can then choose to recruit others if they choose – but they can still make money simply by selling products. With MLM scams, or pyramid schemes, if a product does exist it is almost definitely as an afterthought.

Most MLM opportunities will require you to make a payment to join the scheme, but when it comes to MLM scams, you’ll notice that they don’t give you any information about the opportunity until you make the payment. You might go along to a meeting after you’ve made payment, and you’ll think that it seems like a really upbeat, positive environment. The person that recruited you will tell you that they’ll give you all of the tools needed to make sales and they’ll encourage you to sell to friends and family. However, you’ll quickly find out that it’s really, really difficult to sell to friends and family. If they do buy a token product, it’s unlikely that they’ll buy any more. And then, you have to get out there and do the hard sell on your own – making flyers, cold calling, online advertising, creating videos, blog posts and much, much more. It’s a lot of work – much, much more work than you’d think.

With pyramid schemes, and MLM scams, what you’re selling is the dream. The dream of a better life, a happier home, a large house, a wonderful car, a pool, lots of holidays… and the very idea of that dream is what makes people part with their money. But there’s a reason why pyramid schemes and MLM scams are illegal. It’s because eventually, that pyramid will topple. It won’t stay around forever and only the very few people at the top will make money – leaving you, and everyone else at the bottom, worse off.

We’re not trying to say that all MLM opportunities are bad – not at all. Many MLM schemes provide their clients with a number of fantastic opportunities and some very real benefits, like working from home, working for themselves, being their own boss and being in control of how much money they make. But if you want to go into MLM, you have to be prepared to work. Women are no longer at home all day to accommodate travelling salesmen – if they want to buy something, they’ll buy it online or they’ll go to a store. It’s difficult to convince people that they need something if they’ve never, ever thought about that product before. These days, MLMers need to do things a little differently – they need to make full use of online advertising, websites, SEO and online marketing if they want to be successful. So if you’re prepared to put the work in, you’ll definitely be a success – but you need to know that MLM isn’t easy. And to be successful in the first place, make sure that you’re not getting involved in a scam. If it seems too good to be true, it probably is.