Many of us search the internet looking for ways to make money. It might be because we are stay at home moms looking for a way to help contribute, we might be retired and need something to keep us busy or earn some money, or whatever other reason you might have to finding a way to earn some money.
There are so many scams online, that it can be scary knowing if we can trust some of these opportunities, especially the ones that make promises of all the money that you can make.
I am going to talk about MLM or Multi-level Marketing vs. Pyramid Scheme. When searching for money making opportunities, many times these are the types of work that you will find. Let’s make sure you know the difference, so you don’t get ripped off in the process of trying to earn some legitimate income.
How A MLM Works
MLM stands for Multi-Level Marketing. These are direct selling businesses that offer entrepreneurial opportunities to individuals as independent contractors. These contractors would market or sell products and services outside of a retail establishment.
Products and services are usually sold through one-on-one selling, in-home product demonstrations or online.
Direct sellers can be called distributors, representatives, or consults. Earnings can be achieved through selling products directly, through their sales organization, referring customers to the company or purchasing products for personal use.
In 2017, over 18.6 million people in the United States were involved in direct selling with Millennial’s making up 36.9 % of that work force according to the Direct Selling Association.
It is much quicker to get started than starting a business from scratch and the MLM participant will have the support of the company that sells the products and many times training as well.
An MLM participant can earn money from selling the products as well as having others sign up to sell the products. The consultants that you bring into the program are known as your down line. You can earn income from selling products and from signing up others to sell the products.
Top MLM Companies
There are a great number of MLM companies to choose from. Some of them are probably already very familiar to you. Take a look at the top most successful MLM companies from 2018.
- Amway – Earnings $8.6 Billion
- Avon – Earnings $5.7 Billion
- Herbalife – Earnings $4.4 Billion
- Vorwerk – Earnings $4.19 Billion
- Infinitus – Earnings $3.92 Billion
- Mary Kay – Earnings $3.25 Billion
- Natura – Earnings $3.09 Billion
- Perfect – Earnings $2.96 Billion
- Nu Skin – Earnings $2.28 Billion
- Tupperware – Earnings $2.26 Billion
You can see the complete list at Direct Selling News.
What Is A Pyramid Scheme
Not all MLM’s are legitimate businesses. When they are considered a pyramid scheme, is when you need to walk away and not join.
Pyramid Schemes are frauds that are designed to take your money, but are disguised as legitimate MLM’s. There are promises of making large amounts of money by getting your friends, family and acquaintances to sign up for the program through you.
A Pyramid Scheme will require you to pay a bunch of money to get products and services, and most people will never be able to sell the products, nor will they make any of the money back that they pay out.
How To Recognize A Pyramid Scheme
- Required to invest a large amount of money upfront to become a distributor. It will probably be called inventory. A legitimate MLM will not require large startup costs.
- Is there a buy back for unsold inventory? Legitimate MLM’s will have a buy back program for at least 80% of your cost.
- Is there any market or demand for the products. Pyramid Schemes are relying on who you are going to sign up and those people being forced to purchase a bunch of products upfront.
- Are they focusing on selling the product or signing more people up for their program? Is the focus on recruitment? If so, you need to run away quickly.
- Do you make more money signing people up than selling the products? This is a trademark of a Pyramid Scheme.
How To Protect Yourself Against Scams
I have provided you a list above of 10 legitimate MLM’s, but if these aren’t the ones you are interested in, you need to make sure you protect yourself from getting scammed. You can quickly spend thousands of dollars signing up for a Pyramid Scheme, and you will never be able to recoup that money if you do.
- Before signing up with anyone, check with the Better Business Bureau to see if there are any registered complaints.
- Read the company’s literature, business plan and marketing plan.
- Talk to others that have experience with the multi-level marketing business to find out if the focus is products or signing up more people.
Make sure you do your research before you give anyone your money. If the promises of easy wealth are being promoted, chances are that the only ones getting wealthy are the owners.
Can You Make Money With Multi-level Marketing?
There are some multi-level marketing businesses that you can make money and be relatively successful. You will need to be a really good salesperson, and work really hard. Your largest success opportunities would be getting in on the ground floor for a growing company, but there is a risk that this company might never succeed at all.
There are many success stories with multi-level marketing, but most people involved with them, only make a few hundred dollars per year. That makes it too big of a risk for me personally to get involved.
Alternatives To MLM
There is quite a bit of risk involved with multi-level marketing, there could be an investment, and the reward might not be what you were hoping to receive. Here are some alternatives to multi-level marketing that you can earn some money and the risk is zero.
Do online surveys for Swagbucks – costs you nothing to join, and you can earn for answering questions, watching videos and even playing games. The earnings are low though.
Cash Back Shopping Apps – there are several free apps available that can help you earn cash from shopping.
Create your own website – Creating a website is easier than you might think, and you can get started for free. Affiliate Marketing is selling other people’s products on your website. You don’t have to purchase any products, you are your own boss, and you can work when you want. Learn how you can write a blog for money.
If you are considering trying affiliate marketing, I recommend you look at affiliate marketing training for free. This program will help you learn how to create a website, what tools you need and how to get traffic to your website so you can get those sales. It is free to join and no credit card is asked for.
Summary
I do feel that the likelihood of earning much money with either multi-leveling marketing or a Pyramid Scheme is very low. If this is still the path that you are interested in, you should be able to tell the difference between MLM vs Pyramid Scheme to help protect you from joining something that is going to drain your pockets with little to no return.
Always be careful before shelling out a bunch of money to a company you know little about.
If you have any questions or comments, please leave them below and I will get back with you. You can follow momsmakingmoneyathome.com on Pinterest, Twitter, Linkedin or FaceBook for all the latest updates.
Thanks for this article, it helped clear a lot of things. I didn’t really understand the difference between MLM and Pyramid Scheming prior to this. Wikipedia made it seem like MLM IS Pyramid Scheming and a complete fraud. I’m glad that I found this post. It really helped clear things up about the differences between the two and how MLMs can be completely legit. Have you ever tried participating or building your own MLMs?
MLM’s are governed to make sure that they don’t turn into a pyramid scheme. I have never personally been part of an MLM, but I do know some who have, and it wasn’t successful. They got behind in sales for a few months and were forced to purchase more products then they really could afford. They ended up losing money, not making any money.
This is a great and informative post. Many people can benefit from the information you have provided, especially those who are looking for get-rich-quick programs. I see too many people getting scammed by pyramid schemes. Although MLM is a legit way of making additional income, I still find affiliate marketing through blogging is the best in terms of the money you can potentially earn for the time you put in, whereas for MLM you have to constantly look for prospects to sell to.
Being an affiliate marketer takes lots of hard work, but it is completely your own business, the costs involved are much lower, since you aren’t required to purchase inventory and I believe that you have a better opportunity for earning quite a bit more than you will earn with an MLM.
Thanks for reading and for sharing your thoughts.
This was a really interesting article, and thank you for explaining so clearly the difference between an MLM company and a pyramid scheme. I think with a lot of pyramid schemes there is just the payment of money without the exchange of products if I am correct here too?
You are right that it is very difficult to succeed with either of these business models, and I have tried selling products within the MLM structure in the past. I far prefer the alternative of this which is as you suggested – Affiliate Marketing. There are no costs to start with this sort of business model, and you make as much money as you want to, depending on the work that you put in.
Thanks for reading my article and commenting on MLM vs Pyramid Scheme. You are correct, a pyramid scheme’s main focus is recuiting more associates and not on selling products. You want to stay away from pyramid schemes.
I don’t consider either option a great choice for making a steady income. Most people selling in a MLM structure make very little money.
Thanks for this informative post, it can be very difficult for the person looking for a business opportunity to tell the difference between a legitimate MLM opportunity and a pyramid scheme at a glance, you have helped me in investigating a potential business opportunity, I’m glad I came across this post to gather all the information i can about the MLM company’s products and operations. Much appreciated.
I am glad that you have found the information valuable. When you are looking at an MLM opportunity, always make sure to see if they are really trying to sell products and not just membership. A pyramid scheme is very similiar to an MLM. I don’t ever recommend joining a pyramid scheme.
Great article and a good read for anyone trying to venture on their own outside a typical company. I like how you differentiated MLM and Pyramid, I myself get them mixed up from time to time.
I did try MLM a few years back with Amway. While I did like how they setup themselves, and the community that was supporting you, and even the products actually, I realized being a direct salesperson wasn’t for me. Don’t get me wrong, I believe they have a strong following and strong community, but unless you are a born salesperson, or like to sell directly to a consumer, try to find another alternative. I did make one paycheck which was satisfying at the time!
Is there a list of ongoing pyramid schemes somewhere? I feel this would be helpful if someone, or an organization, had a list of “active” pyramid schemes to watch out for.
Thank you for sharing your experience working as an MLM consultant. I would have to agree, that unless you have that personality that can be pushy for sales, it is hard to be successful.
If you are looking for what are the current pyramid schemes of 2019, here his a list of companies that I would stay away from, since they are all pyramid schemes.