For the longest time, people have had a false understanding of multi-level marketing. MLM has been villainised to a large extent because of the notoriety of Pyramid Schemes. Companies started Pyramid Schemes in the place of direct selling to turn a profit quickly and swindle money from thousands of unsuspecting people. MLM and direct selling are actual business models that do not resemble any get-rich-quick schemes. Let us take a closer look at the two and come out wiser.
What are Pyramid Schemes?
Though both MLM businesses and Pyramid Schemes might look similar, they are definitely not the same. MLM companies such as QNET, Amway, Herbalife are actual businesses that make money by selling products. Instead of using the traditional supply chain methods, they use direct selling to cut out the middlemen. This way, they can turn up additional profits and reduce costs. Pyramid Schemes, on the other hand, may or may not sell products as a priority. They primarily collect money from new members in the name of investment and set unrealistic targets for them to achieve. Hence, many people quit, and new ones join, thus funding the few founders’ entire operations.
If you ever at a crossroads and are unsure how to differentiate between an MLM business and a Pyramid Scheme, you need to ask a few questions.
- Are you being asked to invest money?
Most MLM companies do not require people to make investments. They only set sales targets and pay incentives on those sales to the direct sellers. Pyramid Schemes usually involve you paying a joining fee and placing a buy-in. There are also unrealistic sales targets that one is supposed to achieve consistently to have a shot at earning any real money. In short, please stay away from companies where they expect money out of your pocket.
- How many distributors get commissions on your sale?
A Pyramid Scheme is called that because it is a hierarchical structure of the organisation. The person at the top recruits two sellers and they, in turn, recruit two each until this keeps going on and becomes a huge pyramid. The worst part is that each sale commission is divided between a few distributors. If you find yourself in an organisation where more than five persons take a share from your sale, it is a Pyramid Scheme. MLM companies have strict rules about commissions, and each sale brings you a percentage of commission which only keeps increasing. Beware of companies trying to lure people by promising attractive returns for very little work.
- Are you being promised money for recruiting people?
Direct selling is where products are sold via multi-level marketing to the customers. Distributors hold products which customers can buy directly. To eliminate go-betweens and to turn a bigger profit, this method of doing business is beneficial. However, Pyramid Schemes are where the company promises you payment for recruiting more salespeople. This should sound warning bells for you because it is nothing short of a scam.
- Is there a monthly buying commitment?
MLM businesses set monthly targets so that direct sellers can earn better incentives. However, there is no pressure to increase your sales numbers. You are free to go at your own pace. Pyramid Schemes are the opposite. They force a commitment on the part of the sellers to purchase more products each month. Eventually, people quit because of the undue pressure, and these companies make money by selling the products at a steep price to new sellers.
So, whenever you have to decide, you need to ask yourself these questions. QNET has always been upfront about its activities, and it is nothing but a direct selling company. The work culture at QNET is something to envy, and should you decide to be a direct seller; it is a great place to start.
