If you get paid to bring people in under you, it's a pyramid scheme, also known as Multi-Level Marketing (MLM) or Network Marketing. It's pretty straightforward and simple; you're not an entrepreneur or you don't have your own business, you're not taking advantage of a unique opportunity, someone else is getting rich off of your shortsightedness. There are variations of pyramid schemes out there with every company trying to disguise their practices in order to remain active.
In case you didn't know pyramid schemes are illegal and highly profitable for very few people at the top who are willing to spend fortunes in order to keep the scam working. The most successful pyramid schemes disguised as legit businesses on the global market right now are Usana, Nu Skin, Mary Kay, Herbalife and Amway. These five alone generate over $20 billion in revenue each year so they have resources to protect their empires at any cost. They settle cases for hundreds of millions of dollars in their home countries and promise to change their business model without doing it until the next big lawsuit. Settling cases is just another company expense.
These companies try to position themselves in a grey area of commercial law by saying that their revenue is generated from products when in reality it's their own salespeople who are purchasing said products trying to unload them onto others. There are lots of companies out there that use both direct and pyramid selling methods, now they are not all equal in their malevolence but they do rely on the same type of shady business model. For these companies, their representatives or salespeople, ambassadors whatever they choose to call themselves are actually the ones who are buying the product. You’re not a sales agent, you’re a customer and you don't even realise it because of the way it's been sold to you. If you look at the income statements of these types of companies, it's easy to see where the bulk of the revenue is coming from.
Majority of the representatives of these companies don't earn any money from the company in which they act as distributors yet these people actively spend money purchasing products from the company lured in by discount on already hyperinflation-priced products. Even if you manage to break even in any of these companies, you would just unload that loss unto someone else, usually someone you know ending up hurting them. After perfecting their strategy in developed countries and seeing resistance from developed governments, they know to set their sights on developing nations like India, Indonesia, Thailand, Africa and even China.
Here's how to tell if your friend is trying to bring you into a pyramid scheme. They will approach you only needing a couple of minutes of your time in order to talk to you about a great opportunity. They usually go through their inner circle very quickly and are now reaching out to old acquaintances. They usually explain how it isn't a pyramid scheme but then go on to say if you only bring in three people and these people bring in three each, you're all set. One of the most popular methods is to relate your reward service with product volume.
If the company they work for ranks people in valuable metal or material categories like diamond, gold, silver, platinum, jade or whatever they're in a pyramid scheme. They will end the talk with a buy-yourself-in type of pitch, where for only X amount of cedis, you purchase a set amount of product, you're getting in on this incredible opportunity. They might even show you proof of some revenue or talk about the success of other people but for them, you're just a way to break even and get back whatever money they put in.
The pitch is usually something along the lines of become your own boss, be an entrepreneur or start your own business but the truth is you're not really an entrepreneur, you not starting a business. In deep down, any educated person can tell the difference that's why they prey on the ignorant usually wannabe entrepreneurs that don't know how to really build a business.
The simple difference between an MLM sales company and a pyramid scheme comes down to money, if you have to put in money at any point or if money contribution on your behalf increases your earnings in any way it’s a pyramid scheme. The only legal form of MLM is when you earn solely a commission based on sales, which is technically what a sales employee would do in any legitimate company. If you earn money when you sign people under you, you're in a pyramid scheme.
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