Fraud Tip of the Day - July 5

Multi-Level Marketing Tips - Warning signs and red flags that could alert you to a MLM scam

Multi level marketing is a method businesses use to market their products directly to consumers through relationship and direct selling. It works by having distributors represent the parent company. Distributors are generally non salaried and make their money by commission off sales made by their own independent organization. These organizations are made by either building up their own customer base who purchase directly from the parent company or by recruiting other sales people who perform all the leg work for the distributor. A distributor can make money by selling the parent company's products wholesale to their own organization.

The description offered above for multi level marketing is almost indistinguishable from illegitimate pyramid or ponzi schemes. It can be very difficult to tell between legitimate MLM and scams. If you're considering becoming a distributor or a link in a distribution organization, we suggest bearing in mind the following:

Multi-Level Marketing Tips:

• Can you make a profit by only selling the product/service? Beware the company spokesperson who says the only way to make money is by hiring other distributors. This is an opportunity to walk away from. If they say you can increase your chances of making money by hiring other distributors, that's OK. Just as long as you can still make money in addition by selling their products/services.
  
  
• Consider the MLM parent company very suspiciously. Research the parent company as much as you can. Try to obtain credit reports from Dun & Bradstreet. Ask lots of questions. How long have they been in business? Where do they conduct business? Are they a member in good standing with the Better Business Bureau? What's their litigation history? Are there any current lawsuits pending? Are they a member of any MLM or Direct Marketing professional organizations?
  
  
• Review their products/services very carefully. Are their products/services easily attainable through other channels? How unique are their products/services? Can any claims made about their products/services be validated by independent entities? How do you feel about their products/services? Are they something you can really believe in and be passionate about? Do you know anyone who's purchased from this company in the past? What was their experience?
  
  
• Appraise yourself. Do you really think of yourself as a salesperson? Is this the right opportunity at the right time in your life? Do you have an extensive network of business and personal contacts you can leverage? How many other distributors are in your geographic area? Would you be the first or one in a long line of already existing distributors?

When contemplating a new business venture, please keep in mind that many more businesses fail than succeed. A key question to ask yourself is, "Can I really afford to lose the money I'll be investing in this venture?" If after taking everything above into consideration, you conclude that MLM is for you, please keep the following tips in mind:

• Walk away from any opportunity that only offers commissions for recruiting other distributors.
  
  
• Avoid plans that ask you to pay for very high priced inventory in the beginning.
  
  
• View opportunities with skepticism when they promote profits more through growing your own organization rather than through selling their products/services.
  
  
• Beware grandiose claims and miracle cures - make sure the parent company can substantiate their products/services performance.
  
  
• Take your time in making any decisions. Discuss the opportunity with family, friends, a lawyer, an accountant, etc...prior to signing any contracts. Don't let them pressure you into something before you're ready.