What Makes an MLM Business a Scam?

Why is it that so many people join mlm businesses and never make any money? Worse yet, why is it that people all over the world will fall for one mlm scam after another? The reason is very simple. People want more out of life than they presently have, but most people are not in a position financially to start their own business. Another thing is most people do not have the skills it takes to run their own business.

So when along comes your best friend, neighbor, or relative, offering you a chance to get rich and change your life, You Listen. Your judgment is clouded by your dreams and the trust you have in the person who told you about this new great opportunity.

The first thing that happens is you sign up as a distributor and never read the distributor agreement. Because it only costs $100 to get started there is really very little exposure to you financially, so the stakes are low.

The next step to do is start trying all of the products. The more you try the easier it will be to sell the products to others. One common mistake new distributors make is they start overpaying for products they could go down to Wal-Mart and buy for more than half of what they pay buying for themselves. This is not a multi-level network scam, but it is the first cause of mlm failure.

The minute you start taking money from other things, like household necessities, to finance your new mlm business, you are heading for trouble. Multilevel marketing is a business strategy that requires a member-distributor to sell the company's products as well as to recruit other distributors. The distributor earns commission for every product she is able to sell as well as from the products being sold by her recruits.

So when does multi-level marketing become a scam? The multilevel marketing business is a legitimate business as long as products are sold. This creates the next fallacy in most mlm businesses and accounts for the high 95% failure rate. Most people will never sell anything. Because of the high commission rates paid to achieve various levels, many distributors will begin stocking some products to qualify for the next level. If that product is not sold over the coming days, weeks, and years it will just set around and collect dust.

Because most people who join an mlm company never make a sale, this leads to more debt.

Another common mlm scam comes from recruiting new distributors and is getting paid commissions or doing it. If the company promises to give you commissions for every new person they recruit and for every person your new distributor recruits, without them doing or selling anything, you have the makings of an mlm scam. It is illegal if someone says to you, "Just get in with me and I will do all the work, you do not have to sell or recruit anyone." No one person can do all of the work for their whole group.

Everyone has to be selling and recruiting for you to be legally building your mlm business.

This does not make all mlm companies scams. Actually, thanks to the Internet it’s becoming just the opposite. You can research everything about a company before you join it. Selling Internet based products really simplifies the whole process as well. It is easier to get new customers and recruit new distributors because it can all be done from the comfort of your own home. This will still involve work. Like any brick and mortar business, you need customers and products. To grow beyond what you physically can do yourself you will need to duplicate your efforts by recruiting new distributors.

If you are willing to investigate a company before joining them and then work hard once you have started, you do not need to be taken by any mlm scams and you have the opportunity to change your life as well. Mulit-level marketing is a great opportunity for the average person.