MLM Business Smarts: How to Evaluate a MLM Company

MLM companies are a "dime-a-dozen." And many offer a quality business opportunity.

However, it is your job to figure out which of these "opportunities" is "for real," and which of these companies will leave your bank account "reeling."

Note; This is not the reeling as in "pulling in a big fish," but the reeling as in "a spinning dance that leaves you dizzy."

Here are some tips, compliments of the Federal Trade Commission (FTC).

See the FTC description of pyramid schemes…

The Federal Trade Commission (FTC) will not tell you whether a particular MLM opportunity is legal or illegal. That is your job and that is something that you should do in your research and due diligence before investing.

However, there some common sense indicators that should set off "red flags," even "warning flares" that can steer you clear of a financial pile up.

Look for these warning signs as you consider your investment decision:

1. Watch out for any MLM plan that includes commissions for recruiting additional distributors. This may be illegal (a pyramid scheme)


2. Beware of MLM plans that ask new associates or distributors to purchase expensive inventories. If the product sells like the MLM sponsors claim, large initial inventories should be unnecessary. You should be able to pay as you go, and fund future inventories from sales, i.e., plow your initial profits back into the business


3. Be careful of MLM plans that promise that you will become rich through continued growth of your Downline. If you believe that you will earn more commissions on sales made by new MLM associates and distributors you recruit, instead of through sales of products you make yourself, you are "betting the farm" on someone else's labor. How do you expect that your Downline folks will have any more luck selling the product than you have unless you train them, and until they build their businesses?


4. Stay clear of plans that claim to sell "miracle" products or super-high-priced commodities. And watch out for promises of enormous earnings. Check these claims thoroughly. Just because a MLM recruiter makes a claim doesn't make it true! Ask for "hard evidence," or better still, independent evidence.
   
   
5. Beware of shills, i.e., folks who are paid by a MLM recruiter to tell you that they are making money "hand-over fist." The only money that they may be making is the money they get by pretending to be earning money through the scheme


6. Avoid sign any contracts in a big hotel "motivational" meeting. And, steer clear of any other high-pressure venue. Take your time, analyze the business, and re-think your decision to join. Talk it over with your spouse, a friend…and especially with your accountant and lawyer


7. Do your due diligence homework! Check with your local Better Business Bureau and you state's Attorney General about any MLM investment that you are considering. These officials can only warn you about complaints and legal cases, so use other information, too

Use these strategies in evaluating any MLM opportunity, especially when claims about the company (and your earning potential) seem "too good to be true."

You know the cliche!

Just perform your due diligence and prevent your bank account from becoming another "road kill" statistic on the MLM road of promises…a highway to the poorhouse.