Watch Your Step

The benefits of network marketing are attractive: You call the shots, avoid rush-hour traffic by working from home and earn residual income that accumulates whether you're working, sleeping or playing. In contrast to traditional franchising opportunities, which can require $35,000 to $100,000 or more in start-up capital, you can often buy into a network marketing (also called multilevel marketing, or MLM) opportunity for less than $100. Also, the structure of MLM businesses makes it feasible for you to get started while you're working another job, allowing you to gradually grow it into a full-time operation.

But as with any investment opportunity, not all MLM offers are good picks. For every person who makes it big in network marketing, there are several who give up their businesses after only a few months. What are the pitfalls you should be aware of before you sign up, and how can you protect yourself?

With your financial future and business credibility at stake, it's important to make an informed decision. Here are the seven most common mistakes prospective MLM distributors make and how you can best avoid them: