Watch Your Step

How do you distinguish legitimate MLM operations from illegal pyramid schemes? Here are five things pyramids do that differentiate them from legitimate companies:

1. Promote the business opportunity as the "product." Always determine exactly what the product is before giving the opportunity a second look.

2. Require front-end inventory loading. For legitimate MLM companies, you pay a small fee to get into the business, and inventory is optional.

3. Require substantial cash investments. The red flag is when you're required to spend $500 or more to get into the business opportunity. Most MLM offers initially cost less than $100.

4. Pay fees for recruiting. "A legitimate MLM opportunity will have compensation based on product sales and not recruiting," says Jeffrey Babener, a partner in the Portland, Oregon, law firm Babener & Associates who represents many network marketing companies.

5. Don't buy back. Says Babener, "Any plan that doesn't agree in writing to repurchase a reasonable percentage of unused inventory or sales materials for a stated time after purchase should be avoided."

Contact Source

Sheffield Resource Network, (602) 968-6199, http://www.sheffieldnet.com

Sean M. Lyden is the principal and senior writer of The Professional Writing Firm Inc., a Kennesaw, Georgia, company that writes articles for consulting and advisory firms. He specializes in management, marketing and motivation issues. E-mail him at seanlyden@mindspring.com