Is MLM a Scam? Here’s How to Tell

Is MLM a ScamYou may be wondering… is MLM a scam?

Before we determine that let’s talk about what exactly an MLM is.

MLM is another name for Multi-Level Marketing.

It’s been around for decades. Today there are hundreds if not thousands of different MLM companies that follow this kind of business model.

Here are a few popular names you might recognize.  All of these are legitimate companies.

  • Amway
  • Avon
  • Pampered Chef

As we all know, typical companies sell their products or services by hiring a sales team to make sales.  They also have huge advertising budgets to promote their product through Internet, television, radio and publications.

However, the MLM company sells their products in a different way.  They sell their products through home business entrepreneurs.  Also called independent distributors.

These independent distributors do all the selling, marketing and promoting for the company in exchange for a commission. They also get compensated for recruiting other independent distributors and earn commissions on the sales of the people they recruit.

The big attraction to MLM is the dream of earning an ever growing residual income.

Residual income is money that comes in month after month whether you work or not.  In my opinion, it’s a brilliant money making concept utilizing the power of leverage.  However the practices used by some MLM distributors can be construed controversial and unfair.

Distributors and companies that lead with “recruiting of others” instead of selling their products are scams.

Unfortunately, many of the people that join, don’t fully understand how MLM works.  They get tricked in the hopes of earning easy money.

In my opinion, lying to people by promising false hopes is not a way to build a business.

Another problem with kind of business is that new distributors end up paying inflated prices for useless products they don’t need and spend even more money trying to promote to other people in the hopes of making more money.

When in reality they end up doing the exact same thing the person who introduced them to the business in the first place did to them.  And the process continues.

Because of that, many people don’t like MLM.

Don’t get me wrong, many MLM companies are legitimate and follow honest business practices however on the other side of the spectrum, there are many independent recruiters out there that don’t follow the rules and lie to people to fatten their wallets.

People must be careful to recognize the scams before they join.  Fortunately with the Internet, anyone can do their own research and find the ones that are legitimate and honest.

Now let’s go back to the question…  is MLM a scam?

In my opinion, especially in the United States some are NOT legit but many ARE legit.  The ones that have been around for many years and sell real products are NOT scams but I believe it’s NOT an easy business to go into.

Most people don’t succeed with MLM because it attracts the wrong people for the wrong reasons like I mentioned above.  In my opinion, a hyped up MLM company promising quick riches to vulnerable people is NOT a business.

I think the guys that have money to advertise and understand how to market this kind of business and are able to generate MLM leads end up making all of the money.  They have a massive list of people to contact that will join them in their business.

The sad part is that those guys on top jump around from company to company getting all the same people to follow them and pay them.

Is MLM a Scam?

I’ve been involved in a few MLM companies in the past.

Eventually I smartened up and realized how difficult this kind of business was to actually make money.

Personally I prefer Affiliate Marketing.

If you are involved in an MLM opportunity and are running your business legitimately then I applaud you.  But if you are having a tough time making a legitimate sale in a truthful and honest way then maybe it’s time to re-evaluate your business plan.

Here are a few quick ways to determine if an MLM is legitimate or not.

  1. How long has the company been in business?  Under 10 or over 10 years.  The longer they have been in business, the better chances are they are legitimate.
  2. Where is their corporate headquarters?  Are they in the United States or Canada. If they are, then the better chances they are legitimate.  If they are in some small foreign country you’ve never even heard of, beware.
  3. How do they take payment? Is the payment processor a legitimate bank or credit card company?  If you have to wire cash to them every month, run from them as fast as possible.
  4. Do they have a legitimate product worth the price you’ll have to pay for it?  Can you get a very similar product at Wal-Mart or your local grocery store? If so, then chances are it’s not worth buying and other people won’t buy it as well.
  5. Are registered with the the Better Business Bureau. They don’t have to be registered but if they are, then that’s good.  Make sure their BBB rating is a B or better.  Anything lower then a B is probably not a good sign.
  6. Do a Google Search. Type in “the name of the company with the word scam next to it” and see if some bad press pops up online about the company.
  7. Last but not least. Did the recruiter that introduced you to the MLM opportunity lead with too much hype or did he/she appear to be straight forward and honest?
  8. SFI is an is an example of a legitimate MLM company.

So there you have it.  Those are 7 quick ways to determine if the MLM opportunity you are thinking of joining is worth joining.  Do your due diligence before you jump into any MLM opportunity. If your gut says “shady” run for the hills!

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