What To Know About Multilevel Marketing...

Multilevel marketing companies sell their products and services via their distributors. The multilevel marketing structure offers you the ability to sign up other distributors and receive commissions not only from your own sales, but from the sales of your recruited distributors as well.

These recruits are generally referred to as your "downline."

Legal And Illegal

The majority of multilevel marketing companies are of course completely legitimate. And, in many cases, they adhere to a stricter set of guidelines than do many other companies. However, there are unfortunately a few "bad eggs" that are set up as illegal pyramid schemes.

In a pyramid scheme, commissions are based on the number of distributors recruited, and most of the product sales are made to these distributors - not to consumers in general. The underlying products and services serve only to make the scheme "appear" to be legitimate.

Joining a pyramid scheme is very risky. Why? Well, because you'll undoubtedly lose your money. That, and because pyramid schemes are completely illegal.

Doing Your Research

If you're thinking of starting a home business by joining a multilevel marketing company, then be sure to take the time to learn as much as you can about the company itself.

When evaluating a home business opportunity, here are some things you should know:

• What's the company's track record?
• What products does it sell?
• Does it sell products to the public-at-large?
• Does it have evidence to back up its product claims?
• Is the product competitively priced?
• How much is the investment to join the business?
• Is there a minimum sales requirement to earn commissions?
• Are you required to recruit new distributors to earn commissions?

Be On The Lookout

Be skeptical if a distributor tells you that, for the price of a "start-up kit" of inventory and sales literature, you'll be on the road to riches. Distributors often spend a lot of money to "build their business" by participating in training programs, buying home business leads, or by purchasing the products themselves. And sometimes these purchases are all they ever see for their investments.

Responsibility In Your Home Business

If you decide to become a distributor, you are legally responsible for the claims you make about the company, its product and the business opportunities it offers. That applies even if you're repeating claims you read in the company brochure or advertising flyer. The Federal Trade Commission advises you to verify the research behind any claims about a product's performance before repeating those claims to any potential customers.

In addition, if you solicit new distributors, you are fully responsible for the claims you make about a distributor's earnings potential. Be sure to represent the home business opportunity honestly and avoid making any unrealistic promises. If those promises fall through, remember that you could be held legally liable.

Evaluating A Multilevel Marketing Plan

he FTC suggests that you use common sense when evaluating a multilevel marketing opportunity and consider these tips as you make your decision:

1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid scheme.

2. Beware of plans that ask new distributors to purchase expensive products and marketing materials. These plans may be pyramids schemes in disguise.

3. Be cautious of plans that claim you will make money through continued growth of your downline, that is, the number of distributors you recruit.

4. Beware of plans that claim to sell miracle products or promise enormous earnings. Ask the promoter to substantiate claims.

5. Beware of shills - "decoy" references paid by a plan's promoter to lie about their earnings through the plan.

6. Don't pay or sign any contracts in an "opportunity meeting" or any other pressure-filled situation. Insist on taking your time to think over your decision.

7. Do your homework. You can check with your local Better Business Bureau and state Attorney General about any company you're considering - especially when the claims about the product or your potential earnings seem "too good to be true."

8. And remember that no matter how good a product and how solid a multilevel marketing plan may be, you'll need to invest sweat equity as well as dollars for your investment to pay off in the long run.