When it comes to multi-level marketing (MLM) and pyramid schemes, a lot of people don’t know the difference. In fact, a lot of people don’t even know what a pyramid scheme is. In this blog post, we will outline the key differences between MLMs and pyramid schemes, and then help you determine which one you might be involved in!
Multi-level marketing is a type of business model where people are recruited to sell products or services, and they, in turn, recruit other people to do the same. The people who have recruited receive commissions for their sales, as well as a commission for the sales of the people they recruit. This continues down several levels, with each level getting progressively smaller.
Examples of MLMs
Here are some companies that have successfully built MLM businesses. According to Ventaforce, these are the top 10 MLMs in the United States:
- Mary Kay
- Forever Living
- Nu Skin
Each of these companies offers a unique style and approach, but all utilize the power of MLMs to build thriving businesses. Whether you’re interested in selling makeup, nutrition supplements, or home products, there’s an opportunity out there for you with MLM. So why not take advantage of it? With a little research, you can find the perfect company to partner with and start building your very own business or side hustle.
Is An MLM Right For You?
Still not sure if MLM is right for you? Take our quiz to find out! Simply answer a few questions about your interests and goals, and we’ll help you decide if this style of business is the right fit for you. So what are you waiting for? Start exploring your options today!
MLM Quiz Questions
1. What are your interests? I am interested in…
A. Helping others improve their appearance or style
B. Improving my own health and wellness
C. Helping others improve their health and wellness
D. Selling products that make people’s lives easier or more enjoyable
E. All of the above
2. What are your goals? I want to…
A. Make a lot of money through my business
B. Enjoy a flexible and creative work style
C. Help others improve their lives through my products or services
D. All of the above
3. Which style of MLM sounds like it would be the best fit for you? I would like to…
A. Sell makeup and style products
B. Sell health and wellness products
C. Sell home décor or organization products
D. All of the above
4. What do you think is the most important thing to remember about MLM businesses? I think it is important to remember that…
A. You need to be very sales-oriented to succeed
B. You need to be very product-focused to succeed
C. You need to be very people-oriented to succeed
D. All of the above are important for success
E. None of the above are necessary for success – it depends on your style and approach
5. What is your assessment of the risks and rewards of MLM businesses? I think that…
A. The rewards outweigh the risks
B. The risks are too high and I wouldn’t get involved in an MLM business
C. It depends on the individual business and my goals
D. I’m not sure – I need to learn more about MLM businesses before I can answer this question
MLM Quiz Results
If you answered mostly A’s, then Mary Kay or Avon might be the perfect MLM business for you! Both of these companies focus on style and beauty products, so if you’re passionate about helping others look their best, they could be a great fit.
If you answered mostly B’s, then Herbalife or Amway might be the perfect MLM business for you! Both of these companies focus on nutrition and wellness products, so if you’re looking to improve your own health and well-being, this style of MLM could be ideal.
If you answered mostly C’s, then you might be a good fit for one of the many home or organization-focused MLM businesses out there. Whether it’s selling home décor and organization products, helping others declutter their homes and offices, or something in between, these styles of businesses tend to offer more flexibility and creativity than other MLMs.
Ultimately, the decision of whether or not to get involved in an MLM business is up to you. Do your research, assess the risks and rewards, and find a style that works for you. With the right style and approach, you can build a thriving business that helps others improve their lives – and reaps great rewards for yourself as well.
Pyramid Scheme Definition
A pyramid scheme is a type of investment scam where people are promised high returns for investing in a new venture. However, these schemes rely on recruiting more and more people to keep them going, and eventually they collapse when there are no more new investors.
What’s The Difference?
So, what’s the difference? Well, MLMs are legal while pyramid schemes are not. With an MLM, you are selling a product or service and you are recruiting people to do the same. With a pyramid scheme, you are simply recruiting people with no real product or service involved.
Questions To Ask
Now that we’ve outlined the key differences, let’s help you determine which one you might be involved in. If you’re not sure, ask yourself these questions:
- Is there a real product or service being sold?
- Do I earn commissions for sales made by the people I recruit?
- Do I earn commissions for sales made by the people they recruit?
If you answered yes to all of these questions, then it’s likely that you’re involved in an MLM. If you answered yes to the first two but no to the third, then you might be involved in a pyramid scheme.
Of course, not all MLMs are created equal. Some are much better than others, and some are downright scams. The same goes for pyramid schemes. So, if you’re not sure whether or not the venture you’re involved in is legitimate, it’s always best to do your research and consult with an expert before investing any money.
Here are some frequently asked questions about the difference between MLMs and pyramid schemes.
1. What is the difference between an MLM and a pyramid scheme?
The biggest difference between an MLM and a pyramid scheme is that in an MLM, participants make money by selling products or services, while in a pyramid scheme, participants only make money by recruiting new participants. Pyramid schemes are illegal in many countries because they are based on fraud and deception.
2. Is it true that all MLMs are pyramid schemes?
No, not all MLMs are pyramid schemes. While there are some similarities between the two business models, they are not the same thing. MLMs are legal in many countries, while pyramid schemes are illegal.
3. Why are pyramid schemes illegal?
Pyramid schemes are illegal because they are based on fraud and deception. Participants in a pyramid scheme only make money by recruiting new participants, which is not sustainable. Eventually, the pyramid scheme collapses, and people lose their money.
4. Are there any legitimate MLMs?
Yes, there are many legitimate MLMs. These companies sell products or services and allow participants to earn commissions by selling these products or services. Legitimate MLMs are not based on fraud or deception and are legal in many countries.
5. What are some red flags that an MLM is a pyramid scheme?
Some red flags that an MLM may be a pyramid scheme include high start-up or membership costs, claims of easy money or high profits with little work, and pressure to recruit new members. If you are considering joining an MLM, it’s important to do your research and make sure the company is legitimate before investing any time or money.
6. Is Lularoe a pyramid scheme?
Lularoe started as a legitimate direct sales company style-based fashion business that gained popularity in the early 2010s. At its height, it was estimated that tens of thousands of people had invested in the company, believing they would make money by selling these fashionable clothing items to friends and family. However, many soon realized that the company’s model was unsustainable and that they were actually losing money. The pyramid scheme aspect eventually collapsed, leaving many people out of pocket.
Lularoe was ordered to pay out $4.75 million dollars to settle their pyramid scheme lawsuit and has since restructured its company although its name is now tainted after Amazon launched a docuseries that chronicled the unraveling of Lularoe calling it LuLaRich.
In summary, MLMs are legal while pyramid schemes are not. With an MLM, you are selling a product or service and you are recruiting people to do the same. With a pyramid scheme, you are simply recruiting people with no real product or service involved. If you’re not sure whether or not the venture you’re involved in is legitimate, it’s always best to do your research and consult with an expert before investing any money.