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posted on:
5/3/2011 10:48:52 AM EST
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MLM vs Pyramids
MLM, network marketing, home business, acn
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" . . . just another one of those pyramid schemes." are what people think when they are introduced to an mlm opportunity. That is their understanding based on what the business looks like when it is presented to them on paper.
Knowledge is priceless and so is education. It literally pays to be knowledgeable about the difference between an mlm company and a pyramid.
A Pyramid is a business structure that has levels. For example there would be 3 people at the first level, nine people on the second level, 27 on the third level etc. Money would be exchanged between people involved in the levels but no products or services would be offered. The key phrase is NO PRODUCTS OR SERVICES WOULD BE OFFERED.
Judging a business based on the type of model it uses would somewhat be unfair. If that were the case 95% of businesses in existence would be considered a pyramid scheme. The following will give you a better understanding of business models and different pyramids to look out for.
Most business hierarchy's have a pyramid system where the CEO is at the top making the most money. Under the CEO would probably be the CFO and COO. Under them would be the board of directors. Then you would have your management. Last but not least working the hardest are the people on the bottom of the pile.
Usually they are the ones you see at the cash registers taking your payment or the waitresses or waiters on the floor taking your order.
In some prisons you have one Warden, then the Major, then maybe 3 Deputy Wardens underneath them. Possibly five or six captains come after that. Underneath those five or six captains are maybe ten Lieutenants. After that on the ground level doing all the dirty work would be about 100 to 200 correction officers.
However they (Correction Officers) get paid the least. In most businesses whether it's profit or non-profit operate in a pyramid structure. However, most businesses prefer to call it a hierarchy.
If you have a job working for a corporation or company that is in the stock market you are probably on the front lines doing all the work and getting paid the least. At least you provide a product or a service.
A Pyramid Scheme involves individuals that recruit others that in turn recruit others. This system of recruiting has to have no end to ensure its success.
The reason it’s called a pyramid is the structure it turns into. For example, 5 people recruit 5 people (25 people) to give them $50 ($250). Then those 25 recruit 5 more each to give them $50 ($6250) and the money keeps being passed upwards to be distributed to the recruiters. No products or services are offered or sold.
The reason it eventually turns out to be a fraud is because for everyone to be successful, there has to be a never ending sea of people to recruit for everyone to make money.
For example if there is 10 trillion people in the world and everyone in the world was involved in the pyramid, the last level of recruits will make nothing because there is no one else to recruit.
It is a fact that it is not likely that an individual will recruit the necessary number of people to raise the amount of money to be passed upwards and many people end up losing money.
The difference between a Pyramid Scheme and an mlm (besides the fact that MOST mlm companies offer a product or service), are that you are not required to recruit in order to make money.
You can sell or promote the product that is offered by the MLM company and earn money. You might earn more money if you introduce (recruit) others into the business but it is not a requirement to do so to earn money.
People being introduced to MLM may have the same feeling as a buyer at an auction but had no idea what to do. I said earlier that MOST mlm companies offer a product or service.
There are in fact some Pyramid Scams disguised as MLM companies or Network Marketing Businesses. The way to tell the difference is simple. Ask yourself if the mom company offers a product or service of value.
Also if the mlm company requires you to recruit in order to make money, it should be considered a red flag.
Remember that Pyramid Schemes and Scams are made to sound good and people are fascinated by the idea of making fast money. This can usually lead to poor decision making. You owe it to yourself to do your research. After all Pyramid Schemes USUALLY don't come with a customer support department.
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