MLM Scams

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How to Tell if a MLM is Really a Scam

Whether it is called network marketing or multilevel marketing (MLM), it all boils down to the same thing. Network marketers build their businesses by selling products or services -- and by encouraging others to join their networks.

Often derided as pyramid schemes, network marketing is not always a bad thing. Plenty of quality network marketing and MLM companies exist, and many thousands of people are making real money through those networks.

As with any type of business opportunity, the trick is to sort out the legitimate network marketing opportunities from the scams. Fortunately there are a few telltale signs of shady MLM marketers. If you see any of these red flags waving, it is best to run, not walk, to the exit.

Red Flag #1 - Outsized Promises

This may be the biggest red flag of all, and one of the most common. Some MLM companies tout their outsized returns or promise that everyone who signs up with them makes thousands of dollars a month.

That is simply not possible, and no legitimate network marketing company would make such claims. Network marketing is a business, and individuals will get out of it what they put in. Investors who work hard to build and maintain their networks can do very well. Individuals who take the business less seriously are unlikely to thrive.

Red Flag #2 - High Initial Investment

You should not be scared off by having to buy products and basic outreach tools. It makes sense to buy a sales kit and stock up on products to sell. It does not make sense to invest thousands of dollars in items of questionable value.

Watch out for MLM companies that require a high initial buy-in, and always check the buy-back policies. Legitimate companies will be willing to buy back unsold products and refund certain expenses if you find the opportunity is not for you.

Red Flag #3 - An Absence of Support and Training

You can test the responsiveness of customer service by making a phone call or sending an email to the support line. Do not use the contact information for new members -- even the shadiest MLM company will be anxious to gain your business. You want to test the response you can expect once you are already a member. If the company fails to answer your queries or respond in a timely manner, it is time to move on.

Red Flag #4 - A Low-Quality Product or Service

No matter how vast your network, you cannot succeed if the product or service you are selling is substandard. Always let the product line be your guide when evaluating a network marketing opportunity.

Look at the product or service with the discerning eyes of a buyer. Would you buy the product? Do you find it useful? Would your friends find it useful? If you cannot answer yes to these basic questions, you should seek another network marketing opportunity.

While pyramid schemes and shady MLM companies certainly do exist, not every network marketing business is a scam. Knowing which red flags to look for and how to evaluate each opportunity is the best way to make money in this crowded business space.

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