Ponzi, Pyramids and MLM’s
Ponzi, Pyramids and MLM’s
What’s the difference you ask? Well, plenty!
Your basic pyramid scheme ( which Charles Ponzi perfected in 1920’s Boston) is just that…a scheme—one to get your money out of your pocket and into someone else’s. An elaborate swindle, and sadly one that is still alive and well today.
One unfortunate casualty of this type of “crookery” is the legitimate business that markets its products using Multi-Level Marketing. Other names are “network marketing” or just “networking.” Because they look similar to pyramid / Ponzi schemes, they are often dismissed as such out of hand. So, how can you tell the difference? Here are the clues:
1. Legit MLM’s sell real products or services that generate a profit that is shared among the participants. Ponzi’s offer fantastic promises of huge profits with NO WORK! (Where have you heard that before?)
2. With real MLM’s, everyone pays the same modest “starter fee” which is often refundable. The start-up fee usually covers training materials, sales literature, sample product and registration paperwork. The cost of these materials do nt result in profits or points for the immediate recruiter. Nobody makes anything until someone sells a product or service. No one can buy a better position within the organization with more money— you have to EARN that. Pyramids, chain letters, etc. promise you that the more you pay in, the more you’ll make.
3. Everyone who works hard in an honestly run MLM can make MORE MONEY than the person who got in ahead of them. With a Ponzi, that’s impossible, and a key distinction.The later people’s money is simply used to pay the early birds’ profits, and because it generates to real income, the guys at the bottom of the pyramid lose. “ Last one in is a rotten egg.”
4. MLM’s pay you for work—selling a product or service and recruiting other people to do the same. Again, it’s the work that generates the money. You do NOT get a dime for enrolling someone in your organization. If they don’t succeed, you don’t succeed. Quite a concept, huh? If you are lazy, you get zip. if you work hard, you get paid, sometimes handsomely!
What are MLM’s? The concept of multi-level marketing is not new or even remotely unique. It is simply an opportunity to build a business around a sales force of commissioned salespeople. The hardest part is finding people who want to do the same thing— that is to enroll or recruit people who want to sell products and recruit and build their own business. That is easier said than done, especially with the shadow of Mr. Ponzi over anything that involves getting others to join. Often mistakenly called a pyramid scheme, MLM’s are actually better viewed as multi-level pyramids—with each member having the equal opportunity to build as big an organization as they are able, and can potentially make more money than the person who recruited them. By contrast, look at all the companies today that employ commissioned salespeople, dealers, franchisees, sales managers etc. Those are the real pyramid schemes. Sales managers, district managers, regional sales managers and VPs of sales all make more than the poor grunt knocking on doors. He is doing all the hard work and his commission is diluted, split and passed up to the other guys above him in the form of “over rides.” Now this chap does have the possibility to be promoted higher up to the upper levels, but someone has to quit or get fired first. When this does happen, what does the company do? They either replace the “higher-up” from some outside company or they go out and RECRUIT more grunts…hello?…Mr. Ponzi?
So, In conclusion, If you can stand rejection, and have a sales personality. Money can be made with MLM’s. Just make sure they adhere to the four principles stated here.
1. Profits, comissions, bonuses are derived from the sale of actual products or services.
2. Low start-up cost
3. Ability to earn more than your recruiter (through working harder)
4. No pay simply to recruit. If you enroll someone who does nothing, you earn nothing from that enrollment—move on to the next.
M. B. Lunde is an artist, a business owner, writer – blogger, and MLM-er who lives and works in Southern California.