How To Tell If A 'Business Opportunity' Is A Multi-Level Marketing Scheme

Kevin’s been invited to his friend’s house to hear about a great new business opportunity! He writes, “I did a quick Google search and… while the company appears to be legit, it seems that their way of marketing their products [is] almost pyramid scheme in nature.” The problem for Kevin, and anyone else researching this sort of thing, is it can be hard to tell how much you should trust any specific page of reviews or feedback. Here’s a clear 5-step evaluation to determine whether or not the next big thing is really a multi-level marketing (MLM) scheme.

(Read the full evaluation pages for details and explanations of the questions, and to find out how to locate the information you need to answer them.)

  • Red Flag #1: Participants are recruited in an endless chain of participants.
  • Red Flag #2: Advancement in the scheme is by recruitment, rather than by appointment.
  • Red Flag #3: Participants are expected to buy (or subscribe to) products or services in order to qualify for commissions or bonuses or to advance in the scheme.
  • Red Flag #4: The company pays commissions and bonuses on more than four levels of participants.
  • Red Flag #5: Company payout per sale for the total of all upline participants exceeds that for the person actually selling the product.

Now you can decide for yourself whether or not to attend that next meeting your friend invites you to, or whether you should slap him for being such a sucker.

For the record, Kevin, what we found about ACN suggests that even if it’s a legitimate opportunity, the services they’re selling (long-distance telephone rates, e.g.) are outdated in today’s world of cellphones and VOIP.

“5-step Do-it-yourself Evaluation” [Consumer Awareness Institute]
(Photo: Jeff Kubina)