The Direct Selling Education Foundation (DSEF) had a recent blog I thought had some very good information about how to identify a pyramid scheme. Most people throw around the term “pyramid scheme” not knowing what one really is. They use it in a derogatory sense to describe network or multilevel marketing, business models they do not understand or sales-based businesses. It’s really a matter of not being educated about either the company or business model they are talking about or what a pyramid scheme really is.
The DSEF has provided a few tips to discern between the companies you can trust and the ones you can avoid. Here is a summary:
1. PRODUCTS COME FIRST. The way a pyramid sceme works, you are compensated for selling the business opportunity, not the product. People make money when people join, not when they sell. In a legitimate, ethical company, you make money when sales are taking place.
2. DON’T BELIEVE IT IF IT SOUNDS TOO GOOD. Establishing a business and making money do not happen overnight. You have to actually work at it.
3. IT DOESN’T JUST HAPPEN. Just like you would build any other business, you have to do the same in direct sales. You must build relationships and generate a customer base. I always tell the college and university students who participate in the Southwestern Advantage sumemr sales program (not a pyramid scheme, by the way…), “If you are not knocking on doors and showing the product… you are not making any money.”
4. IS THE COMPANY A MEMBER OF THE DIRECT SELLING ASSOCIATION (DSA)? The DSA has a strict Code of Ethics members follow and the association has a regular review of compliance for member companies. These companies follow best practices and work together as an industry to create a postive engagement between the independent wholesale buyer and the end retail consumer.
The fact is, there are lots of scams in any industry. Always protect yourself and check into a company if you have questions. But don’t label it unless you know what it is you are talking about.
The full DSEF blog can be read at: http://www.dsef.org/2012/06/18/is-the-company-a-scam-how-to-identify-a-pyramid-scheme/.
To learn what a pyramid scheme actually is, find it on the DSA site at: http://www.directselling411.com/for-sellers/who-can-help/pyramid-schemes/.