The Brutal Truth Behind Pyramid Schemes – Here’s What They Don’t Tell You

If you spend any amount of time on social media then by now you’ve seen dozens of friends promoting various business models. These social media accounts may include Facebook, Instagram, Linkedin, Pinterest, Youtube, Twitter, and more. These posts can come from men, women, parents, and students. As you scroll through your feed you’ll also see many friends who are asking if you’re interested in the next great business opportunity.

There’s an element of excitement to these business opportunities. Maybe I can work from home selling these products too, you may be thinking. Or, maybe I can make some extra money. And while we hear our fair share of some people packing it in, we also hear of many friends who have their small online businesses for years. These types of opportunities have actually allowed millions of people to start their own businesses from home so they can quit their day jobs.

However, the one main issue with online business opportunities is that they can be pyramid schemes, or they can be legitimate business opportunities. Why do you care? Because first, you want to stay on the right side of the law. And second, because you’re investing your valuable time and financial investment in a new business venture. If someone shuts it down because it’s a scam, you don’t want to lose your shirt.

Let’s take a look at the differences between a pyramid scheme where you’ll lose your investment, and a genuine MLM—multi level marketing or network marketing type of business that can actually help you to succeed in life and make you feel more confident about yourself.

Do Your Research First

It pays to do your research first. If you hear of a great opportunity online, then look into it first before tossing that initial investment at your friend—even if they say it’s a good one.

The days are long gone when one parent could stay at home to raise the kids while the other worked. There are even many parts of the country where two parents still can’t afford to buy the tiniest condo in their city because real estate costs are skyrocketing. While the solution is to have both parents work, this can lead to burnout. What happens when someone gets sick, injured, or mentally burns out? We live in a country where there’s not a lot of support for paid medical leave.

Many people are exhausted and they’re tired of living paycheck to paycheck. Most months it’s hard to stay afloat. But the good news is that there are ways to make a bit of extra cash on the side. How much time you put into it will determine how successful you really are. If you build something online, you’ll eventually reach the point where you have some spare cash coming in.

Many people are choosing to start these small businesses because they really do work. There’s no need to design or make your products from scratch as it’s all been done for you.

Let’s take a closer look at what you need to know before choosing the perfect business opportunity.

What Exactly Is a Pyramid Scheme?

Many people will toss out the words pyramid scheme, not really understanding what it means. In the USA, pyramid schemes are illegal. Don’t mix them up with MLM—multi-level marketing opportunities that are legal and have a positive outcome for most small business owners.

The traditional setup for a pyramid scheme is to collect $100 from several people. Each person recruited would keep $50 and give him $50. This leader would be at the top of the pyramid, while recruits would be below. You can begin to see that over time, the foundation of the pyramid would be earning a $1 apiece. This meant that the little guys on the bottom didn’t earn much, while the big leader at the top earned all the profits. Over time, the pyramid scheme would fail, as it wouldn’t be worth it for future investors to sign up. This also meant that eventually, the cash flow would stop.

MLMs Are Legal & Real Business Enterprises

MLMs are actually quite different. Yes, there’s a leader at the top, but so is there with your average business. There is your team leader who will assist and train you in every aspect of the business, and who will be there to support you when you have questions or doubts.

Just like with any type of business, an MLM also depends on their team to move product. And yes, when a certain number is sold, then upper management benefits too.

Are you someone who is interested in starting a new business opportunity, plus having the opportunity to move up higher and experience greater success? If so, then a networking opportunity may be the right one for you.

So yes, you may see MLMs promoted a lot online. But so do other types of businesses too. Look at the book authors, or all those shops in China promoting their cat merchandise

If you’ve ever visited a restaurant or bought a cute purse somewhere, chances are you’ve told your friends about it. Yes, it’s natural to share things, and that includes any cool products that you’re selling through your new MLM business opportunity.

The same thing is applicable to people who brag about their jobs online. Your boss gave you the afternoon off with pay, or your boss gave you tickets to a concert. You earned gift certificates. The same is applicable to an MLM, if you achieve something, you’ll want to brag about it.

An MLM offers the perfect opportunity to anybody who hasn’t had formal business training but still wants to benefit from the best small business opportunity.

Why You Should Steer Clear of Pyramid Schemes

You may still be uncertain. Why not just go the illegal route and try a pyramid scheme? Chances are with a bit of digging that you could find such an opportunity on Google somewhere. Well, the truth is that you don’t want to land yourself in jail. And as we said earlier, if you’re coming in late, then chances are you’ll earn only a minuscule reward, if anything.

You want to spend your time actually investing in a real and honest MLM business opportunity.

What Are MLMs?

MLM is multi-level marketing, but it’s also called network marketing, and referral marketing too. This type of business has a heavy focus on marketing, rather than ones where you make crafts and sell at a fair, for instance. But since there are so many sellers online now, even the most successful small business still has to do a lot of marketing just to get their voice above the crowd.

An MLM works on the premise that you can recruit team members, and that when they sell stuff, that you also benefit from your team members’ success too. As more are recruited, you can make more cash.

Many people who have endless business ideas may actually find it of benefit to start an MLM business first. You’ll have the support of your team leader and you’ll get to learn how online or local businesses function. You don’t need to have any prior business experience. As you learn, your business will grow with you. The more time you put into it, the greater the success and recognition you’ll achieve.

What Are Network Marketing Businesses?

Network marketing business is just another name for MLMs. In fact, some people believe that network marketing businesses sound more positive and upbeat than calling them MLMs.

Remember that every time you purchase something at your local grocery store or retail outlet that you’re also contributing to the bonuses and retirement of that CEO. It’s really no different from an MLM. But the good news is that if you buy those nail wraps, water purification systems or aromatherapy appliances from one of your friends, they are the ones who are benefiting, and not some guy you don’t even know.

Supporting MLMs and network marketing businesses means you’re putting your cash where it counts. You’re helping a neighbor buy their kid hockey gear so they can play next season, or you’re helping someone who is recovering from cancer. You’re also contributing to someone’s ability to spend more time with their kids instead of spending a three-hour commute each day to go to a crappy job they don’t even like.

Have you been starting to see “buy local” messages everywhere? The USA is changing. Many people don’t want to buy cheap crap from big box stores. Look at the news. Every day there is a big box struggling to survive. If you’re like most people, you want to support people you know, and who posses your values and ideals. And that’s exactly what you’re doing when you’re investing in MLMs.

Have you ever been to college or university? This is usually one of the first places you’ll be exposed to a pyramid scheme. This involves one guy at the top. He’ll recruit a member of his team. She’ll have to fork over $100 to him. They don’t get anything in return. These partners will then recruit their own members to their team. They’ll collect $100 from each. She’ll then keep their $50 and send $50 to the guy at the top. The pyramid grows. The lower on the rung you are, the less money you get to keep when you recruit your guys. If you’re last at the base of the pyramid, unless you recruit anyone, you’ll get nothing.

As you can see, pyramid schemes are unsustainable and they are usually illegal in most countries. After a while, the guys at the top will disappear. The scheme will fall apart. Recruiting will soon become impossible and people at the bottom won’t be able to profit. Some people won’t get their initial $100 investment back.

The official definition of a pyramid scheme is a specific business model that will recruit members to their cause with the promise of cash (could be services or products too), in exchange for enrolling others into the scheme. This is in direct contrast to supplying investments or interest or providing products or services.

Pyramid schemes and scams have been around for at least a century. They may have many different forms.

Sadly, some multi-level marketing plans have been called pyramid schemes.

As you can see, there is a big difference between a scam and my network marketing opportunity, and even a pyramid scheme and Enagic.

For one, the governments of Japan and the USA would shut our company down pretty fast if we were either. And they keep a close eye on multi-level marketing companies too.

Enagic focuses on the sales of its products in exchange for money, therefore are a legitimate company. Yes, distributors are able to leverage and profit from each of their organization’s sales, but that is a direct sales business model such as Mary Kay, Avon, Scentsy, and many others ‘work from home’ businesses.

Who Can Benefit from MLM & Network Marketing Businesses?

If you’re an adult, you can benefit from MLMs. You can be a man, a woman, or whoever you choose. You can be a student, unemployed, or working a high-paying full-time job.

No matter what you’re currently doing for money, you can benefit from starting your own small MLM-based business. And now that social media is king, networking through it is essential. We aren’t going back to the days when you’d knock on your neighbor’s door or give them a call to sell them Amway or Avon products. Even those types of MLMs have adapted to the social media landscape.

Want to know how I was able to build a real lifestyle business that isn’t a pyramid scheme?

How Can I Tell the Difference?

Spotting a pyramid scheme from a legitimate business opportunity is simple. Pyramid schemes involve only cash, while an MLM-run business will offer the sale of certain types of products or services. It’s up to you to choose what interests you, and what you’ll naturally be able to market as your own business.

It’s also helpful to know that there should be only a small or minimal investment to begin. This gets you training manuals and some of the products so you can get started in selling. But if you have to fork over $2000 and not gain anything in return, then it’s likely a pyramid scheme or scam.

It’s also beneficial to do your research and get your contract in writing.

Closing Thoughts On Choosing the Right MLM Opportunity

You’ll have to do more than type a few posts on Facebook when you decide to promote a new MLM. Like any type of entrepreneur, you’ll have to spend time and effort on your small business. If you’d like to learn more, I invite you to reach out to me to find out why supporting MLMs has had only a positive impact on my life.

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10 responses to “The Brutal Truth Behind Pyramid Schemes – Here’s What They Don’t Tell You”

  1. Nick says:

    Great post Nate!

    It can be difficult to distinguish between what is and isn’t a legitimate busines opportunity.

  2. Christine says:

    Hello Nate
    I’ve been duped several times but I think this post really helps clarify some of the things I’ve been thinking about.

  3. Charles says:

    Great post. First off, network marketing isn’t a pyramid scheme. Pyramids are programs similar to chain letters where people just invest money based on the promise that other people will put in money that will filtrate back to them and somehow, they’ll get rich. A pyramid is strictly a money game and has no basis in real commerce. Normally, there’s no product involved at all, just money changing hands. Modern-day pyramids may have a product, but it’s clearly there just to disguise the money game.

  4. Dean Jacob says:

    This is important to know because there’s a misconception about mlm and network marketing. Everyone thinks that pryamid schmes are the same. This is extremely helpful even for someone brand new like me.

  5. Julie Parkes says:

    I’ve been searching for an answer to this! I’m glad I found this! THANK YOU NATE! You are the best!

  6. Jerry says:

    Great post! this post will help me a lot to clear my doubts. Thanks for sharing.

  7. Aaron says:

    Very interesting I read your article informative and unique thanks for sharing and keep sharing.

  8. Margie Murray says:

    Nate, i really enjoyed this article i am going to bookmark this page thanks again for sharing this with us

  9. Jen Manansala says:

    This stuff is fire, Nate! Thank you for this!

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