Illegal pyramid things?
Seems we get asked this question a fair amount. It’s one of my favorite questions. I like it because it is really a quite valid concern for people.
I was trained to side step the question. It’s worse than that. I’ve taught people to side step it. I wrote a post about what to say when you are asked, “if it’s one of those illegal pyramid things.” Here is a link to it if you would like to read it. If you don’t want to, I’ll just sum it up here.
I, like a lot of people, compare the typical corporate structure to a pyramid. You have a CEO above a vice president or two. Then a group of managers. Last, but certainly not least, you have all the workers. If you draw that out, it looks like a pyramid. The CEO makes the most money and the money gets less as you go deeper down the structure.
In some respects, it is similar to a typical network marketing business structure.
Somehow, this is supposed to reassure a prospect that any MLM is not one of those illegal pyramid things.
Even though I wrote an article using this exact explanation, I now think that it is total rubbish!
The next time someone asks if your business is one of those illegal pyramid things, why not acknowledge that it is a great question? Then give a real answer.
Let’s take a quick look at illegal pyramids so we know what they are and how it could be similar in nature to a network marketing business.
A brief history of illegal pyramid schemes
The most famous of the illegal pyramid schemes is called a Ponzi scheme. Named for the inventor, Charles Ponzi. A Ponzi scheme is an investment scheme. The person running the scheme finds an investor to put in his funds with the promise of a large return on that investment. Then the person running the scheme recruits others to invest. The first person gets their money from the newly recruited people’s investments. Then more people are recruited and so it goes. It can continue until they can’t find anymore investors. Then it crashes and all those still in the pyramid lose all their money. This type of scheme was revisited recently, when, Bernie Madoff did the same thing.
Illegal pyramid schemes come in all shapes and sizes these days. I remember my parents had been invited into a pyramid. They were to pay $100 to get into it and then told to go out and recruit people and each person they recruited moved them up the structure. The promise was that when the got to the top of the pyramid there would be a large payday for them. Fortunately, they said no.
The typical illegal pyramid involves people investing money but, not buying anything. There are no products or services being being sold. A business can still be an illegal pyramid if they sell products. If most or all of the sales are between the people who are distributors within the business.
One of the biggest and oldest network marketing companies was investigated by the FTC as a possible illegal pyramid scheme. In 1979, Amway was found to not be an illegal pyramid. Amway was selling real products to the general public. Also, Amway is willing to buy back any excess products that a distributor might have accrued.
Generally speaking, a company is not thought of as an illegal pyramid if they actually sell their products or services to the general public.
If you compare an illegal pyramid with the typical network marketing company, you have to see the similarities. They both ask you to pay to join. Then they ask you to recruit others into the “business.” You are promised a large payday if you are able to recruit enough people. The person at the top makes the money while those under them don’t make money or even lose money. Sounds all too familiar, doesn’t it?
Actually, they are almost the same in many respects.
Hopefully, you see that when someone asks you if your business is one of those illegal pyramid things, that they have a legitimate point.
Is MLM one of those illegal pyramid things?
Network marketing is absolutely a pyramid. Just like most corporations.
It is absolutely not an illegal pyramid scheme!
No matter how you decide how to answer this objection, rest assured that what we do is in no way illegal.
When you are asked if your business is “one of those illegal pyramid things?” How will you respond? Because MLM is a pyramid after all.
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