MLM Overview
Typically, in any MLM or network marketing plan, you would be associated with a parent company. You are considered an "independent
contractor", and are compensated through sales of their products or services. You are also paid a percentage of the revenue generated by
those you bring into the business.
If a multi level marketing company is legitimate, you can not be paid from just recruiting or "sign-up" fees. The majority of your commissions
are earned from sales of the company's products. In other words, your primary focus should be selling product, not trying to get other people
to join in! The less legitimate companies will offer you more money and incentives to try to bring in new participants rather than having you
concentrate on their product line. You must consider the compensation plan to determine whether you are paid from actual sales to
customers or from new-recruit bonuses and support sales.
I've been in many where it's "free" to join, but all you get is a "cloned" website, and there are literally millions of these, and a promise that if you
follow their plan, you'll make a lot of money. What they don't tell you is that the biggest part of their "plan" is spending thousands of dollars on
advertising and then recruiting other suckers to spend thousands of dollars so you can take a cut of what they invest in advertising. They never
even mention their product line! Most of these businesses will give you two websites, one for product and one for recruiting. You can probably
guess which one they suggest you work the hardest on! (side note: The alleged "product sites" that you get with these are usually so poorly
done and incomplete that there's no way you could sell a lot of product off of them anyway.) These may be "legal", but they are extremely
difficult, if not impossible, to make any money from and what you'll probably end up doing is giving up in complete frustration, never seeing a
penny and losing your original investment!
It is all too often very difficult to tell the difference between a legitimate MLM and other illegal scams, such as pyramid schemes. It is no
wonder that multi level marketing has a serious image problem. There are legal and legitimate MLM's in all 50 states and more than 100
countries. You will see terms such as "affiliate marketing" and "franchise", but many of the illegal pyramid type scams will try to present
themselves as legitimate and honest MLM businesses.
Compensation
Here are some of the various compensation plans that MLM companies have, and still use.
Unilevel plans are the oldest and most popular. They feature two types of distributors -- managers and non-managers -- and three types of pay:
Matrix Plans limit the width of each level in a distributor's group, forcing strong distributors to pile ("spillover") their recruits over to people who
did not sponsor them.
Binary plans limit the width of each level to two legs. Commissions are based on "cycles," where a distributor is paid a fixed amount
whenever both legs achieve a certain number of sales units each. Commissions are paid incrementally when the sales volume in each leg
matches.
Elevator or Matrix schemes feature a game board or a list on which each distributor pays in one or more product units to participate. When a
certain number of units have been paid in, the structure splits and the earlier participant receives consideration. The Matrix scheme may be
teetering on the "legality line", so I wouldn't recommend it, but if you are interested in something similar, just make sure you do your own
research as with any other investment. You can also contact me if you need help or have any questions.
MLM Fraud Tips
Many fraudulent MLM's can usually be identified by high sign-up fees or require you to purchase expensive inventories. Often, the merchandise
cannot be resold, and the company will disappear, leaving all but those at the top of the pyramid with financial losses.
The FTC (Federal Trade Commission) suggests that any MLM organization with a greater incentive for recruitment, rather than product sales
should to be viewed very skeptically. A Business Opportunity Rule was proposed in April 2006. It is intended to require all sellers of business
opportunities, including MLMs, to provide enough information to enable prospective buyers to make an informed decision about the probability
of earning money. However, FTC trade regulation rules usually take 1 to 3 years before a final rule is established, so in the mean time,
research, ask questions of others
and be careful!
Typically, in any MLM or network marketing plan, you would be associated with a parent company. You are considered an "independent
contractor", and are compensated through sales of their products or services. You are also paid a percentage of the revenue generated by
those you bring into the business.
If a multi level marketing company is legitimate, you can not be paid from just recruiting or "sign-up" fees. The majority of your commissions
are earned from sales of the company's products. In other words, your primary focus should be selling product, not trying to get other people
to join in! The less legitimate companies will offer you more money and incentives to try to bring in new participants rather than having you
concentrate on their product line. You must consider the compensation plan to determine whether you are paid from actual sales to
customers or from new-recruit bonuses and support sales.
I've been in many where it's "free" to join, but all you get is a "cloned" website, and there are literally millions of these, and a promise that if you
follow their plan, you'll make a lot of money. What they don't tell you is that the biggest part of their "plan" is spending thousands of dollars on
advertising and then recruiting other suckers to spend thousands of dollars so you can take a cut of what they invest in advertising. They never
even mention their product line! Most of these businesses will give you two websites, one for product and one for recruiting. You can probably
guess which one they suggest you work the hardest on! (side note: The alleged "product sites" that you get with these are usually so poorly
done and incomplete that there's no way you could sell a lot of product off of them anyway.) These may be "legal", but they are extremely
difficult, if not impossible, to make any money from and what you'll probably end up doing is giving up in complete frustration, never seeing a
penny and losing your original investment!
It is all too often very difficult to tell the difference between a legitimate MLM and other illegal scams, such as pyramid schemes. It is no
wonder that multi level marketing has a serious image problem. There are legal and legitimate MLM's in all 50 states and more than 100
countries. You will see terms such as "affiliate marketing" and "franchise", but many of the illegal pyramid type scams will try to present
themselves as legitimate and honest MLM businesses.
Compensation
Here are some of the various compensation plans that MLM companies have, and still use.
Unilevel plans are the oldest and most popular. They feature two types of distributors -- managers and non-managers -- and three types of pay:
- Baseshop overrides are overrides of managers from their subordinate non-managers, collectively called a baseshop. This is the
same as any other sales organization. - Generational overrides are overrides of managers from the baseshop of managers who were previously their subordinate. Most plans
compensate at least three generations of such managers. - Executive bonuses are commissions for managers who exceed a sales quota. For example, 2% of the total company sales revenue
may go to a bonus pool that is shared monthly pro rata to managers who exceed $10,000 in that month.
Matrix Plans limit the width of each level in a distributor's group, forcing strong distributors to pile ("spillover") their recruits over to people who
did not sponsor them.
Binary plans limit the width of each level to two legs. Commissions are based on "cycles," where a distributor is paid a fixed amount
whenever both legs achieve a certain number of sales units each. Commissions are paid incrementally when the sales volume in each leg
matches.
Elevator or Matrix schemes feature a game board or a list on which each distributor pays in one or more product units to participate. When a
certain number of units have been paid in, the structure splits and the earlier participant receives consideration. The Matrix scheme may be
teetering on the "legality line", so I wouldn't recommend it, but if you are interested in something similar, just make sure you do your own
research as with any other investment. You can also contact me if you need help or have any questions.
MLM Fraud Tips
Many fraudulent MLM's can usually be identified by high sign-up fees or require you to purchase expensive inventories. Often, the merchandise
cannot be resold, and the company will disappear, leaving all but those at the top of the pyramid with financial losses.
The FTC (Federal Trade Commission) suggests that any MLM organization with a greater incentive for recruitment, rather than product sales
should to be viewed very skeptically. A Business Opportunity Rule was proposed in April 2006. It is intended to require all sellers of business
opportunities, including MLMs, to provide enough information to enable prospective buyers to make an informed decision about the probability
of earning money. However, FTC trade regulation rules usually take 1 to 3 years before a final rule is established, so in the mean time,
research, ask questions of others
and be careful!
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More about MLM (Multi Level Marketing)
There are so many MLM opportunities on the internet today. It is very confusing and difficult to determine
which are legitimate opportunities and which are complete scams.
It is unfortunate that so many of them ARE scams and only exist to steal people's money!
This page will give you a more in-depth definition and description of exactly what an MLM is and some of the
basic ingredients and aspects that go along with it. Please read this page carefully before you decide to
participate or invest in any MLM.
There are so many MLM opportunities on the internet today. It is very confusing and difficult to determine
which are legitimate opportunities and which are complete scams.
It is unfortunate that so many of them ARE scams and only exist to steal people's money!
This page will give you a more in-depth definition and description of exactly what an MLM is and some of the
basic ingredients and aspects that go along with it. Please read this page carefully before you decide to
participate or invest in any MLM.