Franchises and Multi-Level Marketing 12
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How can I avoid pyramid schemes?
There are a number of things you should do to steer clear of pyramid schemes and other scams:
- Watch out for claims of being able to make thousands of dollars a month within a very short time.
- Steer clear of any company that pressures you into buying substantial quantities of inventory either to join the organization or move up its ladder. If it doesn't buy back the inventory you can't sell (or if the company goes bankrupt), you will be out the amount you paid for the stock.
- Avoid any organization that requires any kind of significant investment to give you the "right" to bring other people into the organization.
- Watch out for investment or real estate management clubs where the money from the new investors winds up in the pockets of the earliest investors rather than being put into any actual real estate deals.
- Consider how much emphasis is placed on selling the product or service. If the emphasis is entirely on recruiting, the operation may be a pyramid scheme disguising itself as an MLM opportunity.
- Beware of plans that claim to sell miracle products or promise enormous earnings. Ask the promoter of the plan to substantiate claims with hard evidence.
- Beware of shills. When you ask a plan promoter for a list of individuals who have bought their plan, you might be given a list of people who are being paid to give false testimonials about their success in the business.
- Don't pay or sign any contracts in an "opportunity meeting" or any other high-pressure situation. Insist on taking your time to think over a decision to join. Talk it over with your spouse, a knowledgeable friend, an accountant, or a lawyer.
- Do your homework! Check with your local Better Business Bureau and state attorney general about any plan you're considering—especially those that seem too good to be true.
There seem to be more scams than real business opportunities out there. How can I find a business to start without getting ripped off?
Thoroughly investigate any business opportunity, turnkey business, or franchise you are considering before getting involved. Make sure you can answer each of these questions affirmatively:
- Do I personally like the product or service?
- Would I buy this product or service at the price I will have to charge?
- Would I be satisfied with the quality of this product or service?
- Do I trust the people selling the opportunity, the turnkey business, or franchise?
- Have I had an attorney review the terms of the contract if I have to lay out much money?
- Do I know exactly what I will be getting for my money and what I won't get?
- Have I called or contacted others who bought this business or plan and asked if they were satisfied?
- Will I enjoy doing whatever is necessary to sell the product or service? I Will I enjoy this line of work?
In addition, make sure you gather the facts to answer all of these questions:
- Who will buy this product? (Be specific.)
- Where will I find these people?
- What, specifically, are they looking for when they buy this type of product or service? (Don't guess. Call prospects and ask!)
- How many potential customers are there in the area in which I will be marketing the product or service?
- How many sales will I have to make to be profitable?
- What will it cost me to make those sales?
- Does the product or service lend itself to repeat customers?
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