THE INCOME DISCLOSURE TEST
If an MLM recruiter touts huge income figures of top distributors,
request that the company disclose average payout to distributors by
percentiles (highest 1%, second highest 1%, and so on to the lowest
1%), so that you can determine your chances of success.
Ask for net payout (after subtracting product purchases) for all
distributors who ever signed up, including those not now active. If
they fail to furnish such data, they are not providing the balanced
information you need to make an informed decision.
Estimate the operating expenses for building your distribution
network. For anyone serious about building an MLM business, a
significant amount will be spent on telephone costs, travel,
samples, sales materials, office supplies, mailing costs, printing
and duplication, and (when friends and family dont respond) some
advertising.
Most distributors wind up spending far more money on products
and
operating expenses than they bring in. The best source for expense
information is ex-distributors, not current distributors who are in
denial about how much they are actually spending. If less than 1%
of all distributors earn the equivalent of a minimum wage for their
time (after subtracting all expenses and MLM products purchased),
you might want to consider a more profitable use of your money,
time, and energy. (Some researchers estimate that for most MLM
programs, less than 1% of distributors ever turn a profit.)
Another acid test of the profitability of an MLM distributorship is
to ask the person recruiting you to show you his/her last years
tax return. It has been found that it is extremely rare for network
marketing participants to show a profit for their networking
efforts on their annual tax returns.
THE PAY TO PLAY TEST
Find out how high the expectation is for you to purchase products,
services, training, etc., over a period of time, in order to be a
serious participant. In other words, what will it cost you to play
the game? Dont be fooled by a simple request for a small sign-up
fee, soon to be followed by endless invitations for specials on
purchases of samples or inventory, accelerating bonus levels for
higher sales plateaus, paid seminars, and training sessions or
retreats.
This requirement (or strong suggestion) that you make large
purchases of products over a period of time to qualify for
increasing bonus levels or purchasing discounts is one sign of a
product-based pyramid scheme. After months or years of fruitless
effort and a garage full of products, some participants come
to
realize they have merely been paying into a pyramid scheme in the
form of payments for unneeded products.
THE PRICE TEST
Are the companys wholesale prices low enough to allow a
respectable profit when marking up for resaleat a retail price
that is still competitive with comparable products through other
sources? Or are retail prices so high that they must be sold at
wholesale to achieve any volume?
If products are priced at a premium to support a large network of
distributors, then the premium portion of the price could be
considered the pyramid portion. So if a MLM product sells for $40
and a comparable product would sell for $20 at a typical retail
outlet, the $20 premium may be deemed the pyramid portion of the
price and would flow to top distributors in typical pyramid
fashion.
THE GOLDEN RULE TEST
How did you feel about the way you were recruited to do the
business, and how do you feel about approaching your family and
friends in the same way? How important are your relationships to
you?
Are you offended when they attempt to exploit your connection with
them for monetary gain? Would you want to do the exploiting?
THE TIME FREEDOM TEST
The perennial dream of those with a pyramidal mentality is to be
successful at recruiting a downline that will bring in enough money
to support them so they wont have to work themselvesthus giving
them time freedom. They can then leverage their time by living
off the efforts of others.
If a recruiter promises that by working hard for a brief time
period you will never have to work again, ask what percent of their
top distributors are no longer actively involved with the
companyand never attend opportunity meetings.
Ask veteran distributors when they last took an extended vacation.
Were they able to do so without significant losses for not tending
their downlines? And did any of them quit or scale down without
experiencing major financial losses?
Better yet, ask for a copy of the recruiters downline and upline.
Contact distributors at several different levels to see if any have
achieved time freedom.
And if you know the spouse of any of the distributors, you might
ask what problems the family has experienced due to MLM
participation (intrusive phone calls, untimely visits to the home,
and neglect of family and other duties by
the distributor).
THE HONESTY TEST
Has the recruiter been devious or up front in his or her inviting
attempts? And can the products and opportunity be sold without
making exaggerated product and income claims? Ask for validation of
each of the claims made.
If you find the truth frequently distorted, powerful and escalating
incentives may be driving the recruitment. If normally honest
persons feel the need to exaggerate
claims to sell the products and the program, you may find yourself
having to do the same.
THE CREDIBILITY TEST
MLM promoters who dont command respect themselves may lean heavily
on the credentials or character of others involved in the
opportunity. If such references are used to excess, watch
out.
Such credibility links can be deceptive. Why? Because the ethics of
MLM are so tricky to sort out that respectable and high level
people have been drawn into the most problematical of
programs.
THE SUPPORT TEST
Does the company offer an adequate support infrastructure to handle
a temporary burst of volume? Will your upline be there when you
need them, or do they have a history of jumping ship when the next
hot MLM deal comes along?
Are conferences and training programs, audio and video tapes, etc.,
free of charge (as is the case elsewhere for company sponsored
programs), or are you expected to pay for themas another revenue
source for the company and upline?
A FINAL WORD
If you have found this helpful in deciding about participation in
MLM, you could be doing your friends and family a favor by sharing
this information with at least five of them. Then ask each of them
to share it with five more persons, and suggest they tell each of
them to share it with five more, and . . . ....:-)
