Many people want to get into business for themselves. The idea of being one’s own boss while making respectable profits is a dream that would be hard to surpass.
Knowing this, some network marketers will try to appeal to the sense of freedom that a person’s dream allows them to consider by enticing them to be in business with them. The low start-up costs are attractive as well as the opportunity to be in business with someone while having one’s own independent business within it.
However, there are certain factors that should serve as red flags about certain networking opportunities and they all surround the start-up fees and legality of how one operates his or her business.
High Start-up Fees in Network Marketing
Networking opportunities and SEO For Drug Rehab usually cost little to get into. Avon, for example, can be started with $10 before buying inventory.
Amway Global costs a little more than $100 to get into, but even this cost is allocated between a catalog subscription and a box of sample products mostly containing household cleaning supplies.
It is when start-up fees go to pay the people at the top that one should be extremely wary.
Majority of Start-up Fees Goes to pay Upline Bonuses
The best sign that what appears to be networking is a pyramid scheme is when start-up costs are allocated toward bonuses to those who are higher up.
For example, if there was a company that dealt in helping people sell gold and silver and to be a representative of this company one had to invest $500, this relatively high start-up cost would be acceptable if the person received goods and services of that amount so as to start a business.
But if one’s costs to obtain a slot in this pyramid contain an actual cost of $100 while people at the top divvy up the rest, then this organization is not sound due to the definition of an illegal pyramid structure.
An illegal pyramid is one where the last person to get involved ends up with a total, or near-total, loss. In the case of the above example, it would be 80%.
This can also occur in legal networking organizations where building a network is the focus while selling merchandise is discouraged.
No Sales Necessary Means Something is Amiss in Networking
Network marketing has two aspects. One is to build a network of business owners who are interested in making some money together. The other is to sell products or services to people outside of the network.
The latter is not an idea that one can pick or choose from. It is the law according to the 1979 Supreme Court ruling in a case against Amway, the first company of this kind, where it was deemed that the corporation was not promoting an illegal pyramid because:
- The people at the bottom received equal value for their money
- People could make money with no network
Today, Amway Global IBOs must sell $50 worth of products month-to-month in order to receive their full bonuses. This is because without the sale of products and services beyond the network, the whole enterprise becomes incestuous, essentially feeding off of itself. Those at the top will get rich and those at the bottom will get nothing (or less) just like in an illegal pyramid scheme.