Network marketing, also known as multilevel marketing (MLM), is the most popular and misunderstood option for home-based business startups. Direct sales, which include MLM and networking marketing, is a viable option to quickly start a home-based business. There are many shysters, just like in all aspects of life. It’s your responsibility to do your research and investigate any potential opportunities.
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What is MLM?
Multi-level marketing is sometimes called pyramid selling or a pyramid program in some cases. It is a marketing strategy that aims to sell products or services to non-salaried workers. Instead of selling products to consumers the products are presented as business opportunities that can be sold to other people. MLM is a major component of relationships and word-of mouth marketing.
These 10 warning signs are indicators that an MLM scheme is present before you sign the contract to open a home-based business with a direct selling company.
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- No low-quality or no-quality product or service
You should be wary of any business or financial opportunity that has a lack product. Pyramid schemes might include programs that promote recruiting more than the sale of products or services. It’s a red flag if a company doesn’t care about acquiring customers who will buy its products but is more interested in “building a team” and membership of sales reps.
It is all about selling products and services to consumers that the foundation of any MLM business works. Although building a team is possible, the income earned from MLM businesses is not based on the recruiting.
- Claims about products that are outlandish and unfounded
Most often, health and wellness companies make wild claims about their products. Reps claim that they cure illnesses or perform miracles. Any industry that employs outlandish claims is red flagged, even direct sales.
Quality products are the foundation of a successful business. Be cautious if the company you are considering joining offers bizarre products or seems too good to be true. You don’t want your name to be associated with a defective product or product that is the subject of litigation.
- High-Pressure Sales Tactics
High-pressure tactics include the temptation to get in on the ground floor. Direct sales is not a high-pressure business. A good opportunity is always a good chance, no matter how old you are. It is safer to work with established companies that have been in business for at least five years than you would with a new company.
If a representative tries to stop you from learning about the company, speaking with others, or “sleeping on” it, they are not someone you want to work for.
- Tendency to Buy and Stockify
Every MLM business will have start-up expenses. Direct sales are much more expensive than MLM businesses, but you can’t buy McDonalds without spending money.
You should be wary of fee-based programs that offer “fast track” or the pressure to purchase inventory that will require additional investment. This is why MLM companies are required to purchase back inventory. However, you don’t want to have to take on debt to start the business and fully understand it.
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It’s nice to have a few products in stock. But don’t buy too many products unless you are certain, based upon your business experience, that they can be sold.
- Communication from a poor company is a problem
Ask tough questions. It’s a red flag if you don’t receive solid answers, or get chastised for being negative or not believing in the company.
Strong support and solid training are essential for any business to succeed. MLM companies must provide you with a lot of information. This includes details about the compensation plan and financial information about the average income earned by representatives.
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Ask questions and study the document. You should not work with someone who is slow to answer questions or doesn’t address your concerns. Legitimate companies want you to be informed