How to Protect Yourself: Multilevel Marketing
Source: The Florida Attorney General's Office
Multilevel Marketing Plans require you to sell a product and enlist several other people to sell the same product. They promise you a profit on the products you sell and a "cut" on all products sold by the people you enlist. Before committing yourself to a Multilevel Marketing Plan offered by any company, consider the following:
Research the Company
Find out how long it has been in business and research its past successes and failures. Call your local Better Business Bureau and government agencies like the County Consumer Affairs Bureau, the Office of the Attorney General and the Federal Trade Commission to determine whether any complaints or lawsuits are pending. For an out-of-state company, you may wish to call the appropriate agencies and authorities in the state where the company maintains its headquarters.
Ask for References
Find out if the company belongs to any trade associations like the Direct Selling Association located in Washington, D.C., and ask the association whether the company is a member in good standing. Get the names, addresses and telephone numbers of other persons in your area who have joined the plan and ask them about how long they have participated in the plan and what experiences they have had. Be sure to ask about their average monthly sales and commissions. Be wary of persons who make claims of enormous profits in short time periods; they may be set up by a not-so-legitimate company to make such exaggerated representations to lure you into parting from your money forever.
Ask About Safeguards
Find out what safeguards the company has in place to buy back unsold merchandise from you and whether you are obligated to establish a certain volume of retail sales before being able to move up the network of distribution. If the Multilevel Marketing Plan focuses primarily on the recruitment of new members, it may be in reality an illegal Pyramid Scheme which should be avoided.
Be Wary of Too-Good-To-Be-True Claims
Be wary if anyone associated with the company says that you don't have to do anything to make lots of money. To make money through a legitimate Multilevel Marketing Plan you will have to work at selling products and selling the marketing plan to new distributors.
Ask About Market Saturation
Determine the saturation levels in your area of distribution. Legitimate companies do not have too many distributors in one area.
If you do decide to become part of a Multilevel Marketing Plan, start with a small investment and build gradually. Beware of companies which pressure you to invest large amounts of money upfront.