It is not uncommon for retirees to look for convenient ways to add to their retirement income. And seniors looking to earn a little more money often find multi-level marketing (MLM) opportunities appealing, especially since they are presented as easy income. But, there are also many multi-level marketing scams out there too.
Those who try to get you to join MLM companies are not often strangers but are instead friends and family. The friend or family member who approaches you with this easy money opportunity has no intention of scamming you; instead, they often believe in the company and product they are trying to sell. Often the person who is attempting to get you to sign up is as much of a victim as you.
Though not all MLM companies work as a pyramid scam, many do, making money off unsuspecting victims. Pyramid business models make money when new agents are recruited and purchase a start-up kit. Unfortunately, what many do not know is that the company makes far more money by selling to those they recruit than they do by selling to regular customers.
There are a multitude of MLM companies selling various products, such as:
- Kitchen tools
- Vitamins and supplements (including anti-aging products)
Seniors often find MLM scams appealing since they offer an opportunity to work from home. Unfortunately, many of these same seniors find that they lost money instead of adding to their already limited income.
Today we share what an MLM scam is, how to identify MLM Scams, and how to avoid them.
What are MLM Scams?
Not all MLM companies are pyramid scams or even necessarily scams, but most MLM opportunities cost those who invest in them more money than they will ever make. Few, if any, get rich quick opportunities ever work, and MLMs are amongst the most common out there.
If you consider joining an MLM company, understand that there is a 99% fail rate for those investing in an MLM business. The reason why MLM business opportunities do not work vary. However, one of the most common reasons is the lack of return business and a small customer base.
Most MLM scams require people to solicit friends and family, not just to buy the product but also to join the MLM company. As mentioned earlier, many of these companies make the most money when new members purchase their start-up kit and base inventory.
After someone invests in an MLM company, they soon realize they won’t be making any money unless they get others to sign up too. So, that’s when people start reaching out, often on social media, to anyone who will listen.
MLM opportunities seem like a good idea since they are often presented as personal businesses that run themselves. This makes them similar to some other work from home scams. And most seniors find working from home an appealing way to bolster their retirement income.
The bottom line is that MLM scams are businesses that require new associates to invest in start-up kits and inventory to get their company going and, more often than not, need them to get others to join too.
5 Ways to Identify an MLM Scam
- The Pitch
- The Use of These Phrases
- The Products are Low Quality
- Unbelievable Product Claims
- Investing in Your Future
The sales pitch is often a canned pitch taught by most MLM companies. These are common red flags when it comes to these scams. There are two parts to the pitch.
First, you are contacted by a long lost friend often via Facebook or other social media venue. MLM agents are instructed to reach out to everyone in their social media address books. It is a standard marketing ploy to sell to or recruit everyone you know.
The second thing that makes it easy to identify an MLM scam is if the old friend is looking to re-connect out of the blue and wants to get together. Some may attempt to tell you about the product beforehand, though most wait until you two are face-to-face.
Once you two get together after a short period of chit chat, they will launch into talking about their money-making side business. It will start as if they are just talking about their life but then will slowly transition to the pitch, asking if you thought you would be interested in starting a fun side business of your own.
If your coffee date with a long lost friend turns into a pitch, you know it is likely an MLM scam.
The Use of These Phrases
Most MLM scams use the same canned training programs for all of the recruits. And many encourage their agents to use specific phrases that help intrigue others to sign up for this new business opportunity as well.
MLM scams attempt to sell the dream of easy money, and the convenience of working from home, which for many retirees, is ideal. If you happen to be having coffee with that long lost friend and they start in on their pitch, listen for these phrases, and if you hear them, know that they are likely trying to recruit you.
Popular key phrases used are:
- Work from home
- Extra income
- Be your own boss
- Set your own hours
- Residual income
- Passive income
The Products are Low Quality
Some MLM scams do not even have products to sell, or if they do, the products are of low quality. MLM scams sometimes push building a sales team or recruiting others as their primary goal instead of selling a product to a consumer. If such a company approaches you, it is a sure sign that it is a scam.
Any company not interested in selling to an end user is a scam. Legitimate companies are looking to offer a service or product, not just recruit.
So if the job is all about recruiting others, you know it is an MLM scam and not worth your time or money. Or if the product is low quality and the sales training has little emphasis on the product, you know that this is a company that is most likely an MLM company looking to scam people.
Unbelievable Product Claims
Unbelievable product claims such as age-defying products or dietary supplements that help you lose weight without dieting are often tied to a scam. If a friend is trying to get you to buy, sell, or request you host a party so your friends and family can learn more about this outrageous product, it is likely an MLM scam.
Unfortunately, these products rarely, if ever, live up to the claims. So not only will you not be reaping these benefits, but if you sign up, you will be asking friends and family to waste their money on these products too.
Plus, you do not want to be involved with a company that will likely be sued for making false product claims. So, if a friend tries to get you to sign up to sell one of these products that seem too good to be true, it is likely an MLM scam.
Investing in Your Future
A major red flag that someone is attempting to pull you into an MLM scam is that you need to purchase a start-up kit and inventory. These scams are presented as investing in your future by purchasing a start-up kit.
The MLM representative will tell you that it is a minimal investment and that you will more than make up that money plus more as soon as you start building your team. However, these “minimal” investments can easily cost people more than $100 for a startup kit and more than $500 for inventory.
Unfortunately, the reality is that very few people who buy into MLM scams rarely make enough money to cover their initial investment, let alone make any significant income. Many seniors who invest have a hard time offloading their inventory and are often stuck with a bunch of useless products and an empty checkbook.
If any company requires you to pay them to sell their products your answer should always be “no.”
Things You Can Do To Avoid MLM Scams
If you are impressed in a product and are passionate about selling it to others since you think they will benefit from it, before you invest any time or money into this company, take the time to look into a few details and ask yourself a few questions:
- Check for pending lawsuits – Many big names out there, such as Melaleuca and LuLaRoe, are both under investigation for making false claims on how much you can earn. Several other companies are being looked into for false product claims, so take the time to do some research before investing.
- Check the area for market saturation – You don’t want to join a company only to find out that there are 15 others in your area that are already reps for that company.
- Ask questions – If someone is pitching you this incredible opportunity, ask them how much they have spent and how much they have earned. If they skirt the question, then it may be best to find other opportunities.