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Is Your MLM About To Go Bankrupt and Leave You Flat?

By Ted Riley
Posted Saturday, November 6, 2004


Investing in a legitimate MLM is probably the best way to ensure that your MLM is not going to go bankrupt on you. This is not always an easy thing to ascertain even when you have access to detailed information about the multilevel marketing company you have invested your time and money in. Even the best of them has had problems with regulatory bodies and litigation so the best idea is to explore the legality, legitimacy and financial stability of the MLM in question.

Separating the Good from the Bad

There are several ways to find out whether an MLM company is based on a scam or not. Most of the multi level marketing companies out there do try to operate on a legitimate MLM principle but the problem is that regulations that govern this alter a lot from state to state and country to country. Each American state has no fewer than fifty statutes in place to keep the scams at bay but the scams keep coming and legitimate MLM operators are often shut down in the bargain.

The things that separate a legitimate MLM from a scam are quite simple and are things that you should look at closely when you are starting your own business whether it is a home business or one of the many other small business opportunities that are out there.

Upfront Costs

The first thing that you should look at is if the product or service you will be providing is being provided for a reasonable price. Many multilevel marketing companies operate solely on the principle of charging way too much for what they provide knowing they will go bust from the start usually forming the company on the backs of the work at home investor who inevitably gets it in the teeth.

There should also be no or little investment other than the purchase of the sales kit or demo materials to get you started and this should be provided at or near the company’s cost. You will also want to be able to become a sales rep without having to buy thousands of dollars worth of inventory. This is a sure fire way to separate a scam from a legitimate MLM.

Avoid Pyramid Schemes

The idea of the pyramid scheme is what has given the multilevel marketing industry a bad name and it is these operators that are most likely to go bankrupt and take your money with them. So it is important to make sure that there is actually a product to sell and not just getting more people to come on board. This is also illegal and ignorance of the law is no defence, even in America.

Examine the Compensation Plan

Another way to separate the scams from the good work at home or small business opportunities is to look at the compensation plans provided by the multilevel marketing operator. If they are promising anything like sixty percent or more for the first few cycles, run a mile because they are going to go bust in the very near future and they will not provide anything then!

Do They Offer Training?

The subject of training is a pretty good indicator of exactly what sort of multilevel marketing company it is. A legitimate MLM will want the people in the company to be able to sell the products and recruit more people to do that so it is in their best interest and a financially sensible thing to provide training to every person who wants to be involved in their multilevel marketing venture.


The variety of multilevel marketing scams is astounding and the people who run them are very inventive. So much so that as soon as the government recognizes them as not being a legitimate MLM they will start up another multilevel marketing company that runs on a slightly altered idea. So when you are choosing a work at home or any other type of small business opportunity to invest your time or money in be very careful and do your homework.

Copyright 2004 Android Technologies, Inc.

About the Author

Ted Riley is an entrepreneur and educator interested in teaching others on the benefits and rewards of having your own home business. He writes frequently for the web site "A Grandmother's Business", a web site dedicated to the needs and equirements of the mature woman entrepreneur and job-seeker. To see more articles like this visit: (

Ted Riley is also the managing editor for Web2Voice is dedicated to bringing consumers and small business entrepreneurs useful articles that are thought-provoking, timely, and informative.


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