Introduction
With the economy slowing down it seems that there is an ever increasing number of 'business opportunities' popping up everywhere. To own your own business is the American Dream there are hundreds if not thousands of stories of those who were discouraged in the corporate world who left, took the risks and invested in opening their own business. In the search for an opportunity though, there are the legitimate and then the shady. How can you tell if the opportunity you are introduced to is legit or is it another MLM scheme? This article will answer that question.
The Red Flags of Shady 'Opportunities'
1. The Opportunity - Anytime you have a group of people continually referring to 'the opportunity', you could be listening to a MLM presentation. It is a phrase that is supposed to describe this product or service that absolutely everyone will buy because they can't live without it. And so many people need this product or service that we need YOU to represent us. In reality what they need from you is your contact list because your name will give them an IN with your friends, family and neighbors.
2. The Location - Rarely does a legitimate business meet with groups of people in a local hotel to promote their business. More often than not, if there is a monthly or weekly meeting at an area hotel, you are dealing with a Primerica, Pre-Paid Legal, Amway, or Noni Juice meeting. Occasionally, a legitimate company will have an informational meeting at a hotel, on a quarterly or yearly basis to find new owners. These meetings will end in a job interview, or application to purchase franchise rights and not in a call to pay $199.99 to sign up as a representative.
3. The Tools - In a MLM group, there are only about 3% of the members who make enough money to make a living at it. Those in the lower brackets struggle to make ends meet because they are spending what they do make on the "TOOLS" of the trade. These "tools" include videotapes or CD's, audio tapes, books, business cards, brochures, etc. An estimated 30% of the income of the upper 3% comes from the sale of these "tools" to the masses who take them and distribute them in earnest hoping to eventually be one of the big-shots. Sadly, for 97% of them, it never happens. The tools for a legitimate business will be common sense ones. You want a restaurant franchise? Your tools will be kitchen equipment, food and property. These tools make sense!
4. The Recruitment Angle - If you were opening a restaurant or any other business, you would need to hire help. If you were opening a legitimate business without a payroll you would need some independent contractors. Here's the trick - you will PAY them! If you are in an MLM meeting, they leave this little tidbit until the end. You have to advance in this organization and in order to do so, you have to recruit three people to promote yourself to the next 'level'. Then, each of your three have to recruit three to promote themselves, and when they do that, YOU are promoted too! This is a Multi-Level Marketing scheme. If you have to keep recruiting to keep getting paid or to advance in the organization get out now!
5. Outrageous Claims - Often the opportunity meeting will trot out a few of the upper 3%. Pictures of their mansions, cars, planes, etc will be onscreen and they will capture your imagination with their outgoing personality and excitement. 'YOU can make $30000 a month, like I do!' If the opportunity is legitimate it is usually a very reasoned approach to attract new franchise owners. 'It will cost this much, average income is this much, we'll talk multiple locations later.' No one suggests that you will purchase a plane within a year of your McDonalds opening. No one suggests that you purchase and pass out videotapes to promote your new McDonalds and no one will ever suggest that you can earn a little money if you 'recruit' a new franchise owner into the fold.
Conclusion
A legitimate business opportunity is not cheap. It is not flashy with loud emotionally charged music blasting before the meeting. It does not require recruiting your friends, family and neighbors. It does not promise extravagant lifestyles. It does not guarantee success. If you have attended one of these meetings and are on the fence about joining consider this. The average income of a MLM representative after two years is right at $1400 a year. A few of them do well enough to eke out a living, but that figure includes the multi-millionaire 3%. The average income of a legitimate business owner is right at $45000 a year. 50% of the businesses started succeed, 97% of MLM'ers fail. Play the odds and start a legitimate business and don't fall for the hype of Pre-Paid Legal, Primerica, Amway, or any of the other fly-by-night pyramid schemes that continue to crop up all over.
David Roberts, CFE, CQBPA, MBA, lives in Kissimmee, Florida with his four girls, three dogs, two snakes and one wife. He has been a member of the Association of Certified Fraud Examiners for five years and has been studying fraud for longer than that. He is the owner of Homesoon Accounting Services which specializes in Quickbooks Consultations and Fraud Prevention and Detection.
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