Uncle Bill has a very special opportunity he wants to share with you...
Filed under: Ripoffs and Scams
The holiday season is a time for family... a time for friends... a time for conversation... a time for you to get roped into a "special opportunity."
Did Uncle Bill ever approach you at a gathering of family and friends to tell you he wanted to share an opportunity with you? Or did he walk up to you and say that he had just started his own business? (And you were probably dumbfounded because you couldn't think of any type of business that Uncle Bill was qualified to run.) What about an invitation to come hear a great motivational speaker? Or an invite to a meeting, the substance of which Uncle Bill wouldn't tell you... but he would say that you would be really interested?
All of these are typical come-ons when someone has become involved in a multi-level marketing scheme. They go by different names – MLM, network marketing, dual marketing, direct selling, binary plans, and many others. They'll tell you "this company is different," but it's really not.These "business ventures" are usually more properly termed product-based pyramid schemes. Everyone knows about pyramid schemes – participants pass money up the pyramid and the person at the top gets rich. MLMs have a similar concept, but they skirt the laws against pyramid schemes by hiding behind products.
These products (or sometimes services) are generally overpriced. They are billed as something revolutionary or different or of a much higher quality than what's out there in the stores. But that's all hogwash. The products are high-priced because the MLM companies must pay commissions to all the levels in the pyramids.
And there are only a select few in the pyramid who make the real money. They're at the top. The MLM representative will sell you the dream and tell you that you could make it to the top too. Yet millions of people before you have tried and failed, because the MLM system is set up in a way that guarantees the failure of almost everyone.
The holiday season is the time for giving, not for taking. Don't let Uncle Bill or someone like him take your money (or your time!) with one of these MLM schemes. Run, don't walk, the other way when he tries to corner you and tell you about this wonderful opportunity.
In future posts, I'll tell you more about MLMs and the real story behind these companies that falsely claim you'll find financial freedom with them. They are selling dreams, and the reality is that more than 99% of people who join these companies lose money. Stay tuned!
Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.
Did Uncle Bill ever approach you at a gathering of family and friends to tell you he wanted to share an opportunity with you? Or did he walk up to you and say that he had just started his own business? (And you were probably dumbfounded because you couldn't think of any type of business that Uncle Bill was qualified to run.) What about an invitation to come hear a great motivational speaker? Or an invite to a meeting, the substance of which Uncle Bill wouldn't tell you... but he would say that you would be really interested?
All of these are typical come-ons when someone has become involved in a multi-level marketing scheme. They go by different names – MLM, network marketing, dual marketing, direct selling, binary plans, and many others. They'll tell you "this company is different," but it's really not.These "business ventures" are usually more properly termed product-based pyramid schemes. Everyone knows about pyramid schemes – participants pass money up the pyramid and the person at the top gets rich. MLMs have a similar concept, but they skirt the laws against pyramid schemes by hiding behind products.
These products (or sometimes services) are generally overpriced. They are billed as something revolutionary or different or of a much higher quality than what's out there in the stores. But that's all hogwash. The products are high-priced because the MLM companies must pay commissions to all the levels in the pyramids.
And there are only a select few in the pyramid who make the real money. They're at the top. The MLM representative will sell you the dream and tell you that you could make it to the top too. Yet millions of people before you have tried and failed, because the MLM system is set up in a way that guarantees the failure of almost everyone.
The holiday season is the time for giving, not for taking. Don't let Uncle Bill or someone like him take your money (or your time!) with one of these MLM schemes. Run, don't walk, the other way when he tries to corner you and tell you about this wonderful opportunity.
In future posts, I'll tell you more about MLMs and the real story behind these companies that falsely claim you'll find financial freedom with them. They are selling dreams, and the reality is that more than 99% of people who join these companies lose money. Stay tuned!
Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.
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Reader Comments (Page 1 of 1)
12-14-2007 @ 10:44PM
Fuzzmanmatt said...
For the last seven years I've been trying to tell my mom the same thing, but she refuses to listen. There are those who "believe," but refuse to see the truth. "When the dream is big enough, the facts don't matter!"
Reply
12-28-2007 @ 11:54AM
JoJo said...
This article is like saying all used car salesmen are scammers, or all television programs are crap. Sure, most are, but not all. You have to look before you leap.
12-28-2007 @ 11:58AM
Dale said...
I don't think any of us have the right to belittle how people make their living. Many salesmen sell products people let gather dust once purchased. 99% of "traditional" businessess fail in their 1st 10 years. Bill Gates and Donald Trump'd probably say we're idiots for working our lives away and still not being at least millionaires. So with that in mind, unless you can refine their way of making money, dont bash network marketing. Please and thank you.
Reply
12-28-2007 @ 1:04PM
Fuzzmanmatt said...
Right from the training materials! Very good! Now, before you think I'm belittling you, think about this (something that Tracy pointed out in a later article): The folks who make money in MLMs are not the people who are selling PRODUCT, it's the people who are selling the DREAM. The people who are best at selling the dream get noticed by the people who started selling the dream. Lets break them into teams. Team one will be the founders. Team two will be the people who are good at selling the dream. Team one knows that the money is selling the motivational products, tapes, seminars, videos, etc. Team one knows that if they're the only people featured in those "training materials" people aren't going to buy into the dream that "anybody, even YOU," can do it. But, they see that Team two is good at motivating people. Team two can convince people that "anybody, even YOU" can do it. So, Team one brings in Team two to help present at these seminars. Team two gets more people motivated, gets more people involved, and Team two gets good at finding people "just like them" to present at these seminars. So now, we've gone from Team one and Team two, and added Teams three, four, and five. But exactly as the charts show, under Teams three four and five there needs to be five under each of those, and each of those needs to have five under them, up to a depth of at least 16 layers! That's (now I show my failure at math) 80 people! And the average cost of one of these tapes is $15. Each one of these people is encouraged to buy one tape a month. That's $180 a year per person, and you've got 80 people, that's $14,000 a year. The cost of materials per person per year is maybe $3. That's $13,760 in PROFIT. That's STILL NOT ENOUGH to keep you, as a single American, above the poverty line. You still qualify for welfare, and yet you're working 40, 50, 60+ hours a week.
A good read for anybody who is still thinking about the potential that this has should go out and read Merchants of Deception, available for free from http://www.merchantsofdeception.com/
I am in no way associated with Merchants of Deception or any other anti-MLM association, I just believe that a good example of "network marketing" is telling your buddy down the street who's having car problems to call your other buddy from across town who owns a garage. Otherwise it'd be like the Snap-On guy saying "Hey, I see you're having car problems. What if I told you that by opening a garage you could make a bundle of money, and then get people who come to your garage to open their own garages so they could make money, too. I'll even supply you guys with the tools!"
12-28-2007 @ 12:09PM
Tracy Coenen said...
Sorry Dale, but the statistic you quoted is incorrect... total fiction.
But the FACT is that more than 99% of participants lose money in MLM. It is not a "business" or a "way to make money". It is a way to SPEND money for almost everyone, and that's why all consumers should stay away from it!
Reply
12-31-2007 @ 10:59PM
integrity said...
Pretty good Fuzzmanmatt However YES your math is way off The seventh level if you start out with ONE Person at the top and place five under them and then five under each of them YOU would have 78,125 people on the seventh level down. ANYHOW it is not an overnight thing making money in MLM and you are right MOST Products are OVERPRICED I have found a few such as xxxxxxxxxxxxxxxxxxxxxxxx
BUT this is simply ONE of thousands of opportunities out there in Network Marketing. It's not easy to make any large amount of money until you have enough customers/consumers......not just downline distributors on autoship.
And Tracy Coenen, you need to chill....did you get ripped off once or twice? NOT every single MLM based Business is a Demon. Christ all mighty there are too many examples of anything and everythign and situation out there to sit here and argue with ANYONE but chill NOT every cop is a bad cop! Not every Homebased Business Opportunity is a ripoff. Not everything that glitters is gold.
BUT if you work at it and you believe in it and you don't rip people off while you are helping others then it is OK to be making a profit. Isn't it?
And if you two don't HAVE any, BUT you're willing to PAY a premium for it BECAUSE it is worth it to YOU then who gives a RATS BUTTOCKS?
Too many garages and not enough accountants!
Someone should take a marketing course and consider this, WHY doesn't everyone own their own garage.
Because thats ridiculous THATS WHY!
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1-01-2008 @ 3:56PM
ohh yehhh said...
I enjoyed reading the intellegent comment you wrote.
Besides all that you said, good sales people are the highest paid, across the board! That's a well known fact. Nothing to feel shame about.
If a person/people set out to cheat & swindle for a buck, they are just another crimminal. Look at big business, credit card companies & on & on. Oh let's never forget ENRON who got away with destroying,how any peoples lives!? GRReed.
I have more confidence in the MLM/Network Marketing company I chose to build my financial security with. We all have a chose between dependent & interdependent. Good Luck to All in 2008 - Happy New Year!
1-01-2008 @ 3:31PM
Coni said...
Geeze! Talk about over generalization.
Not ALL network marketing is a scam. My aunt raised 4 kids with her Tupperware business and I bet all of us know at least one Mary Kay distributor. It is a legitimate business model just like anything else. How much money you make depends on how much time you put into your business, learning about marketing and of course researching the right company to partner with. I agree that there are many less than reputable companies out there but that is why it is up to the individual to figure that out for themselves. A simple google search will reveal fairly quickly if the company you are interested has a bad rap or not.
Personally I love my network marketing business. The income is great and it sure beats punching a clock. Is it for everyone? Absolutely not but it can be an excellent living for a self motivated person who is willing to put some effort in.<
Reply
1-01-2008 @ 3:57PM
CJ said...
Obviously Ms. Coenen doesn't realize that the VAST MAJORITY of people who have accumulated REAL WEALTH in our nation's history-have been/are business OWNERS! Network Marketing is actually one of the only great ways to have an opportunity to become WEALTHY without having to INVEST ALOT of your own money. Does ANYONE reading this have $250,000 to buy a McDonalds Franchise??? Tracy, you are giving people the WORST advice possible-Run away from the MOST SUCCESSFUL low investment/low risk BUSINESS MODEL that exists today! ALL BUSINESSES are LIKELY TO FAIL = Awful but True! However, just because PEOPLE may (FAIL) in a Network Marketing Company doesn't mean that the company itself won't be tremendously successful. FYI- I would recommend that you don't ever write an article accusing a LEGALLY operating MLM company (Thousands exist...) of being a Pyramid Scheme-You may find yourself slapped with a LAWSUIT. People like you, are the BE AFRAID CROWD! It's fine to remain an EMPLOYEE your whole life. However, if someone wants SOMETHING BETTER, they should ABSOLUTELY give MLM/Network Marketing serious consideration! It is a LEGAL, and HIGHLY SUCCESSFUL BUSINESS MODEL which has proven it's viability for DECADES.
ps. Ignorance breeds more ignorance.
Charles L.
Raleigh, NC
Reply
1-01-2008 @ 4:29PM
James M said...
In a free enterprise business system the viability of a business will be proven by how it is received by the masses and not by the impassioned opinions of individuals. All corporations/businesses are either praised or criticized during their existence. People are entitled to their opinions but when they attempt to sell those opinions to others at the expense of some they open themselves to criticizm. I find that when a person denegrates another or another's business it is generally because either they have something to sell themselves or they are venting their own personal past frustrations. Either way we should "run' away from these people and their "advice". In the end-analysis one is always better off doing their own research and coming to their own conclusions when deciding whether a particular course is right for them.
Reply
1-01-2008 @ 7:46PM
Carol R said...
Network Marketing has been very good to me and my family for 10 years.
I am proud to be with a multi billion $ company with amazing wellness technologies.
Aside from the terrific benefit we get from living in a Wellness Home, I drive a car paid for by my company, and soon will qualify for a home too. Many "traditional" businesses do not survive their first year, so why hold network marketing to a higher standard? It takes work and dedication like everything that is worthwhile.
Reply
1-01-2008 @ 10:51PM
Tracy Coenen said...
Newsflash: Participating in an MLM is not "owning you own business." YOU OWN NOTHING. You get money from your downline as long as the company allows you to. You can't sell your downline or take it with you. And check your contract... most MLMs can terminate you at any time, for any reason, with very little notice, and *poof* your downline is gone.
MLM (or network marketing or pyramid schemes or whatever you want to call them) are abusive systems made to look like business. Real facts about failure rates are purposely concealed by the companies that run these scams because if people really knew how little chance of success they had, they'd never join.
Over 99% of people who join MLMs lose money. It's not because they didn't work hard enough. It's because THAT'S HOW THE SYSTEM IS SET UP.
The only people who profit in MLM are the company owners and the very few at the top of the pyramid.
Line up 1,000 people who are planning on joining an MLM. 10 of those will turn a profit. Some very small, one $100,000 or more a year if they stay in the scheme long enough and recruit enough new marks. The other 9 will turn a small profit... most of them not enough to support themselves.
990 of those people will LOSE MONEY. That means they will spend more on the pyramid scheme than they will ever get back.
If people really knew those odds, who would join?
As for calling these company pyramid schemes.... they are. Usana, Mary Kay, Amway, PrePaid Legal, Herbalife, Avon, Primerica.... the list goes on and on. Product based pyramid schemes. All of them.
Reply
1-01-2008 @ 11:05PM
Marcus said...
Let's not forget about the tax advantages of owning your own business. I started two businesses this past year. When I was just an employee of a company, all I had for deductions were the "standard" or maybe a portion of mortgage interest on my home. Now, I have all sorts of mileage, the office space in my home used to meet with clients, supplies I would probably be buying anyway, meals & entertainment with clients who I would probably eat with anyway, utilities, cell phone, purchase of a vehicle or computer, networking groups I belong to, and more. Even if I lost money in my business all year long, it is deductible from my taxes that I would have had to pay into the gub-ment anyway.
My mowing service made about $14K part-time, and lost about $11K to expenses. Next year if it makes $10K, there would only be about $2K in expenses. Can I live off of it? No, but will it help reduce some debt or help me to have a little extra cash for other opportunities. You bet! My greeting card business getting off the ground was about $1500 including mixers and meetings, but it helped me build relationships that got me a $100K job in the process (a $70K pay raise), as well as more clients in my other businesses. There are a lot of ways to look at income vs. expenses. What did having a network of friends from my MLM business do for me? A lot!
There are a lot of fly-by-night outfits out there in network marketing. I could say the same thing about contractors, lawyers, bankers, oil/gas companies, drug companies, aviation companies, radio stations, TV reporters, or any vocation that anyone chooses to be a part of.
Your job is to do your due diligence on the company you are evaluating or thinking of investing in. If they are afraid to tell you what they are or who they are, or how your money is made, they might not be worthwhile. You shouldn't have to be afraid of what you sell. You should be PROUD of what you are selling. If you can be, then you will do well. If you can't be, you won't. Find out if the product or service is competitive. Does it have a true value or intrinsic value to you? What will it do for you? Will you be proud of it, or embarrassed by it? Would you buy the products if there were NO income attached to it? That's why I joined the opportunity that I did. I saw the value and used the service long before I decided to make it into a business. If it has that quality, you know it will do well.
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