Chris Kavas

It is one thing to read about it from a post on Facebook but another when it is a trusted friend that wants you to join their business.

There are countless examples of people who jumped in to a business head first because of the hype and excitement and, because they did not do their diligence, got burned.  Maybe it is because they think the buy-in is so low compared to traditional business that it becomes easier to bypass doing one’s homework and “take the risk”.

Imagine being the caring and well-meaning esthetician that lost a majority of their clients because they approached their customers about a business opportunity that turned out to be a pyramid scheme. The $20 distributor kit starts to look a lot pricier.

Before you start thinking this is an anti-MLM article, recognize that I agree with Rod Cook at MLMWatchdog:

“Network Marketing is the last hope for the little guy”

It is frustrating watching so many treat Network Marketing like playing the lottery and seeing all the scams parading as network marketing companies sully this industry.  If worked right, Network Marketing is an honorable, ethical and legitimate business model.

There are a lot of legitimate Network Marketing companies out there and with a few simple questions you can determine if it is a company you want tied to your name.  MLMWatchdog has a good page with advice here.

So look beyond the hype, ignore the “get in now or else” and ask these basic questions:

1) What is the product/service? How many times do you hear people advertise “no product and no selling”?  That could be a red flag.  If there is no product, there is no business.  Ask yourself this question:  Would you buy the product if you could only find it in a store? If the answer is no then keep looking.  If, on the other hand you are still trying to figure out what it is the company sells, then run.

Is it better to have one product or a wide portfolio? Most companies seem to fall into 2 categories:  They either have more products than your local megamart or they are a “One Product Wonder” that will have one main product and maybe a few more that are basically a slight variation of their main product.  Both have their good and bad points.  There is a real benefit to focusing on one main product with big appeal and having a wide portfolio of products to show your prospect after they are a customer.  I will post more about this at a later date.

2)  Do you make money moving product or do you only get paid to recruit? Take a close look at how money is made.  If you can only make money from recruiting, realize that is a big flag for any regulatory agency.  YTB (Your Travel Business) ran into this when the California Attorney General hit YTB because the money was made in recruiting and very little money could be made selling travel.  You can read the details here.

3) Does the company endorse illegal behavior? We all know that over-zealous distributors will sometimes exaggerate and make false claims to build their business.  It happens with all Network Marketing companies.  What I am talking about are the claims made by the company and their top leaders.  It is difficult for those new to this business to know what is and isn’t legal.  Here are red flags to look out for:

• Income Claims. Read my post about making income claims and you will know what I mean.  You can read it by clicking here.
• Product Claims. This is more for companies with a tangible product.  Does the company claim their supplement cures a disease?  Do they claim you can “lose weight while you sleep”?  Do they claim to be FDA approved?  It takes a herculean effort to get the FDA to approve a claim and usually once they do the supplement becomes controlled and only available from a prescription.   When in doubt, verify.  Regulators don’t differentiate between distributors and the company they represent when going after false claims.
• Questionable ethical behavior. Mark Yarnel has a good litmus test.  He asks if you would want your Mother to be a part of the company.  If the answer is no, move on.

4)  Is it a real company? This one may sound obvious but you would be surprised how easy it is to miss.  Each year tons of Network Marketing companies start up and each year tons of them close their doors.

• Look up the address. Is there an address?  If so, look it up on Google maps – is there a building or an empty lot?  Is it a private mail box?  Private mail boxes may be an indicator of avoiding postal fraud investigators.
• Do they take credit cards? If they only take bank wires, money orders or checks, run.  Run fast.
• Do they offer refunds? Good companies will have a solid refund policy.  Some will refund your money up to one year.

A note about researching the company online. Like everyone else, you will do your obligatory online search using the company name and the word “scam”.  If the company has been around for a while you will see the majority of results will fall into 2 categories.

• Distributors promoting that company with scam in their title to draw you to their page.
• Anti-mlm zealots whose only goal is to kill the entire Network Marketing business model.  To them, everything is a scam.

When you investigate the company on line, keep an eye out for legitimate complaints.  Bypass the first 2 pages of results and look for posts on message boards.

I hope this will help you determine if the company is worth your time and money.  In another post I will go into detail about choosing a team and company with the right support, system and pay plan that best fits you.