Winsett: What you should know about multi-level marketing

Winsett: What you should know about multi-level marketing

May 26th, 2017 by Jim Winsett in Business Around the Region

Jim Winsett of the BBB.

Jim Winsett of the BBB. ...

Photo by Contributed Photo /Times Free Press.

Q. I am looking for summer employment. One opportunity looks to be multi-level marketing. What advice might BBB provide?

A. With the ability to reach out to dozens, or even hundreds or thousands, of people at a time through email and social media, it may seem like everybody you know is in business for themselves and selling something. You may get invites to parties selling jewelry, clothing, makeup, kitchen gadgets, or health supplements or added to Facebook groups for "pop up shops."

Many of those businesses are multi-level marketing plans — people make money through their own sales as well as the sales of people who they recruit to their sales teams.

Multilevel marketing is legal, but there is a fine line between those businesses and illegal pyramid or Ponzi schemes. The main difference is that with multilevel marketing, your income is based on actual product sales (by you and your recruits) while with a pyramid scheme your income is based on your signing up other distributors. A Ponzi scheme is similar to a pyramid scheme, but focuses on fake investment opportunities instead of sales.

Make sure you do your research before joining a multi-level marketing business. Here are some things to think about:

What will you be selling? Find out what you will be selling and compare prices and quality with other products. Make sure that any marketing materials you will be using are truthful and there is evidence to support claims about the products.

Learn about the company. Look into the company's track record and reputation. Look for a business review and complaints at bbb.org. Do an internet search with the name of the company and words like scam or complaint. You can also search for news articles related to the company.

Understand the plan. Make sure you are clear on all terms and conditions of the plan including pay and expenses. Remember that as you recruit other distributors, you are responsible for any claims you make about how much money they can earn, so be sure any claims are backed up with evidence. Get all information in writing.

Ask for the name and contact information of someone at the company who can answer your questions. Ask them things like: How many people are on your team? How long have you been in the business? How much money did you make last year? What were your expenses last year? How much product did you sell to customers and how much to distributors? What percentage of the money you've made came from recruiting other distributors and selling them inventory or other items to get started?

Note this weekend is also Memorial Day holiday. On Memorial Day, the holiday that seeks to pay tribute to those who gave their lives serving in the military, many of us will pay respects to those who died by responding to requests for donations by veterans and military-affiliated organizations.

As with any charity appeal, BBB urge donors to exercise caution and do some research before making a giving decision. Donation requests by veterans groups are high around the Memorial Day holiday. Visit www.give.org to verify that a charity meets the "Standards for Charity Accountability."

Senior citizens, as well as friends and relatives of seniors, should stay diligent as they watch for the many fraudsters out to steal from unsuspecting victims. Sign up for the Do Not Call Registry at donotcall.gov. Find out more about elder scams by visiting Consumer Financial Protection Bureau at consumerfinance.gov/older-Americans. To view other consumer tips, visit bbb.org.

Jim Winsett is president of the Better Business Bureau in Chattanooga.

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