Is this a pyramid scheme or a real job?

September 23, 2005 2:18 PM

How can I tell a legitimate sales marketing company from a pyramid scheme?

I've never sold for commission. A friend of mine started recently, and seems to be making good money doing it. I'm tempted to apply for a job at the same company, but also hesitant — after all, don't lots of these companies turn out to be scams? I trust my friend's judgment, but I'd feel better if I had enough information to make my own judgment.

So how do I know if it's a pyramid scheme, or some other kind of scam? And if it is legit, how can I set my mind at ease about it?

posted by nebulawindphone to Work & Money (12 answers total)

Is there any chance that the company is registered with a business association, like the Better Business Bureau?

If not, Google is most likely your best friend.
posted by WinnipegDragon at 2:27 PM on September 23, 2005

In a pyramid scheme, you get people to give up money soley for the promise of more payments later on when they recruit more people. A sales job with Mary Kay or the like, is similar, but you actually recruit people to sell things and you get a split. Selling things is legal. Collecting money on the promise of more money when new recruits find new recruits is illegal.
posted by lee at 2:36 PM on September 23, 2005

See "Ponzi scheme" here for the relevant features of a pyramid scheme. The page includes examples, so if your business opportunity closely resembles one of them, beware.
posted by Crosius at 2:39 PM on September 23, 2005

If it's legitimate, the focus is selling a product which everyday people might be interested in buying. If you're busy selling the idea of selling to other people, and the actual product involved is an afterthought, then it's a pyramid scheme.
posted by MegoSteve at 3:07 PM on September 23, 2005

Often, scheme type businessess try to get you and others to buy into the philosophy rather than a product or service. The goods become ancillary to recruiting others for "residual" income. If someone so much as whispers that referrals promise grand tidings, be careful.

And yes, Google is your friend.

About a year ago, I ran into a guy at Target. He wanted to talk to me about a business opportunity. I entertained the idea only to see what the pitch was, knowing full well I wasn't going to partake in the Internet version of a well-known multi-level marketer (MLM). I agreed to a meeting, researched what were critques and played the fool, asking questions about the businses.

He had a textbook answer for everything. Good sales techniques, perhaps. What I realized was he spent more time and money on tapes, books and conferences about "successful" independent business owners (the fanciful name given to agents) rather than actually selling product. It is the people who made the tapes, books and conferences who raked in the money, I think.

MegoSteve, you heathen. Beat me to it.
posted by pedantic at 3:11 PM on September 23, 2005

Google is probably the best shot. The Better Business Bureau may have some information, but I've known shady companies to belong to the BBB.

One thing to watch out for - any company that says you will be promoted to management or will run your own business very quickly.

It could be perfectly legitimate, though. My wife used to work in a commission only job, and she made quite a bit of money.
posted by bh at 3:11 PM on September 23, 2005

Illegal or no, any business venture involving recruiting others and training them to recruit others themselves is most likely an MLM, and will annoy everyone you know.

I mix and produce tapes for an MLM client of mine, and can tell you right off the bat that marketing materials, e.g. CDs, tapes, booklets, and kits, are where the real money is made. The widget they happen to be selling is just to get suckers to believe there is an actual opportunity there beyond the opportunity to line the pockets of a royalty-receiving producer.

Beware of supplemental materials and recruiting.
posted by plexiwatt at 4:09 PM on September 23, 2005

Check whether they have a permanent physical location, or are picking up stakes and moving frequently. Then, see whether they are using multiple front groups from a single address to create the illusion of various "partners."
posted by johngoren at 6:23 PM on September 23, 2005

What would you be selling? There are perfectly legal, legitimate businesses like Cutco and Kirby vacuum cleaners that sell their products this way.
posted by mkultra at 6:29 PM on September 23, 2005

One thing I can tell you is that once these scams start getting more and more prevalent you can be sure you are in the midst of a burgeoning recession. I remember the abundance of flat out cash pyramid schemes and MLM companies in the early nineties.
posted by any major dude at 6:55 PM on September 23, 2005

Having just finished reading an AskMe link about knives, and one of the off-site links posted in that thread, I think it's fair to say that Cutco isn't a particularly legitimate business. Crap knives sold with lies and frippery doth not a legit business make. If that's legit, so is snake oil sales.

And for that matter, ditto for Kirby. Thousand dollar vacuum cleaner my hairy ass! There's no way in hell you're going to improve on a high-quality Sanyo, Miele, or suchlike -- and they are half the price. Another case of pushy salesmen selling overpriced product through deception, buzzspeak, and high-pressure sales tactics.
posted by five fresh fish at 5:10 PM on September 24, 2005

I used to sell Cutco, and know a lot about kitchenware. They're completely legit. Sucked at selling, so I didn't make much money, but there's money to be made if you're motivated. You have no idea what you're talking about.
posted by mkultra at 2:47 PM on September 25, 2005