In these tough economic times, many people are willing to turn over rocks in order to find some means of employment, especially if it gives you the opportunity to be your own boss, which many people believe will shield them from further layoffs. As the unemployment level rises, so does the number of people signing up to participate in multi layer marketing schemes. If you're considering pursuing a career in direct sales or a work from home arrangement, you should know how these companies operate and the dangers you face.

In Multi Layer Marketing or Multi Level Marketing, also called MLM, direct sales, affiliate marketing, and network marketing, participants in the scheme are structured in a pyramid not unlike the type used in Ponzi scams. The company purchases items from distributors and sells it to its salespeople, who in turn recruit more salespeople to sell the product to, layer after layer until eventually the product is sold to a customer at a high markup, with percentages of the final sales price resting with each individual involved in the chain.

While some companies use independent salespeople to sell their cosmetics or plastic food storage containers, many focus on requiring the salespeople to recruit more distributors instead of actively selling the product to an end customer. This creates a dangerously unstable pyramid which eventually collapses, leaving all the people at the bottom of the pyramid to swallow the losses associated with being unable to sell the product while the people at the top retain their cut of the sale.

Ads designed to recruit salespeople to multi level marketing schemes often promise thousands of dollars in income per week, however statistically 90% of the people employed in multi level marketing schemes make less than $5,000 per year. Since payment is based on commission, it is easy for the company to blame the salesperson for the lack of income, promising profits will improve if they make more effort to sell the products. In fact, you have a better chance of being able to support yourself if you open your own small business.

Even in multi layer marketing schemes that are not scam operations, it is very difficult to make a large enough profit to match working even the lowliest job. In fact, you will effectively be signing on to do a lot of work without a guarantee that you will be paid for it. If you must take such a job, always study the company, its track record, its products, and its compensation scheme before you agree to anything. Companies that place more emphasis on recruiting salespeople than selling products are to be avoided, and beware of any promises that sound too good to be true, because they probably are.

This cautionary advice is brought to you by Scarfone Hawkins, providing legal services to corporate and personal clients.

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