How To Identify A LEGAL Network Marketing Business
Network Marketing is NOT a dirty word or bad business to become involved in. In fact, it’s a solid business process with success rates for some of the “quality” programs running as high as 25%.
However, overall success rates across all programs are more like 2%, a dismal figure and why so many have such a poor opinion of this business process.
This huge failure rate has to be placed in perspective. It’s not “network marketing principles” which are the failure but rather:
- The individuals who jump into these programs believing the promises of easy money for little effort. Returns generally only come when you “work the business”.
- The actual business and sales models used by many network marketing promoters lack substance and are unsustainable. In many cases, the programs themselves are nothing more that “pyramid schemes” with only a select few at the very top likely to achieve any success.
I am NOT currently involved with any network marketing program. In fact, my last involvement was the establishment of a new network marketing venture in 2009 – as a Director and operations manager. My tenure was short lived – I exited 7 short months afterwards.
During that short tenure, we received LEGAL ADVICE on the structuring of that operation. This advice was from an Australian lawyer and, whilst the laws may differ from country to country, the basic principles outlined below give you a guide on what to look out for:
#1: The Remuneration Program Cannot Be “Recruitment” Driven
Any program whose remuneration structure is based solely on “recruitment” is ILLEGAL IN MANY PARTS OF THE WORLD.
The term “recruitment” applies to those programs where the remuneration structure is purely based on getting others to join. It does not apply when remuneration is based on the sale of a genuine product.
In such cases, you are selling a product and a genuine business opportunity – i.e. an opportunity to also sell that product and profit on each sale.
One sure way to identify non-compliance are fast start bonuses based on the number of people you recruit.
#2: The Business Must Be Registered Within Each Country It Operates
In most countries, any matrix-based program which offers 3 or more “payment” tiers is deemed to be a network marketing operation and therefore is REQUIRED BY LAW TO BE REGISTERED WITHIN THAT JURISDICTION.
Quality network marketing companies always comply with this requirement. By comparison, illegal schemes are registered in one country only yet seek members worldwide.
Affiliate programs are different as they normally have a maximum of 2 tiers in their payment system –and transactions are generally for a specific product. As a result, they DO NOT require registration in each country.
#3: The Joining Fee Must Include Product of Commensurate Value
In other words, a joining fee of $100 must be covered by product valued at $100 or more which you can use or sell.
In many countries, this may be as high as 2.5 times the value of the joining fee.
Every business is entitled to set their prices at whatever level they wish. Like with any work-from-home business opportunity, it is up to the individual to determine whether they feel the host company’s product/s are competitively priced to allow you to get a return and build a sustainable income for the effort you need to put in.
The law as it applies to network marketing operations does vary from country to country. Nonetheless, the above provide a simple way to assess the legality of an opportunity when it is presented to you.
HOW TO AVOID GETTING CAUGHT OUT
Stick To Quality Companies:
There are many quality companies to choose from which use network marketing principles in their payment operations. They all operate within the bounds of the law and many have been around for a long time. Do your research and go with those who offer a real and sustainable business opportunity.
Focus On Your Own Efforts Rather Than Someone Else’s:
Schemes attract people based on the principle that you can earn money by having others building a down line for you.
That is true if you are at the top. However, there’s room only for a handful of people at the top and so if you come in at a lower level it may take you time and a lot of effort before you earn even a dime.
Affiliate marketing is a much safer way to go especially since in most cases you do not have to pay a sign-up fee.
It’s easy to blame promoters when a program you have joined is closed down by authorities or the promoters do “a runner”. However, at the end of the day, if you get involved after knowing the above, then you cannot blame anyone other than yourself if things go amiss.