What is Pyramid Selling?Extract from Residual Magic by Richard Wall

Most countries have rigorous legislation which outlaws pyramid selling (although pyramid selling itself is not legally defined). The usual horror stories are:

• There is no product - like a chain letter where people pay to join a scheme and you are paid a commission for those new 'recruits'. A few years ago ‘gifting’ programs were very popular - if they ever became big they were closed down and the last people in lost their money. A bit like ‘pass the parcel’ when the music stops.
• There is a product, but it’s overpriced to enable the company to pay out the large commissions.
• New recruits are encouraged to buy a garage-full of products to get started. Water filters and burglar alarms here in the UK in the early/mid 90's spring to mind.
• Distributors are paid on recruits rather than on sales of products and services.
• There’s a large mandatory up-front purchase commitment.

A Ponzi Scheme is the foundation for most of the regulatory pressure on the MLM industry over the past few years. In a nutshell, this is a money-making scheme which entices you to buy something, ‘duplicating’ yourself by recruiting other people to do the same and those people recruiting people and so on. Hence the pyramid structure – just like a chain letter. Here in the UK, the courts talk about ‘bound to fail’ schemes. The main reason why they are supposedly bound to fail is somewhere down the line you will run out of people. The last people in the pyramid lose out. Also your success is down to chance... your commissions depend largely on people you haven’t introduced and over whom you have no influence.

The Golden Rules for MLM

Rule Number 1: Ask yourself, with your hand on your heart, “Are the products/services good enough to stand up without the business opportunity?” If yes and there are no ‘garage qualify’ purchase quotas or monthly targets, you should be fine. If not, you are going to find your circle of friends getting smaller! Brian Tracy (see chapter 5 of Residual Magic) sums up effective selling very well: “If you don’t believe in your product, if you don’t love your product, if you wouldn’t use it yourself, if you wouldn’t sell it to your best friend or your mother you are probably selling the wrong product.” Don’t worry, Brian doesn’t mean over the top bore-your-friends-to-death evangelicism, just genuine ‘constrained enthusiasm’ about your products/services.

Rule Number 2: Do you feel you are doing your friends a favour by asking them to look at your business opportunity, or do you feel a bit embarrassed asking them? If it’s the latter, you must either quit the business or raise your confidence. In some MLM businesses raising your confidence high enough is impossible. The early days of networking were often mysterious: “come round for dinner” was often the invitation. Unsuspecting punters would go round for dinner to their friends. After the first course, a whiteboard would be wheeled out from behind the curtains and the presentation would begin. There’s a stigma about this approach… for example a friend in our village said a few years ago, soon after my MLM debut, “It’s not bloody AMTRAK is it?” Well he was close. And no it wasn’t Amway!

Rule Number 3: Read Chapter 5 of my Residual Magic eBook. Without this you have no chance