Hundreds and thousands of MLM (multilevel marketing companies) are coming in market every year. There is no doubt that MLM concept is what gives an opportunity to common men to become rich and successful in their life. However, since last few years, the number of fraud schemes (also known as money rotating schemes, pyramid schemes or chain system) has been increased.

If MLM is good concept, than why these companies are considered as fraud?

Only because, MLM business is about saving distribution and advertising cost of the product and rewarding that back to the members who moves the products and advertises it with word of mouth marketing. While, so called chain systems has nothing to do with the product, quality of products or business of products, they only rotates money from lower level to upper level and generally this kind of schemes are having binary plans. Means there will be only two members below each member. You can not create more than 2 legs.

Then what is the wrong with this chain MLM business?

The first thing is, it is not business. Because, there is no product dealing in this system. Every member joining earlier gets money (Commission) from the membership fees of members joining later. This way, company can not sustain it’s business more than few months, year or a two.

Then what is the real MLM Business?

The real MLM business Is all about products and services. IBO (Independent business owner, the member or distributor of MLM business is often known as IBO) gives only few years of efforts in building the network (network of IBOs or Customers who uses products and distributes to others) and can keep earning for years. Now see, what will happen if there is no products involved here and you get commission only from the recruitment? Once you will stop introducing new members in the chain system you will stop earning money.

How do I find that the MLM Business is legitimate or not?

There are many parameters you can check to find genuineness of any network marketing company like the age of company, the products, the cost, quality and effectiveness of products, the networking plan and much more but here I will show you only three things to checkout and you will see if the network marketing company is genuine or note.

Three (3) Things to Check MLM Company is genuine or not.

1. The source of Company’s income

Before you join any network marketing company, you must study the flow of money, how company is making profit and how you are being paid for your efforts. If you see too much profit only from the recruitment (introducing new member in your chain or network) than it may be red signal for you. Ideally there should be no commission on recruitment, because it spoils the whole business system and product distribution network. Company should be dealing with the FMCG products that each and every person can use and will need frequently. For example, if you go with MLM Company which offers services and products in education, than your costumer will be students only, and hence your business will be limited to students only.

2. Freedom to design your own network

Ideally, the true MLM Company has nothing to do with the design of network. The design of network (means how many member below you and how many below each member) only affects your own income, because profit of company is on business of products and not on the type of network. So if the company is limiting your freedom by binary plan, or you are not independent to create unlimited legs, than again this may be the red alert for you.

3. Use your own smartness to understand company’s plan

Here I want you to smartly understand the networking plan and commission plan that is being described by company or one of company’s IBO. Sometimes it is observed that the fraud MLM companies use base of products or services to behave like a genuine MLM company but once you join it, you will realize that there is only main income source and that is from recruitment. Products and services are just company’s marketing strategy and to divert the people’s mindset making them believe that they will make money with the products.

I request you to share with us (by comment below) if you know any such fraud network marketing company and have doubt on any MLM company. Help us spread the awareness.