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March 6, 2017

Three Thoughts About All These So-Called Pyramid Businesses

During the latter half of my college career, a casual acquaintance of mine invited me to hear about a “business opportunity.” (We’re friends now, but prior to this we hardly moved in the same circles.) A confident, jacked dude in a hotel meeting room explained the differences between wholesale and retail, extolled the benefits of business ownership, and uttered those magical words: “residual income.”

By the end of that presentation, I was totally in. I think I had make-believe business cards by the end of the week (wish I hadn’t thrown them all away after unearthing them a couple months back – they would’ve made an enjoyably embarrassing picture to accompany this post). Then I was making a list of people I hadn’t talked to for years to call and pitch.

Any of this sound familiar?

Eventually I stopped working with that company, but it seems like I know a lot of people now who have started businesses with similar models.

Whether you’ve been part of a Multi-level marketing (MLM) business, are currently working one, or wish everyone would shut up about theirs, here are three things worth keeping in mind about them:

1) It’s Probably Not a Pyramid Scheme, Because Pyramid Schemes Are Illegal

This is the accusation that gets tossed around most liberally. Some jerk thinks he’s Sherlock because he can draw triangles on top of each other. “Aha! You see?! It’s a pyramid!” Yes. Keep sleuthing, moron.

You can learn what a real pyramid (or Ponzi) scheme is from one minute’s worth of Googling, so I will not explain it here. What sets a pyramid scheme apart from a sustainable MLM model is that a true MLM does not promise magic money from new recruits (sounds like Social Security). Payments consist of commissions from sales of actual products.

Once again, I wish I hadn’t recently chucked all my materials in the trash, but I once sat down to work out my company’s payment math on paper to confirm for myself that it wasn’t a pyramid scheme. It completely checked out. The company made lots of money, and their “independent business owners,” who bought a significant amount of products themselves, recouped a sliver.

It’s a statistical fact (and maybe a necessity) that the majority of people will never replace even their job income from their MLM business, but it can be profitable in other ways:

2) They Are a Crash Course in Personal Growth

To get anywhere in an MLM, you have to overcome your fear of rejection, set quotas and daily goals for yourself, and refine your presentation skills. These are worthwhile pursuits no matter what.

The most enduring thing I took away from my experience was a love for entrepreneurial ideas. The dream of self-employment and/or business ownership has stuck with me even though I am inoculated against ever joining another MLM.

Lastly, here’s something I didn’t know when I began, which would have likely quelled my obsession from the start:

3) The Successful People Might Not Be Wealthy Purely Because of The Business

Something I wasn’t told during that initial, exciting, obsession-generating pitch is that the uplines who really raked it in weren’t making their money just from the business side. They were also getting a cut from the sales of educational resources like CDs and books and conferences.

In fact, one of the main reasons I fizzled out was the pressure to buy motivational CDs and business books every month. These subscriptions were touted as a step to success and considered a basic requirement to prove how seriously you took the business.

Looking back, it’s easy to see why. The educational materials were another source of income for the high volume producers. Of course I can only speak to my particular experience; I don’t know the details of the newer companies (the one I joined has been around for decades).

I dislike being told what to do, and in the end I didn’t believe in our products strongly enough to consistently buy them, let alone convince others to pay premium prices. I was done.

There was one other “feature” of this business that let me walk away without regret:

Bonus: Is This a Health and Wealth Cult?

I will never forget trekking to a huge motivational conference over a weekend in an arena attached to a hotel. Lights flashed, leaders within the organization promised the rewards of sticking with the business, sales volume milestones were recognized, the founders of my particular organization within the business were canonized by a hokey singing group, and people became Christians.

Hold up, please.

It’s true. There was a worship service on Sunday morning that was nearly indistinguishable from the previous gatherings, with cheesy songs and speeches. Then there was a call to devote your life to Jesus. I escaped the spectacle quickly.

I am a Christian myself, but I can’t abide filth like that.

Starting a business is great (even if you’re actually jumping in on a business that someone else started), but intertwining your business goals with the practice of your faith could be perilous to your soul. That particular organization was ultimately not for me.

The Goal is Mutual Benefit

I think back with shame on the time when “the business” was the only topic of my conversations; I was a mercenary looking to recruit people for my gain. I had a lot to learn.

Maybe you’ve discovered an MLM at a good time of maturity, when you know that success comes from adding value to someone else first. Maybe you have a friend or family member who has joined one, and you weren’t sure what to think. Maybe you were recently presented with an opportunity and are deciding about whether to sign up.

Whether this confirmed your suspicions or reinforced your determination, I wish you success in whatever you choose to pursue.

Thanks for listening.

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