This blog post is the companion post to the video: How to Tell if a Company is a Pyramid or a Legitimate MLM.

You may have been recruited for a network marketing opportunity or you are a recruiter. Inevitably, this question will come up, is the company a pyramid scheme or a legitimate business opportunity?

Although this is a complex legal area, let me share a simple metaphor that draws a clear line in the sand.

The metaphor is about a gentlemen, will call him Party #1, and he sells a case of canned tuna fish to Party #2 for $10. And, Party #2 sells it to Party #3 for $20, and Party #3 sells the case of canned tuna fish until it gets to Party #10, who buys the case of canned tuna for $500. And, Party #10 opens up the case of tuna fish and it’s rancid. It’s inedible.

He goes back to Party #9 and complains, “I bought this case of tuna for $500 and it’s rancid.” Party #9 tells him to take it to Party #8, and Party #8 tells him to take it to Party #7, and so on until Party #10 goes all the way back to Party #1 and says, “You’re the one who started all of this! I have a problem!”

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This blog post is the companion post to the video: Role of Compensation Plan in a Successful Direct Selling Company. The following is the transcript of MLM Attorney Jeff Babener’s own words:

Hi, I’m Jeff Babener of MLMLegal.com. I’d like to talk to you today about the compensation plan. It better be good.

Does a compensation plan make or break a startup MLM company? History suggests that a good compensation plan is helpful and absolutely necessary. Does it drive financial success? Probably not. Will a bad compensation plan contribute to failure? Probably, together with other unlucky breaks. As industry expert Michael Sheffield notes with respect to a good compensation plan, “Its absence will be noted more than its presence.”

Is there anything new under as far as compensation plans are concerned? Probably not. The goal is always the same regardless of the type of compensation plan: motivate varying behaviors of distributors, ranging from direct sales, to building wide to building deep, to supporting a downline, to maximizing sales volume production and retention.

It is of key importance is that the compensation plan is easy to explain to recruits and that it is perceived as fair and balanced.

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WHAT?

The next Starting and Running the Successful MLM Company Conference is quickly approaching! On May 16th & 17th, 2013 we are hosting the MLM Conference for the 25th year! This is now our 64th annual conference (held almost consistently three times per year over the last 24 years). All executives/owners of MLM, direct selling, network marking, and party plan companies are welcome to attend. This is the original MLM Startup Conference, hosted and perfected by direct selling industry expert, MLM Attorney Jeff Babener.

WHO?

Direct Selling Attorney, Jeff Babener, Founder of Babener & Associates and Sponsor of the MLM Startup Conference, has over 25 years of experience in the industry, representing companies such as Avon, Nikken, Melaleuca, Discovery Toys, Usana, and NuSkin.

MLM Industry Consultant, Mike Sheffield, with The Sheffield Group and Co-Sponsor of the MLM Startup Conference, has helped launch over 800 companies over the last 27 years.

Over the course of two days, you will hear from many leaders in the direct selling industry, who include:

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This blog post is the companion post to the video Choosing the Right Product for Your MLM Company. The following is the transcript of MLM Attorney Jeff Babener’s own words:

Hi, I’m Jeff Babener of MLMLegal.com, and I’d like to talk to you today about how to get your product right the first time.

If your business is the machine and your software runs the machine then your product or service is, as the French would say, your reason for existence. In looking back on the history of the direct selling industry, a chicken and egg analysis makes it difficult to determine whether the business opportunity or product was the essential reason for commencement of the business. There are instances of both being true. The founders of Avon, Mary Kay, and Home Interiors came from successful experiences in marketing other products. They found a product suitable for their marketing talents. On the other hand, the founders of Nikken, Amazon Herbs, and Shaklee had a passion for bringing uniquely-new products to the world and direct selling became the best vehicle.

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This blog post is the companion post to the video MLM Startup Tips, Educational Resources, Answers to Network Marketing Questions. The following is the transcript of MLM Attorney Jeff Babener’s own words:

Hi, I’m Jeff Babener of MLMLegal.com, and I’d like to talk to you today about how to find MLM startup answers at you fingertips.

The umbrella term for the business is “direct selling.” Whether companies such as Tupperware, Amway, or The Pampered Chef practice a variety of business models, the business species is known as “direct selling.”

Under the direct selling umbrella you can find party plans, MLM or multilevel marketing, network marketing, and direct sales. The objective is always the same; however, to build a consumer products or services marking company that distributes through a vast network of sales persons, who sell both consumer products and services, as well as recruit and develop an even larger network of salespersons. Remuneration is paid on the sales volume of those downline recruited networks.

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This blog post is the companion post to the video Raise Capital in Order to Recruit Key Distributors. MLM Attorney Jeff Babener discusses the need to raise capital in order to recruit key distributors below.

Hi, I’m Jeff Babener of MLMlegal.com and I’d like to talk to you about capitalization, can you recruit? Do you have a great recruitment background, the ability to recruit? Or a lineup of strong distributors? If so, your need for capital will be substantially diminished.

In the end your ability to recruit a talented and motivated sales network will be the number one key to your success. In fact, your need for capital is in direct inverse proportion to your ability to recruit. If you can recruit then you may have a cash cow on your hands. If recruitment is slow then your business plan needs to allow for buffer capital to hold you through one, two, or three years of break even or loss scenarios. That capital should be lined up ahead of time either through personal and close relationship resources or through angel investors.

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This blog post was created to bring you all the web pages, videos, and informational material about pyramid schemes vs. legitimate (legal) MLM companies from MLMLegal.com and MLMAttorney.com together in one place, for your convenience. This post is accurate to its publication date. Keep checking www.mlmlegal.com and www.mlmattorney.com for updates on the direct selling industry and pyramid schemes!

Here is a list of all the links within MLMLegal.com and MLMAttorney.com that focus primarily on pyramid schemes.

Videos

Short Course on Network Marketing: Q&A with Jeffrey Babener on Pyramid Schemes

From a Legal Perspective: The Difference Between a Pyramid Scheme and Legitimate MLM

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