Business Opportunity, Scam, or Pyramid Scheme?

If you ever visited my page on MySpace, you may have read my rantings about Corporate America and the many ways people are scammed. Since so many people are out there trying to deceive us, it’s no wonder everyone is paranoid. At this point, someone can offer you the cure to cancer and we’d turn it down in fear of being scammed. Now, more than ever, our society is one based on fear and it’s a real shame.

Fear is what makes people turn away from perfectly-viable opportunities. If you think about the many “business opportunities” we are all offered at some point in our lives, one can’t help but to think “which one of these is actually legit??” Sadly, there is no science to this so it’s always going to be hit or miss. Any opportunity we consider in life, whether it’s the next career move or just the next play in a game of cards, is a constant balancing of risk and reward. If the potential reward outweighs the potential risk, then you can take a measured risk. Timing, of course, is always a factor but that’s not what we are discussing here right now.

If you’re wondering what has me discussing “business opportunities” again, relax, I am not trying to sell you on anything (never have been). What triggers this blog is the simple fact that I see lots of my friends at a crossroads in their life. Many of my friends are professionals with paper certifications and diplomas up the wazoo, yet they can’t find work or they simply don’t know what their next steps should be. The simple fact, as I always seem to reiterate, is that both the career and business tracks are high risk and high turnover. A big part of it has to do with defining what sort of person you are and finding opportunities, companies, and maybe even clients that align with your worldview, your goals, principles, and biases (we all have them).

Consider the prospect of a business opportunity, perhaps a home-based (but not necessarily home-bound) business. The immediate thought may be “it’s a scam” or, even worse, you write it off as a pyramid scheme. Well, I’ll rehash this old argument: pyramid schemes are illegal and do not last long. If a company is publicly traded, has good rating on the BBB, and has actual product/services, it is not and cannot be a pyramid scheme.

Now that the ‘ol pyramid scheme matter is out of the way, let’s do some simple career coaching. When most folks consider leaving the career track and going into business for themselves, their main reasons for it is that they can have their freedom back. Well, I’m here to burst some bubbles even more: if it is time freedom you are looking for, most business models, including popular franchising opportunities, do not offer that, at least not to boot. You need to consider working years, if not decades, before you can walk away from your business and let it run itself… Or sell it off to some poor, unsuspecting chump.

People say they want freedom but that’s not really what they’re saying, most of the time. That’s part of the complexity of human nature: we don’t say what we mean, we don’t want what we really need. Aligning the often-contrasting forces in life is part of the self development process and success in business/career paths. Back to the matter of freedom in the work world, what people are referring to is often time freedom or perhaps the greater freedom: independence. Control is what it all boils down to usually. People want to call the shots, make their own schedule, take vacation when they want to, deliver product/services the way they feel is better, and just do things their way; sadly, in both business and traditional jobs, you will often have to succumb to someone else’s rules.

Take a look at the franchising business. One may look at businesses like Subway, Starbuck’s, or McDonald’s and think to themselves “it’s an instant success story waiting to happen” but the reality is that it’s still hard work. Franchising takes lots of money, especially when you are buying into an existing franchise and not starting your own. Unless you have a million dollars laying around, wave good-bye to McDonald’s because that is pretty much the bare minimum that you need. Let’s not forget that, when you buy into someone else’s franchise, you’re still making someone else at the top really rich while you usually just make it by – talk about a pyramid scheme!

What I love about folks worrying about being scammed is that they write off the good opportunities as pyramid schemes and then join a company where the executives keep all the profits and only the chump chang trickles down. Remember what I said about the difference between what people say and what they really mean? Well, when people say they are worried about a pyramid scheme, they are not scared about someone up top getting rich off of their efforts (that happens every day), but, rather, they are scared to do something different from what others around them are doing or expect them to do. It’s all a matter of peer pressure. Business is just like high school – popularity and peer pressure are huge. No one wants to lose their friends, even if it means ultimate fulfillment and/or happiness in life.

If you define a pyramid scheme as any business model where people at the top make the most money and the people at the bottom make little or no profit, then any business in the world is a pyramid scheme. Language is a powerful tool so it’s important not to throw around terminology that one does not understand. Pyramid schemes are a federal offense punishable by huge fines and long jail time. Let’s get this matter settled here. If you think you are better taken care of at your job than you would be working for yourself, you have been duped. Call me jaded or negative but the reality is this: the ideal of finding a company that treats your right, appreciates your work, and pays you what you’re worth is just another pipedream that we all buy into because that is what the college businesses and mental bullies of the world want us to believe. Heavens forbid that the value of such institutions be taken away and they become less profitable!

When you look at any opportunity, I say your best bet is to examine the company culture or look at people doing similar businesses: are those the type of people you wish to associate with? To me, success in life, in anything you do, is as simple as figuring out who you really are and who you really want to become. Alas, along the path to happiness and fulfillment, people will pull us in every direction. We need to be careful not to take the expectations of others as our own; sometimes, it is appropriate, other times it is just misleading.

How does one easily gauge the viability of a business? It starts with taking everything the people doing the business say with a grain of salt and looking for unbiased third-party validation. You want to make sure that this is a real business so validation is key. If the company is publicly traded and carries well-known certifications, recognitions, and distinctions, then that is a good sign. Look for negative publicity and dig deep, then determine who is generating this publicity? Are they disgruntled employees or disappointed franchisers? Getting to the root of these issues is key if you are seriously considering any business opportunity.

The power in business comes in establishing networks. Franchising can start with a person or with a complete business unit but the principle is always the same: take a successful system and duplicate it in other key markets, effectively extending the reach of your business. The MLM and Direct Sales businesses are not the only ones that use this model and, as much as people will deny it ’til blue in the face, companies you do business may already have an MLM/DS component. America Online and many financial institutions, for example, use an MLM model to spread their product out into markets they may have otherwise missed. Believe it.

What makes a system good? This is a tougher question because, before looking at the system, you have to determine if it is people-dependent or tool-dependent. There is always a people element but many folks will sell their “thing” as a turn-key system when it is really not. If your system depends on someone else selling for you, it is NOT turn-key. A truly turn-key system is mostly automated which means you can reach hundreds if not thousands of customers daily and have more chances to find the right ones. A good business system is one that does the following:

  • Clearly defines processes and standards, thus ensuring a consistent quality of service.
  • Manages knowledge effectively, disseminating it consistently throughout the entire business/network.
  • Accounts for clear and deliberate means for sustained high customer satisfaction.
  • Specifies a revenue model that creates several income streams
  • Makes marketing an ongoing, cohesive effort through all operations, not just a single department.
  • Offers a needed product or service in a marketplace that is both ripe but not overly-saturated.
  • Provides at least one unique advantage over the competition, not just an “angle”.
  • Bases all customer offerings on passion, beliefe in the product, rather than jumping on a hot trend.

People may argue with this but, if you think about any really succesful business today, they do just that.  One of my biggest issues with business opportunities these days is that they oversell and overpromise.  Employers in traditional workplaces do this as well.  That is why the third-party validation and general research is key.  No one is going to tell you that their business stinks, even if they are sick of everything, deep down inside.

Let’s get more specific. Most of you out there have probably considered franchising of some sort, whether it is in an MLM, DS, or large corporation format. The viability of these businesses really depend on the people in them though, in many cases, the powerful brand overshadows the need for superior quality service. Why is this? Well, consumers don’t really look for the best deal; in fact, the buying process is hardly logical. You may have the best price, best product, and best support team. You may be able to substantiate this with stock analysis, third-party research, and customer testimonials. In the end, most customers won’t give your business much value if they find weaknesses in the little things: your logo, your slogan, and your popularity. If people never heard of your company and you are in a saturated market, get ready for a hard sell.

I’m sure you all have been to Starbucks. Their coffee is decent, by most standards, and there is no doubt that the prices are insane. In many situations, all one has to do is walk a little bit or drive down the road for cheaper, if not better, coffee. Why do people still support Starbuck’s then? Two word: effective marketing. They have a strong brand that everyone recognizes. It also helps that they have great staff training and, as a result, excellent customer service (usually). Even so, you probably don’t have to wait on a long line at the local papa-and-mama coffee shop so worrying about your order being mixed up is the last thing in your mind (which is where the Starbucks training comes in handy, really). I personally avoid Starbucks now whenever possible. I want to support small businesses like my own and help stimulate the economy by avoiding that ugly thing called monopolization. Let’s not forget that Starbucks uses GH-induced products.

Starbucks provides an awesome case study because there are many marketing lessons learned here. The company has tons of negative publicity. It’s not just about the Growth Hormone. People complain that the coffee beans are burned, the prices are insane, and the product sucks compared to that of competitors. In fact, I see more reasons substantiated for why people dislike Starbucks than why they love them. Even negative publicity is better than no publicity.

Convenience goes a long way. With traditional businesses, if you have a storefront or a huge walk-in component, location is huge. If you are a distributor, you thrive off of supply-and-demand. There’s more to the customer decisions than going with what is convenient or easy. The logic of customer decisions is that they’ll go with minimized risk over superior product any day. Customers will almost always go with the familiar if they know the expected risk and issues, even if the promise of something better is right in front of them. Better the devil you know than the devil you don’t, they say.

If there is anything you draw from this marketing crash course, let it be this: buying decisions are not always logical and most customers follow illogical processes. It’s not about mere facts and figures (if only it were that easy). Most customers need to be educated but that doesn’t mean they want to. You can’t force people to open up their minds so, if you’re going to do any business at all, you need to make sure there is at least some level of interest in your target market so that you do not stay “in the red” too long. With just about any business you venture into, you will have more losses than gains in the beginning so you have to be ready to set forth a plan to get out of the hole and get into that nice black that everyone talks about. Making lots of money with a business means nothing if your operational costs eat that all up, which is often the case with a lot of the franchise models you’ll see out there: you may just make enough to stay in business.

Understanding these basic marketing principles will help you better weigh your options when deciding whether or not to go into business for yourself, and what franchise to go with. The beauty of any franchise is that people before you already put together marketing tools and plans. Planning and marketing are core to any business so having these things already in place helps out a lot; on the flip side, if you do not like the marketing that is in place, there may not be much you can do about it. In a franchise, you are often given many stringent rules on what you can and cannot do, simply because you are representing someone else’s brand, not your own. Good luck finding a franchise opportunity that gives you that true freedom you seek!

All cynicism aside, there are franchise opportunities that offer lots of flexibility but those are really hard to find. The problem with having a ready-made system is that you often have vendors, supply channels, marketing tools, and other critical business components chosen for you. Chances are you may not want to get your napkins from a certain supplier but, if that is stipulated as part of your franchise model, you have to use those napkins. Maybe you want to go with organic ingredients and offer more whole-food alternatives than other franchise locations. Chances are that your idea will be shot down before you even get to make your argument.

As you can see, evaluating how worthwhile a business venture can be is a lot trickier than just determining if it is a real business. You have to find something that matches your ideals as a person, something that excites you, something you can be passionate about. There are not many pyramid schemes or fraud out there these days but one can still be tricked or “scammed” into believing an opportunity is a lot more profitable than it really is. Do your homework and do yourself a favor: do not just go to friends for their opinion. Friends mean well but are often not a good source of business savvy. I’m not saying I am either so, please, get out there and do some leg work. There’s plenty of money to be made – just make sure you are the one to make it!

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13 thoughts on “Business Opportunity, Scam, or Pyramid Scheme?

  1. Pingback: Brand Marketing: When Perceived Value Wins « Yogizilla’s Blankity Blank-Blank

  2. Wel you are right all that you said and I been outhere and at it for while but just last year I found this very unique company and it’s opportunity and so far so good. I have had great results with it thus far and I recommend it every and all those looking to br free. So if you could i love for you to review it and let me know what you think.

  3. Thank you for your thoughtful comments, Terrance!

    In regards to your business venture, it looks like the model has been well thought-out, which is always refreshing. The beauty of getting in on something on the ground level is that you have more control over how the business shapes out so that’s another big plus. The obvious flip side to that is that you have more challenges to meet as the market may not be primed. It also means each team member has a lot more money and time vested in the business interests.

    Currency exchange is indeed experiencing a major growth trend right now. It seems that your company is positioning themselves to eventually have a real presence in the global market. I believe such an auspicious plan would be smart simply because focusing on just local markets can hurt your growth potential.

    In the Network Marketing/MLM arena, the best businesses, to me, are the ones that have rock-solid training, clearly-defined principles, and hype-free marketing. While I do see some seller talk and design no-no’s on the C.O.I.N.S. site, it *IS* the sort of site that would make me, as an opportunity seeker, delve deeper. I can discuss many things regarding web site design and marketing optimizations but that’s neither here nor there…

    As I have mentioned in many of my articles and answers here and on LinkedIn, there needs to be a real need, a solid sales system, stellar training, and passionate/accessible leaders driving momentum. From my initial review, it seems that you have aligned yourself with just that sort of company. My general advice is enjoy the challenges, do your best, ask questions often, seek answers always, and prepare for anything to come. New companies in “young industries” are always in a volatile position, especially for the first 3 to 5 years, at least, so try to get in with the decision makers and make sure they keep everyone’s best interest in mind. On that end, it’s all about establishing checks and balances.

    Judging from the repsonse I have received on topics like this and the fact that MLM’s now make up a majority of businesses in the US, I’m going to discuss these items in more detail in the future. Let me know what you’d like to see discussed specifically and I’ll definitely be sure to do get into more detail. I’m also considering bringing in guest bloggers (who do you know?) here in the near future so many good things are ahead!

    One last note about examining businesses like yours. Do not fall into a mental trap by believing that people wishing to be free will be easily swayed by a great compensation plan, nice people, and good training. In the end, even a compensation plan that sets up multiple income streams (especially the residual kind) is not nearly as important as having a product, service, and/or mission that someone can really get passionate about. Hot buttons work but sincere interactions, not being afraid to show your company’s metaphorical warts, goes much further than any selling strategy you may be taught. Prospect education is the starting point and, from there, you can really gauge the interest and probability of success for your candidates. Do not waste your time with the wrong ones. This is something that Kim Klaver stresses all the time and I believe it is the single most important thing to remember. Sales & marketing is all a numbers game so make effective use of your time.

  4. Hope to get some answers and feedback. Is Market America a worth while investment ora BIG Scam or Pyramid

    Please help!!!!

  5. I’m a “successful” network/multilevel marketer, and I’m just passing through. Everything I’ve read here is absolutely true. Too many people jump at “a good opportunity” before they check it out, lose money, then get upset and play the blame game. The sad truth is it’s the people that ruin the opportunity, not the other way around. No one should expect mlm marketing to work if they don’t, regardless of how great the product/training/etc. are. If someone follows the advise given in this blog they can’t go wrong. No one gets a free ride. It demands vision, patience, and focus. Anyone who tells you otherwise is a little out of integrity. There isn’t much for me to say that hasn’t already been said by more experienced people than myself. I’m just speaking from personal experience and observation. For those who are persistant, “if you stick and stay you’ll get your pay”.

    MLM really is the best thing that’s happened to me, but it’s taken a lot of personal development and persistence to make it so.

    Good luck to all of you on your ventures!
    – Nathan

  6. Right on!

    Nathan, I thought I had replied to this (I believe I tried to e-mail you directly, actually) but I wanted to say this again: MLM is not for everyone but it *IS* the real deal! The sad part is that people say they don’t believe in get-rich-quick schemes but, deep down inside, that’s what they want. When they see there is work involved, they run the other way.

    Success in network marketing is like success in any other business: work harder, keep track of your progress, or work smarter and consistently to get better results every step of the way. Once you find the things that generate the results you want, keep on doing them, even when things don’t turn out exactly the same.

    The problem is that people want to go into autopilot mode the moment they get a team to work under them. They become the boss they’ve always hated and don’t even realize it. It’s quite interesting to witness this phenomenom.

    I believe that the best way to go into any MLM business is keeping your expectations in check. If someone promises big bucks and a lavish life, smile, then formulate your own dreams and realize that those dreams are your ultimate goals. There have to be some stepping stones along the way to keep you reaching further.

    People also have to realize that everyone reaches critical mass, their pinnacle of success, at different times. It’s not a race to see who gets there first. In the end, it doesn’t matter when or how, just that you got there. If you fail, keep on trying. The only true failure in business is giving up before you ever really tried.

    You’re right: it takes great personal development and, to be totally blunt, 90% of the people out there can only survive in a world where they climb corporate ladders and help others rich. Reprogramming people that love to be employees is a very difficult task. People have to want to make the changes. They are VERY tough changes, too.

    The key in MLM is realizing that it pays performance. If you don’t work hard, working a career track is best for you. If you work hard and are tired of not getting paid what you’re worth, owning a business is for you and, quite possibly, MLM may provide a good track for you to follow. Self development is HUGE. Train to become what you wish to be. It’s really that simple.

    Dave, I am not sure if you got my messages but I do not know enough to comment on Market America. I would check business directories and reliable third-party sources to see if anything negative exists. If they’ve been in business long enough, there has to be something you can Google out there! If you’d like, e-mail me and I can research further.

    Thanks for sharing those great gems, Nathan. Much success and happiness to you in 2008!!

    Yomar Lopez

  7. Hey I love this. Wish I would have know this when I joined it wouldnt have taken me 2 years to get where I have gotten.

  8. Hindsight is a tricky thing indeed but better to learn these lessons late than never. There are people that are still learning these things and may never truly see the light. Those people may have given up on their dreams long ago. That’s the saddest reality of them all…

    I say it’s better to try and fail than never take a risk and wonder what could have been.

  9. I want to know if Elite Global Communication is ligit or a big pryimid scam? Are they going to take all my money and hard work and the leave me high and dry? I need to know please help me. I dont want to leave my job if i will lose in te end.

  10. Elite Global Communication.. Are they one of those companies that sells affordable telecommunications? I know there are lots of those out there. They work but it’s not for everyone. You’ll have to love sales and save up money for a rainy day before you even consider leaving your job.

    Remember: most of these new-age franchises are all sales-driven. You invest time and money but there is no way to guarantee any results. The market and timing is everything. The only thing you can control is how consistent and persistent you are. If you can keep a good attitude in the face of peril, you’ll be fine.

    The simple question is this: do you have a product? After you answer that, you must ask yourself if you believe in the product. Does it make you passionate? Many businesses make sense on paper but that doesn’t mean it’s for you.

    In short, I’d check out as many third-party resources as possible. Check the BBB (Better Business Bureau, corporate news, business directories, and whatever else you can). If they have a web site, you can run a WHOIS on it to see how it is registered and to whom. That’ll reveal some very useful information. Be wary of registrants that hide their data or use umbrella/front companies to register themselves.

    In regards to pyramids, remember this: a pyramid is a scam in which people make money from bringing others into the fold. If there is no service or product, you have yourself a pyramid. No one gets paid for simply recruiting or hiring unless you are recruiter for a staffing firm or something of the sorts and, even then, that’s all sales-driven as well.. Ultimately, you’re selling services to your clients but simply finding people doesn’t ensure anyone money anywhere.

    BTW, I ran a search in DogPile and it seems that there are many companies using Elite Global Communication(s) as their name. All of them seem to be separate companies. I notice they are on CareerBuilders and other job sites. Is this a job or a business opportunity? Seems a be fishy but, again, you have to dig deeper using the information you’ve been given.

    I definitely would *not* leave your job yet, just to be safe. Besides, your job can be a good source of leads if you work it right…

  11. Tried to read through all of it but I hope I can help. If a MLM is publically traded run. Stock holders want to make money too and if they feel like the distributors are making too much guess woh loses.
    Longivity weighs high on the list. It kind indicates they will be around for awhile. Mangement integrity is a good thing.
    Compensation plan needs to be looked at. How many people do you need to make say $10,000 per month. Product has to have quality and be priced so that it is a good buy for people not in the business and so a good customer base is possible.
    The Last thing that is usually overlooked is policies and procedures.
    This is usually very hard to read but you need to look at the termination part and the if they can change the compensation plan.
    It helps if you have a passion for the product line and can you do this long term.
    Having said all tht I usually do not practise what I preach.
    To me passion for the products and comp plan are very important but knowledge of the rest is important so that you can have an exit plan.
    The easiest type of business is to offer a service that helps others succeed. Lead generation is important so if some of your activities help others get leads than people will be interested.
    My passion is anything concerning the environment but I have not found the perfect company yet. I am looking at a start up which is risky except I know the people doing the start up.
    If you want more on evaluating a company there is actually a very good free e-book I can hook you up with.

    • Very good insight, Peter. Sadly, it is a double-edged sword. Being publicly-traded makes the company seem a lot more credible and also makes the suits more accountable. Of course, like you said, it means there are a lot more middle men and the interests concentrate on the top, not the bottom of the food chain. Of course, like with any sales-driven business, persistency is key. You can always get to the top but how much volume and persistence/frequency do you need? Having passion for your “thing” is definitely huge and that’s what it all boils down to because, really, no system is perfect and there will always be flaws. Personally, I am not looking for one such business opportunity but I am willing to help people that are looking.

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