What is a pyramid scheme?

Pyramid schemes require you to join for a fee – and the only way to get back your money is to persuade other people to join and take their fees.

Scheme members are asked to sell goods or services through other members rather than direct to clients.

People at the top of the pyramid make money from the fees of people lower down, rather than selling a legitimate product.

The business model is unsustainable and those at the bottom of the pyramid lose their fees with no prospect of recovering the money.

In Summary

  • Pyramid schemes are scams based on unsustainable business models
  • Members will be asked to pay large fees or make a big upfront investment in the scheme
  • Members will be required to recruit people to the scheme in order to recoup their fees

Spotting a pyramid scheme

Watch out for the following warning signs of a pyramid scheme:

  • To make money you will be required to sign up other people
  • The scheme involves selling goods and services of little value, for example, goods that serve to promote the scheme such as information booklets
  • There will be an upfront joining fee or large initial investment
  • You’re asked to sell goods or services through franchisees or sub-distributors

If something looks to good too be true it may be a scam.

Reprinted from – http://www.which.co.uk/consumer-rights/advice/how-to-spot-a-pyramid-scheme

For self-motivated individuals with a knack for sales, opportunities abound to make a little extra cash. Working for a multi-level marketing company (MLM), also known as direct sales and network marketing, can even become one’s primary source of income.[1]

However, it is easy to fall under the spell of misleading pyramid schemes.

Grand promises, huge sums of cash, and minimal work are very tempting aspects of pyramid schemes. Knowing the difference between legal multi-level marketing and illegal pyramid schemes can help you make the safe decision when considering that job on the side.

How to Spot A Pyramid Scheme