Not all multi-level marketing (MLM) ventures are fraudulent. Some do actually add value to a consumer's life and offer a good way for people to earn extra money in the comfort of their own homes. However, MLM can also be used for nefarious purposes, wherein a person takes money from consumers without living up to his or her end of the sales transactions. To protect yourself, The Balance recommends looking for the following red flags before getting involved in an MLM.
People entering into a business opportunity must do their research to ensure it's a good fit. Additionally, business owners should encourage a person to take his or her time before jumping into a decision, as this is in the best interest of the potential recruit as well as the business itself. When a person involved in an MLM puts pressure on fellow salespeople and consumers, it should be taken as a huge red flag. When pressured to make an immediate decision, it's best to just walk away.
A business is only as good as the product or service it's selling. That's why business models that emphasize recruiting new salespeople in lieu of presenting a product in the best possible light should be approached cautiously. Building a skilled sales team is no doubt important, but it shouldn't take precedence over selling products to consumers. When it does, it's likely the business is actually a pyramid scheme, which is devoted to bringing new salespeople to provide bonuses to the salespeople involved in the recruiting process.
Lastly, remember that any claim about a product that seems too good to be true usually is. These outlandish claims of miracle cures are designed solely to attract consumers, knowing full well that the product is incapable of delivering. Not only is this unethical, it's also an example of false advertising. Consumers can actually file suit over false advertising, as it's unlawful to make knowingly false claims about a product simply to increase sales.