Direct Sales vs Pyramid Schemes

Selecting a direct sales company to start your new home based business is a fun and exciting time. When you are looking for the perfect business, you will want to take the time to research any company that you are interested in joining. There are many legitimate direct sales companies to choose from but you will also need to make sure that what you are joining is not a pyramid scheme. Here are a few ways to spot the difference between how a typical direct sales company is run and a pyramid scheme.

What is a Pyramid scheme?

A pyramid scheme is based on an actual pyramid structure. It is very wide at the bottom and only 1 person at the top. The new person coming in pays a fee to join. Most of the time it is a very large fee and there is little to no product that you receive for promoting your new business. You may get a website or some literature but rarely do you get any business products.

As more and more people are brought in, they go to the bottom of the pyramid and the money flows upward in the company structure eventually reaching the top guy. When he makes the dollar amount that is agreed upon, he drops off and the pyramid shifts again. Those at the bottom levels do not see any money for a long time, if they ever get any at all. At some point the structure will collapse and the pyramid scheme will be over. It is all based on recruiting new people into the bottom of the structure and keeping that money flowing upward to the top leader.

Warning signs of a Pyramid Scheme

One of the big warning signs is a large outlay of cash before you get any product or a disproportionate amount of cash to product. An additional warning sign is if there no product that is sold to consumers or the company is just based on recruiting people mainly. Some schemes will have a product but the price is overly expensive or it is a requirement that the recruit buy large quantities of the product, more than what someone would normally use in a month’s time.

What does a Direct Sales Company structure look like in comparison?

A strong and healthy direct sales company is mainly identified by the products that they sell. The recruit is not required to pay large amounts of money for a business and what they do pay comes back to them in an assortment of product and business supplies. The recruit is encouraged to sell products to customers and is not required to buy large amounts of product that they would not be able to use or sell in a reasonable amount of time. Direct sales companies do like recruiting, but it is not a requirement of joining their business.

As you can see there are distinct differences between pyramid schemes and legitimate direct sales companies. When talking to the recruiter, take the time to ask plenty of questions and learn as much as possible about what is required of you and how the company is structured. If the warning bells go off, do more research on your own and tread lightly. The direct sales industry can be the perfect home based business choice for you, if you take the time to research and select your new business carefully.

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