Tweamster's Blog

Pyramid, Scam, or For Real

May 31, 2010
9 Comments

What Are They and What’s The Difference?

I sometimes wonder why there is any confusion on these terms as they apply to working from home, but then other times I think it’s just par for the course. There seem to be people on this planet who enjoy denigrating, confusing and muddling up the issues. So, to piss off those types of people (who like to denigrate, confuse and muddle up things), I am going to inject some clarity into the subject. All right?

I guess being the unserious type; I should inject my humorous look at it first. The difference is in who gets screwed: with a scam everyone gets screwed (except the guy who thought it up); with a pyramid, the latecomers get screwed; and with a real business or opportunity – no one gets screwed.

Definitions

Scam – A fraudulent business scheme; a swindle. An illegal plan for making money. A scheme for making money by dishonest means.

Pyramid – An illegal scheme in which participants give money or other valuables in exchange for the opportunity to receive payment for recruiting others to participate in the scheme.     A fraudulent money-making scheme in which people are recruited to make payments to others above them in a hierarchy while expecting to receive payments from people recruited below them. Eventually the number of new recruits fails to sustain the payment structure, the scheme collapses with most people losing the money they paid in.              From the Federal Trade Commission – “Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure.”  – http://www.ftc.gov/speeches/other/dvimf16.shtm, paragraph 4

Network marketing – Most definitions of network marketing get way too complicated; here’s my favorite simple definition: “Any method of marketing that allows independent sales representatives to recruit other sales representatives and to draw commissions from the sales of those recruits.”  – Wave 3  The New Era in Network Marketing by Richard Poe ©1995  “Network marketing is a form of distribution of products and services that, through word of mouth promotion, uses the power of duplication  of effort.”  –  The New Entrepreneurs by Rene Reid Yarnell ©1999                                           “Some people confuse pyramid … schemes with legitimate multilevel marketing. Multilevel marketing programs are known as MLM’s (or network marketing) and unlike pyramid … schemes, MLM’s have a real product to sell. More importantly, MLM’s actually sell their product to members of the general public, without requiring these consumers to pay anything extra or to join the MLM system. MLM’s may pay commissions to a long string of distributors, but these commission(s) are paid for real retail sales, not for new recruits.”  –  http://www.ftc.gov/speeches/other/dvimf16.shtm, paragraph 7

Another way to define it is who gets paid; in a scam, the originator gets paid; in a pyramid, the early birds get paid; in network marketing, anyone who makes a sale gets paid.

Examples of Scams

If you get an email from Nigeria wanting you to send money to prove you’re worthy of helping them transfer money into the U.S.; delete immediately, it’s a scam.

If you get a check from anywhere that you weren’t expecting, and when you call to verify, they ask you to send them the cash in exchange for the check; call the authorities – it’s illegal and is called bank fraud & mail fraud; and yes it’s a scam.

Examples of Pyramid Schemes

If there is a one-time fee to buy into the program or “business,” and there are no ongoing product sales, it’s most likely a pyramid. If all recruiting stopped today, where would the commission payments come from?

If most of the money comes from recruiting someone and the actual residual income comes from a tiny percentage of an ongoing purchase of a product or service, that is probably a pyramid even though it is well disguised.

If the ad says “One-time fee, no buying, no selling, no recruiting, we build your organization for you.” RUN quick like a bunny! If they don’t need you to sell or recruit or buy anything, why do they need you? (Hint – it’s your money) Your money/cash/commissions are only coming from the people that join after you. It is a pyramid.

If the start-up fee is your cost to purchase a report, and you make money by selling others the report to get them started; look out Martha, it’s a pyramid.

Examples of Network Marketing

Okay, I’ll admit I’m only going to pick obvious companies here that have stood the test of time. The whole point of this series of blogs is to teach you how to pick a good and worthwhile company that you can use as your vehicle to create that stable, long-term, leveraged, residual income.

Disclaimer: I am not recommending any of these companies as your home business opportunity, if you are looking at joining any of them, it is up to you to research them and do your due diligence and figure out if it’s the right company for you.

Amway, Herbalife, Mannatech, NuSkin, Pre-Paid Legal, Shaklee, Visalus, Xango are all network marketing companies.

Mary Kay Cosmetics and Melaleuca are not network marketing companies, but if they were, I would put them on the list too.

If you want to be amused, check out how many company names are on a reasonably current list of network marketing companies at: http://www.mlmconsultant.com/mlm_company_list_directory.htm

Now That You Know The Difference

You have learned one more of the basics, for more info, go to www.AlansMLMTips.com and sign up for the “7 Days, 7 Insider Secrets” email newsletter. (No money down, no obligation, it’s freeeeeeee…)

Quote

“If I had to do it all over again, rather than build an old style type of business, I would have started building a network marketing business.”  – Robert T. Kiyosaki, entrepreneur and author

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What Else Do I Need To Know?

May 23, 2010
1 Comment

Before We Move On

Let’s recap. So far we’ve looked at the company track record, financial strength and the caliber of the management and how these things interact and what they mean to you as the prospective entrepreneur working to build your home based business with that company.

We understand what residual income is and why we want it. And the relationship of the three factors in the first paragraph to creating a reliable, long-term, residual income.

So, let’s move on.

Leverage

If you’ve ever been to an opportunity meeting, or a home party, or a business presentation at your local Starbucks, you’ve probably heard the word “leverage” mentioned. You may have a good idea what was meant, or you may not have a clue, or maybe you’re wondering why you have to have a crowbar (a type of lever) in network marketing. So, let’s define it.

One meaning is “the mechanical advantage gained by using a lever.” If you’ve ever pried the lid off a can of paint, you’ve used leverage, the screwdriver was the lever, it’s use was leverage enabling you to open the paint can.

Let’s narrow this down and find a more appropriate definition for business usage, “to increase, enhance, or optimize something.” So, any tool that you use in a business would be a type of leverage. A computer would be a type of leverage, you use the computer to enhance your ability to keep track of sales and expenditures. A fax machine is a type of leverage by increasing your ability to send and receive documents so that you don’t have to wait for the mail.

Leverage In Network Marketing

Okay, there’s a general idea of leverage, now let’s apply it to network marketing: “Every successful person or business takes advantage of leverage. There’s only 24 hours in a day! And no matter how talented you are or how much you get paid per hour, if you don’t take advantage of leverage you’re limited by the number of hours in a day. By learning to leverage your time, you can also benefit from a percentage of other people’s efforts, and dramatically increase your income and freedom. …

“The unique and wonderful thing about the network marketing business is that everyone has the same opportunity to become the owner of their own business with a fraction of the investment of time and money of a traditional business. Instead of worrying about training people to become their competitors, in network marketing the people at the top have a vested interest in helping others on their team to succeed.”   – excerpted from http://www.mlm-company.net/leverage-income.html

Here’s another quote that I found very enlightening from an Australian chap named Nic Brits. The site that I found this quote at no longer exists, but it’s still a good example of how it works: “True leverage is turning small numbers in to large numbers.” In an earlier post, someone had asked how to have 10,000 people in your downline. Nic continues, “Teach 5 people to each teach 5 people who in turn each teach 5 who in turn each teach 5 people who in turn each teach 5 people each to another 5 people and at this stage you will have 15,625 people in your downline team. … starting with a small number you create a large number by using leverage.”

You may have heard this quote before: “I’d rather have 1% of 100 people’s efforts than 100% of my own.”  – John Paul Getty

What Does That Have To Do With Residual Income?

If you recall in my blog on residual income, we had the following definition: “RESIDUAL INCOME is income from efforts which continue to generate revenue over time without requiring any additional effort.”

If you put those first five people in place and you train them correctly and they find five people, are you doing all the work? Is leverage beginning to work for you? Might you start seeing leveraged income turn into residual income?

Summary

Leverage increases your ability to enhance your income. What we’re looking for is reliable, long-term, leveraged, residual income. The company itself should provide reliable and long-term. You provide the leverage by how well you build and train your organization. Residual comes about from the longevity of the company and your ability to provide what the company needs – product sales.

Want To Know More?

For more info, go to www.AlansMLMTips.com and sign up for the “7 Days, 7 Insider Secrets” email newsletter. Did I mention it’s free?

Quote

“Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.”   – Mark Twain


Five Things To Evaluate

May 17, 2010
9 Comments

Harvard School of Business?

I don’t think I can count how many opportunity meetings I’ve sat through where the five things to evaluate were given as coming from the Harvard School of Business. Three digits, anyway, easily over a hundred times. While the five things to evaluate are all good things to investigate and answer, I have been unable to find anything on Google that actually connects the Harvard School of Business with this simple method of evaluating a business opportunity.

My second problem with them is – WAIT – I’m starting off way too serious here for my own comfort.

A Stupid Joke

What did the Kentucky Fried Network Marketer say to the chicken? “We’ve come up with a better way to sell chickens. You get a cut of every chicken marketed; as America eats, you get rich.”

The chicken says, “I don’t eat chicken.”

The KFNM says “No, no, you don’t understand, we pay you for every chicken you sell.”

“Why would I want to get paid for selling chickens? I don’t want to sell chickens.”

That is probably the worst joke I’ve ever invented, but it makes a point. If someone doesn’t want to sell what you’re selling, are they ever going to put in the work required to be successful, if you somehow manage to convince them that they should join you in spite of themselves?

Back To Harvard

Here are the five areas that the Harvard Business School (or the Harvard Business Review, depending on who you’re talking to) allegedly (by the way, if you know when or where Harvard Business School or Harvard Business Review said this, please send the information along to me) recommends that you evaluate:

1)    The company

2)    The need or the marketplace

3)    The product

4)    The compensation

5)    The timing

I think I’m approaching the record for the most tortured use of different punctuation marks in one sentence.

Okay, so what’s missing, what’s wrong with this list? Well, it’s a good start, but as a saying that Mark Twain popularized goes, “There are three kinds of lies: lies, damned lies, and statistics.” In other words, you need to do your own research and see if the statistics your prospective company is showering you with are real. Do they bear any relevance to what you need to know about a company that you’re considering working with?

Examples

For instance, if a company says the company is rock-solid, is that rock sitting at the top of a thousand foot cliff, or is it sitting on a few million in the bank and debt free?

If a company says they are the fastest growing company in the automotive  widget industry, but the other companies are growing at 1% a year, what kind of growth is the company really experiencing?

Our sales grew 115% last year! From where, to where? If the year before was $100,000 and it grew to $215,000 last year, that’s not very exciting, promising, but not newsworthy. What about if sales went from $100 million to $215 million? Hmm, maybe they’re on to something here. The right answer depends on what you’re looking for.

What Are You Looking For?

Which brings us to one of the things missing from the 5 areas to evaluate. What are you looking for? What are you good at? What are your strengths and weaknesses? In evaluating any company, or any product, you have to look at yourself and decide if the company and product are a good fit for you. Can you believe in the product? Does it help people? Try the product yourself so you can tell others what it’s done for you.

What Else Is Missing?

One of my favorite mentors has come up with and trademarked what he calls  “The 12 Critical Success Factors™.” He goes into much greater depth on how to find and select a company to enhance and maximize your chances on creating that long-term, stable, residual income.

For more info, go to www.AlansMLMTips.com and sign up for the free “7 Days, 7 Insider Secrets” email newsletter.

Quote

“Dream with me for just a minute,” (Rick) encourages. “Imagine traveling across this great land of ours on your own schedule. You have no alarm clock screaming for you to blast out of bed each morning. You can afford to stay at any hotel and eat in any restaurant you choose. You can purchase clothing and extras without too much notice of the price tag. While you are at your leisure, thousands of people are putting thousands of dollars in your bank account each month.”   – from The New Entrepreneurs, by Rene Reid Yarnell


Residual Income

May 10, 2010
2 Comments

What Is It & Why Do I Want it?

People join network marketing companies for many reasons. I’m sure you can think of several; a like-minded social group to hang out with, a little extra spending money, something to do, a source of personal growth, getting a great product at a discounted price, being able to help someone with a product or service they provide through their company, because they benefited from the product or service and thought others should know about it.

Residual income is, or certainly should be, one of those reasons. So, let’s define what residual income is. Here are some definitions that give a very good idea of residual income and how it might apply to network marketing.

Refers to the income or monies that arise from earlier efforts which still continue to generate a revenue flow over time without requiring the need for any additional effort (e.g., a stream or flow of future royalty payments from a song).   http://www.tuition.com.hk/dictionary/r.htm#Residual_income

Royalty income that accrues to the owner of an intellectual property, such as art, books, lyrics, music, patents, etc.  http://www.businessdictionary.com/definition/residual-income.html

RESIDUAL INCOME is income from efforts which continue to generate revenue over time without requiring any additional effort (e.g., a stream of future royalty payments from a book).  http://www.ventureline.com/accounting-glossary/R/residual-income-definition/

The word comes from the Latin word “residere,” meaning “to remain behind, rest,” from re- “back, again” + sedere “to sit.”

In other words, you get to sit back and keep collecting income once you’ve done the work to generate the income. Personally, I kind of like this idea.

My brother likes it, he’s a musician and he gets residuals on things he’s done over the years long after he actually did them.

Insurance agents like them, they collect residual commissions as long as you keep paying your premiums.

J. K. Rowling (of Harry Potter fame) most definitely likes them.

Okay, So How Does This Apply To Network Marketing?

Let’s say that you sell someone a bottle of vitamins. Let’s say they pay $40 for it, and that out of this $40, you make a commission (income) of $2. The vitamins work well for them, they notice a difference in their energy level or they sleep better or they don’t get colds anymore. They keep buying these vitamins every month and you collect your $2 every month.

You keep telling people about these vitamins and they try them and like them and you have more people buying vitamins and you get your $2 from each of them (as a commission from the company you’re working with). Maybe you have 20 or 30 people buying vitamins from your company and you now are getting $40 or $60 each month which means your vitamins are now covered by your income. Hey, free vitamins, not bad, but you’re just getting warmed up.

You keep working at it and a couple of people who love the vitamins want to start selling them too. They each tell some people and start selling a few vitamins and a few of their customers want to start selling. And they do and they get their customers and a few want to sell these great vitamins. And so it goes…

Let’s keep it simple and say you get paid on four levels down; you sign up Bob who signs up Joe, who signs up Rose, who signs up Jack. You get paid on any vitamins that Bob, Charlie, Diane and Erin sell. And to keep it really simple, let’s say you get $1 on each month’s worth of vitamins sold in your organization. Each person signs up two people to sell vitamins and each seller sells 10 people vitamins every month.

You

Bob     Becky

Charlie  Crystal  Chad  Cara

Diane  Dave  Dominique  Dylan  Deirdre  Donny  Deanna  Dyan

Erin  Eric  Evvy  Erica  Erina  Eddy  Ev  Edsel  Erry  Elly  Eva  Edina  Ed  Edrick  Ev  Es

That’s 2 plus 4 plus 8 plus 16 = 30 people in your organization. Thirty people each selling vitamins to 10 people makes 300 people buying vitamins every month and you make a dollar for your part in helping the company acquire these customers. That makes $300 every month plus the $40 or $60 on the customers you personally acquired. Still not the gravy train, but are you selling those 300 customers every month? Are you answering their questions about the vitamins?

This is a very simplistic example, but I wanted to give you the flavor of residual income. Now, since you’re not selling all of these customers every month, does that give you just a tiny bit of incentive to go out and find more customers and more customer finders?

What if everyone on the above list decided to play a sales game and everyone found 2 more customer gatherers? Now you have 60 people selling vitamins and they all find 10 customers, that’s 600 customers or $600 every month. What did you do for that extra $300? You found 2 more customer finders.

What if the company that you worked with was paying $10 on the product you were selling? And $5 on the first 4 levels? Hmmm, $5 x 600 customers =$3000. Not wealthy yet, but I think you’ll breathe a lot easier at the end of the month with that extra 3 grand in your pocket.

What if they paid five levels deep? You really should start getting excited about residual income somewhere along about here when you start playing with the numbers.

If It’s That Easy, Why Isn’t Everyone Doing It?

I don’t recall saying it was easy, but it certainly is rewarding. Did you ever get anything without working for it? Learning is the key to succeeding in this business. Work hard, learn lots, discard what doesn’t work for you, find mentors. There are hundreds of ways to make it difficult or impossible. Mentors will help you avoid those.

Want to increase your odds? Check out your company first before you put your blood, sweat and tears into it. Go to www.AlansMLMTips.com and sign up for the “7 Days, 7 Insider Secrets” email newsletter.

Quote

“Everybody’s a self-made man; but only the successful ones are ever willing to admit it.”


What To Look For – Part 3

May 3, 2010
2 Comments

I’m really getting good at these original titles. That’s a joke.

In the first two articles, we covered the company track record and the financial strength of the company. In this article, we are going to talk about the management of the company. As you can see, these three factors are somewhat inter-related as a strong management team and a good track record will probably indicate financial strength, and financial strength and a good track record will most likely be a result of a strong management team.

Now, remember, we are looking to build a long-term, stable residual income; so what does a strong management team have to do with that, you ask?

Here are some reasons you might want to know if your company has a strong management team or not. Let’s say that you’ve joined a company and are happily recruiting new people into your organization and selling products to your friends and family, and generally things are looking good and you are beginning to see the results of your efforts. Then, in the mail, you get a letter like this (actual letter with the company name changed):

”After careful consideration, the Board of Directors of XYZ Co. has determined to pursue an alternative business model resulting in the discontinuation of our XYZ Co. Multilevel Marketing Program in its current form, and has asked me to inform all XYZ Co. Independent Distributors of this decision.  As a result, the current XYZ Co. Compensation Plan will be terminated effective …”

So much for that residual income. Would you be feeling very cheery about your company? And maybe even a little down on the network marketing industry? Thinking that working from home wasn’t all it was cut out to be?

Management also decides where the unearned commissions go (those commissions that someone didn’t qualify for)? Do they go back to the company or do they go into normal distribution to the rest of that rep’s upline to inspire them to help him qualify next month?

Is the management in it for the long haul? Or are they there to cash out as soon as possible? At which point the new owners can change the rules, reducing the payout or even cancelling distributors.

How will management react if and when bad times arrive? Will they stand by their distributors? Or will they drop them like a hot potato? Here’s a quote from a 2004 email detailing the end of Excel Communications as a network marketing company:

What does this mean to independent representatives? Answer: VarTec will no longer maintain the Excel sales channel. Agreements between Excel Telecommunications and independent representatives will be terminated as part of the bankruptcy filings.

“What about the commissions that independent representatives are supposed to receive under Excel?

Answer: Under the Chapter 11 bankruptcy filing, the MLM sales and compensation structure contracts are all subject to a motion to reject, and independent representatives will no longer receive commissions from VarTec or Excel.”   – quoted from http://www.mlmwatchdog.com/rc_Excel_crash.html

Of course, to show there were no hard feelings, they gave all the customers back to the distributors who signed them up with the company; oh wait, no, they kept the customers. Ah, I’m feeling very warm and fuzzy now.

Integrity is a keynote of a management team. Are they going to do what they said they would, will they stand by the people who helped them grow their company – their distributors?

Where do they come from? Were their previous endeavors successful? Do they seem like people you want to trust your future with?

Here are some ideas for checking out your proposed partner’s management. (Thanks to MLM Watchdog for many of these suggestions.)

1)    Do a Google search on the top management personnel

2)    Do a Google search on the top management with the addition of the word scam or fraud

3)    Check the company website? Do they have an address? Use Google Earth or Google street view and see if the picture matches the picture on the website.

4)    Do a Google search on the company itself with scam or fraud added to the search string?

5)    If you can’t meet the management team yourself, talk to someone who has and get their impression of them.

6)    What distributor support services has management put in place?

I think I’ve rambled on long enough here, you’ve got the idea; check out your prospective management team to see if they meet your standards of integrity and loyalty. Will they help you achieve your goal of a long-term stable residual income? Only you can answer that for yourself, I hope I’ve given you some ideas to get you started.

I started with a joke, so I’m ending with some humor as well.

Apparently, mlm’ers are a rather humorless bunch. After doing a Google search for mlm humor, the only things I found were anti-mlm, disparaging and denigrating, so herewith an internet joke translated into mlm-ese:

Q: How many network marketers does it take to change a light bulb?

A: That depends on where they are in the comp plan; the leaders brighten up the room all by themselves and don’t have to change the light bulb.

Till next time, have a great week!


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