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Article: How To Avoid a Pyramid Scam
Word Count: 500 including bio
Author: Leslie Truex
Website: Http://www.workathomesuccess.com
How To Avoid a Pyramid Scam
A challenge to finding a work-at-home opportunity is avoiding scams. One of
the most feared swindles is the pyramid scheme. Unfortunately, most people
do not know what a pyramid scheme is. As a result, they pass up viable direct
sales opportunities they erroneously believe are pyramids, but sometimes are
caught up in Internet or "investment" schemes that are illegal pyramids.
So what is a pyramid? First, a pyramid scheme is not defined by its shape.
If the shape determined legality of an organization, the government and most
businesses would be illegal since the hierarchy is a pyramid. Second, the act
of recruiting others doesn't automatically mean a business is a pyramid scheme.
Instead, a pyramid is a scam that promises monetary benefit, without a product
or service. Bernie Madoff ran a pyramid scheme in which people thought they
were putting their money into legitimate investments. However, Bernie did not
invest the money. Instead, he "paid" initial investors with money from newer
investors. I had a friend who was invited to "gifting club" whereby he could
invest $5000 and the club then would help him find five other people to "gift"
$5000. Essentially the scam promised to net $20,000 from a $5,000 investment.
They are illegal because they promise financial gain, but there is no product,
service or legitimate investment instrument.
In an illegal network marketing scam, participants are paid to recruit new
members instead of on product sales. This is where things can get confusing.
While you can earn income by introducing new business builders into a network
marketing company, your income should NOT be based on recruitment. Instead,
legitimate income in network marketing is based on you and your team's sales.
Some Internet programs try to get by this rule by having a "membership" program
with junk ebooks or services to qualify as products. You can spot these because
the focus is on recruiting not on providing a product or service. Be suspicious
of any business that focuses on payment per recruit instead of income based
on sales.
To avoid pyramids, investigate companies. Find out what products or services
it sells, its origins and quality. For example, if it's a bunch of eBooks you
can get for free or through private label rights elsewhere, then it's probably
a business trying to look legit, but is focused on pyramid income. Study the
compensation plan, which should be based on a flat-rate or percentage of sales.
Ultimately, if the only way to make money is by getting others to join, then
it's probably a pyramid scheme. But, if your income is based on the sale of
a product or service, or a legitimate investment tool (i.e. stocks), then it's
probably safe.
About the Author: Leslie Truex is the author of The Work-At-Home Success Bible
(Adams Media). She has been telecommuting and running home businesses for over
15 years and helping others to work at home in jobs or home businesses since
1998. Get work-at-home jobs and other resources with her free newsletter at
http://www.workathomesuccess.com
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