Q: During a [multilevel marketing] meeting, there were about 40 enthusiastic people telling a bunch of us how we could make $1,000 to $1,500 in the first month. The company sells health and beauty, weight loss, and water-purification products. Please shed some light on the pros and cons of this business.
–G. DeBrossard, Cincinnati
A: Before you make any investment, check out the firm with the Better Business Bureau (BBB). Also look on the company’s Website, even if the initial investment appears to be small consider the other items you’d have to purchase.
The firm you’re considering is a multilevel marketing (MLM) firm. Generally, sales representatives for MLMs foot the bill for administrative and marketing costs. They’re also pushed to recruit other participants into the business so they can move up in the organization and gain financial rewards4this effort can be very time consuming and expensive. Find out whether the bulk of the sales commissions and firm’s revenues are based on retail sales4that would be a good sign, but you should investigate further. Even if the company sells quality products, you should feel you’d be effective at selling them and be willing to invest at least several hours per week. Also ensure that the company’s financial structure isn’t largely based on fees from recruitment. “You’ll run out of friends to bring in and the income will stop,” warns Ardith Morgan, author of Business Opportunities: Secrets Revealed (Business Basics Inc., $39.95).