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ServaisSays, Issue #028 -- Is Your Network Marketing Business a Scam?
May 19, 2014
Is Your Network Marketing Business a Scam?
Even though it is a tough business, I've always liked the Network Marketing business model. I like the idea that the more you work your business, the more money you'll make.
I also like working smart for a living. You can work smart by having people come to you instead of you chasing dead leads. It's not all about telling your friends and family to get in business with you. Many people who quit the Network Marketing business did so because they were part of the NFL Club -- they had No Friends Left to talk to.
Most of all, it's important that the Network Marketing business you're in is a legitimate business. That can be hard to tell sometimes.
I was with Fortune Hi-Tech Marketing (FHTM) for 8 years and found moderate success. Company president Paul Orberson would send messages once or twice a week updating all representatives of what was happening with the company and how much it was growing. Many of his messages had parallels to the Bible and quotes from great leaders of the past and present. I only had moderate success because I didn't have a lot of time to devote to it.
However, I was shocked in January, 2013, when Fortune Hi-Tech Marketing was shut down by the Federal Trade Commission. The state Attorney General in Lexington, Kentucky called FHTM a pyramid scheme. The company had just celebrated its 12 anniversary in business.
What was wrong with the company?
There were a couple of red flags that I think is important to talk about here.
According to reports, the main reason FHTM was shut down was that people were rewarded more for getting other people into the business and not promoting a product. FHTM did have a lot of communication, health and wellness products, but they had a very low payout on customer usage. The bigger rewards were for people who signed up new representatives at $249 a piece who got a couple of customers.
Paul Orberson would say in many of his messages that his company was not a pyramid scheme. He would argue that his company sold products and services that consumers use every day. The Attorney General's office found that more than 75% of all commissions paid were for recruiting bonuses and that nearly 2% of the representatives made more than $1,000 per year.
The important takeaway here is that even though a Network Marketing company is selling a product, that doesn't mean that it's not a scam. These companies have to be careful about huge bonuses on recruiting new members.
The second red flag was the D- grade from the Better Business Bureau (BBB) for several years before they were shut down. Paul Orberson addressed the issue a couple of times in his messages. He talked about how some new representatives in Montana that didn't follow company guidelines and made promises to people that simply weren't true. He said the company did pay some fines to continue business in that state. However, there were more complaints in other states that eventually resulted in the closing of the business.
If you're looking to get started with a Network Marketing business, make sure you check them out thoroughly. Don't get pressured by some anxious representative who is so excited about adding you to their team. Take your time and check them out with the BBB before you get started. If you have questions about a business that you're already in, check them out.
There are other Network Marketing companies that have been around for quite a few years that pay great bonuses for recruiting new members. They're in danger of getting their businesses suspended as well.
Good luck in your business ventures!
P.S. You can learn more on how to effectively build your business by visiting my website. There are FREE eBooks that will help with the most important problem every business person runs into -- getting enough traffic to visit you.
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