The temptation to have extra income often outweighs common sense. Wanting to make quick money, some do not delve into the details and think that they become participants in network marketing. But in reality, they invest money in a financial pyramid. As a result, instead of profit, they get empty accounts and bitter experience. In this article, we tell you in a simple and understandable way how not to confuse network marketing with a financial "soap bubble" and save your money.

What is network marketing and pyramid schemes?
Network marketing is a legitimate business. Here, certain goods are sold directly to consumers or specific services are provided. The main goal is to spread information about the product itself and attract consumers through personal contacts and recommendations from employees of the organization.

Network companies are officially registered, conduct transparent business, pay taxes and, as a rule, have certificates of quality and product safety. They do not promise quick and easy money, but offer partners the opportunity to build their business, receiving income from sales and bonuses for the development of the network.

Another important point is that network companies take care of their employees: they conduct training and motivational trainings, and provide support to distributors. Yes, many people do it for advertising purposes, but in any case, people can count on at least minimal feedback.

But a financial pyramid is definitely a fraudulent scheme. Its meaning is the continuous attraction of new participants and enrichment at their expense. Financial pyramids are not officially registered and do not pay taxes. It is also difficult to hold them accountable for fraud. Their goal is to constantly attract money from new participants, promising super profits. But in reality, only a small group of people make a profit at the expense of the majority, who are left with nothing.

What is the difference between network marketing and a pyramid scheme?
In fact, it is not difficult to distinguish a network organization from a financial pyramid. We have prepared a memo that will help you quickly figure out where the fraud is and where the opportunity to make money is.

It is important to understand that there is no financial guarantee or insurance for participants. No one is obliged to refund money in case of unforeseen circumstances or failure. Financial transaction reports are not provided, and none of the participants can control their accounts and investments. Financial pyramids can go bankrupt or disappear at any time, and then all participants lose their investments and will not be able to return them.

How to distinguish MLM from a financial pyramid
Let's explain what MLM is. This is from the English multi-level marketing - multi-level marketing that resembles a pyramid in shape. That is, each distributor attracts new members to his team, trains them, and then has a percentage of his team's sales. And so it is with every distributor.

So what is the difference between MLM and a financial pyramid? Answers to the following questions will help you understand the differences - ask yourself or the person who persistently persuades you to "invest profitably".

1. How much do I need to pay for participation in the organization?

To join MLM companies, you do not need to contribute large sums to the common pot. Usually they ask to buy a small starter set of products or pay a symbolic amount for registration. In a financial pyramid, to join, you need to invest a significant amount of money (from a thousand to tens of thousands of dollars), which will allegedly bring a huge income.

2. What exactly does the company do?

MLM companies sell a real product that has value for the consumer and documents confirming its quality and safety. In a financial pyramid, they only promise super profits, without justifying the mechanisms for obtaining it. The list of active pyramids is available on the website of the Central Bank.

3. What does the income of participants depend on?

Network marketing suggests that the more you sell and the more partners you have, the higher the earnings. In the pyramid, income depends on attracting new participants. The more people you enter into the pyramid, the more interest you get from their deposits. Selling a product or service doesn't matter.

4. How do the organizers interact with the participants?

MLM companies train employees, help develop skills, increase sales, and build a team. Also, unlike pyramid schemes, MLM do not promise to become a millionaire overnight, but it is possible to achieve a good level of income if you work hard and consistently.