MLM, or multi-level marketing, has come under some criticisms of late, mostly due to a misunderstanding of what MLM is and isnt. Many people believe that an MLM is no different than a pyramid scheme, but in fact, it is a legitimate business model. In fact, it can be a very lucrative business for any home based business entrepreneur.

MLM is a business model involving the direct selling of products or services through the personal recommendation or endorsement of independent representatives. If you are the representative, you receive a commission on the sale for giving the recommendation or endorsement. Most products that use MLM are not advertised in the mainstream media or in stores.

MLM goes on to create an upline and a downline through recruiting. As an independent representative, you recruit other independent representatives to directly sell those products and services (your downline). You receive a commission on their sales. Your upline includes your recruiter, the person who recruited him/her, and so on. They earn a commission on your sales. In fact, it is not so different from multi-tier affiliate programs.

However, this structure is how most people confuse MLM with a pyramid scheme. With MLM, the products or services sold have a proportionate value to the amount invested. In a pyramid scheme that value is highly disproportionate or the scheme just involves the basic transfer of funds up the pyramid. For instance, the most classic pyramid scheme is the one where you get a letter telling you to mail money to the person at the top of the list, cross it off, and put your name at the bottom. Then you mail out letters to so many people and eventually reap the rewards when your name gets to the top of the list, which it never does.

It is important to note pyramid schemes that are disguised as MLM programs, as there are some people out there trying to take advantage of those wanting to get involved in MLM programs. If you are looking to get involved in an MLM program, then make sure that your investment is proportionate to the product or service you will be selling. Remember, pyramid schemes are illegal, and you participate at your own risk.

Read the rest of the article here: What is MLM and Can It Be a Valid Home Based Business?.

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