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Signs It Is An MLM Scam

The Red Flags To Watch For When Seeking Out a Direct Sales Company

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Signs It Is An MLM Scam
Martin Poole

My marketing and sales career started off in all the wrong ways. At just 19 years of age, and with less than 30-days involvement, I unknowingly became a victim in one of the largest MLM scams in the history of network marketing.

Equinox International began in the early 1990s and on April, 25, 2000, the Federal Trade Commission issued a notice that Equinox indeed was an MLM scam, and settled the court case with a penalty of $40,000,000 in restitution to the victims. My portion of the payout came 10 years after I had been scammed and was a paltry $40.05.

The sordid details of my story aren’t as important as the lessons I learned from the brutal experience. If you are contemplating entering the world of direct sales, follow these signs to avoid becoming a victim in an MLM scam.

Signs It Could Be An MLM Scam:

Over Promising Job Ads or Job Descriptions: If the “help wanted” job posting sounds too good to be true, it is. The biggest red flag of a fishy opportunity is anything that talks about making an enormous monthly income without any experience.

A “Weird” Job Interview: If you show up for a job interview and the whole thing feels a bit off -- follow your gut. In my case, instead of a legit sales interview, I was whisked away into a group to hear a presentation on water filters and cleaning products. Once the presentation was done, I was taken to a one-on-one interview and interrogated -- I mean pressured -- I mean convinced to join the company.

Outrageous & Unfounded Product Claims: A successful business is founded on successful products. If the company you are considering becoming a representative for has bizarre products or products which seem a little too good to be true, use caution. The last thing you want your name tied to is a faulty product or a product which is the focus of litigation.

Pressure To "Buy-In": All MLM businesses will have some start-up costs. Because you are an independent representative, you will need to pay for all your office expenses, product kits and so forth. However, in my situation with Equinox, every new representative was asked to “fast-track” to a management position by buying tons of inventory for $5,000. It was touted as an investment in your business. Anyone not willing or able to come up with the cash was treated as an outcast.

High Pressure Sales Tactics: If you are presented with a “really good” deal on a product kit or other company item, but the deal is only good until you walk out of the office, red flag. Any company not willing to allow you to go home and speak with your family about an opportunity or the cost of something is not going to be an ethical business partner.

A Push on Recruiting Sales Reps Rather Than Selling Product: It is basic business theory – a business must sell product in order to be successful. If a company isn’t focused on acquiring more customers to buy its products, but rather, interested in "building your team" of sales reps, consider this a red flag. The foundation of any good MLM business should be in its customers.

Unsettled Energy: From day one, I failed to acknowledge the biggest sign that something wasn't right – my gut. I felt unsettled from the moment I walked into my so-called interview to the moment I no longer had ties with the company. In further hindsight, the other representatives also displayed a sort of frenetic energy. Everyone seemed positive about the company, but in a very desperate and frantic way. Don’t fail to trust your instincts.

Poor Company Communication: Don’t be afraid to ask hard questions. If you don’t get solid answers back or feel you are getting chastised for not being a positive thinker or believing in the company, consider this a red flag. In order to be successful at any business, you need strong support and solid training. A legitimate MLM company will want to make this kind of thing easily assessable.

Pay For Training or Other Business Items: If a company routinely pressures you to pay for training (outside of a typical annual convention) or asks you to pay for office expenses - like renting a desk - this is another red flag.

Poor Better Business Bureau Rating: One of the most important things anyone can do when looking to join a business is to check out its Better Business Bureau rating. If you see warnings or information suggesting negative experiences, run the other direction.

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