Network Marketing companies (aka MLMs) are often marketed as Home Based Businesses. This is one the reason why I blog about them quite often. Network Marketing (NM) companies charge enrollment fees and this often can be a contentious issue. But the fact that the NM company charges an enrollment fee does not automatically mean it’s a scam.
The fees to enroll in a Network Marketing company are used by the NM company to get you started in their business opportunity. It’s a cost of doing business for them, so in theory there’s nothing wrong with the practice. If you look at franchise opportunities, you will find they usually have very high enrollment fees that eclipse the cost of NM company enrollment fees. Still some NM companies can get a little ‘carried away’ with their enrollment fees. Here are some things to keep in mind when researching Network Marketing home business opportunities.
Enrollment fees should reasonable – “Reasonable” is a subjective word, but generally speaking, NM enrollment fees should not exceed $500 unless there is something very substantial being delivered. An exorbitant fee that doesn’t yield something considerable for that fee is a red flag for a pyramid scheme.
Enrollment fees should be clearly stated – NM enrollment fees often come with ‘options’. Make sure you are familiar with them and that the person you’re dealing with has clearly laid them out for you. Also make sure you are familiar with any enrollment fees ‘upsells’ as in: The enrollment is $x, but there is a premium package for $y.
Enrollment fees should not be inventory loading – Does the enrollment fee include inventory? Often they will include a product sample, but you should judge the difference between a ‘sampling’ and an inventory loading situation. The FTC defines inventory loading as follows:
Inventory loading occurs when a company’s incentive program forces recruits to buy more products than they could ever sell, often at inflated prices.Make sure you understand what you are getting for your enrollment fee when you research a network marketing opportunity. If you are unclear after all has been explained to you, get them to make things clear or move on to something else. Nebulous enrollment fees can cause grief later on!