In some circles, home based business means network marketing. There are a load of network marketing (aka MLM) companies advertising themselves as home based businesses. Network Marketing companies are actually legal in the US. However they must meet the Federal Trade Commission (FTC) requirement of having a certain percentage of their sales volume coming from retail sales (versus sales internally to distributors).
That’s where the waters often get murky. When you’re researching a network marketing opportunity, the ratio of sales coming from retail sales is often not disclosed. Furthermore, many network marketing companies shoot themselves in the foot – so to speak – by pricing their products so far above comparable retail products, that they don’t stand on their own. In those cases, the real money to be made is in selling the business opportunity. The FTC offers these 3 points about choosing a network marketing company.
When you are sizing up a network marketing opportunity for your home based business, you will often hear a lot of hype about the huge amount of money you can make. Brush the hype aside and remember that only a small percentage of people make good in network marketing companies. Take a hard look at the products (or service) they sell and determine if the product(s) stands on its own or if the business needs continuing distributor enrollment to survive.
- Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
- Beware of plans that ask new distributors to purchase expensive products and marketing materials. These plans may be pyramids in disguise.
- Be cautious of plans that claim you will make money through continued growth of your downline, that is, the number of distributors you recruit.