Bernard Madoff’s Ponzi has been all over the news and you can hardly miss reading about it. A Ponzi scheme refers to an illegal arrangement that involves paying previous investors from the money deposited by new investors – therefore creating a situation where the ‘business’ depends entirely on bringing new investors in.
Related to the Ponzi is the Pyramid Scheme, where the business depends entirely on the recruitment of new people into the business and not from the sale of a product or service. This scheme has been found in many home based business opportunities that are modeled on the Network Marketing or MLM model. Sometimes, products (or services) sold in Network Marketing companies are so wrapped up in their business opportunity that the product or service has no real value unless it’s bought with the opportunity in mind.
To determine whether a Network Marketing is legal or not, answer this question: Does that product or service have any value outside the opportunity? The product or service must be sellable and useful on its own — without buying into the opportunity. If it isn’t, it may well be a pyramid scheme.
Pyramid Schemes like the Ponzi are not sustainable. They always come crashing down at some point. In the case of Madoff’s Ponzi, it just took longer than usual. When you are evaluating a home based business opportunity, always make sure it offers a truly independent marketable product or service.