There are lots of things that need clarification in this new era of PONZI, PYRAMID and MLM schemes. I have noticed some mixed up in the about that needs to be clarified; that is why I shall be doing this post: Major differences between PONZI, PYRAMID and MLM.
What Is A PONZI Scheme?
A Ponzi scheme is a type of investment scam that promises unsustainably high return on investment by paying previous investors with the money invested by new investors. Most of these scams work from anonymous offshore bases which make them hard to track down. E.g MMM, Ultimate Cycler and many other
What Is A PYRAMID Scheme?
A pyramid scheme is a dishonest and usually illegal business in which the money of later investors is used to pay the people who invested first.
The fraudsters behind a pyramid scheme make their marketing scheme look real with many types of products or services. However, pyramid schemers simply use money coming in from new investors to pay off early stage investors.
Inevitably when new investors stop signing up and depositing, the scheme collapses, since no more funds can be paid out. When they can’t raise enough money from new investors to pay earlier ones, the pyramid scheme falls apart. As it comes crashing down, many people can lose lots of money.
SIMILARITY BETWEEN PONZI AND PYRAMID SCHEMES
In both Ponzi and pyramid schemes, existing investors are paid by the money of new investors. But there is a big difference between a Ponzi and pyramid scheme.
DIFFERENCES BETWEEN PONZI AND PYRAMID SCHEMES
In a Ponzi scheme participants believe they are actually earning returns from their investment. In a pyramid scheme, participants are aware that they are earning money by finding new participants. They become part of the scheme.
Characteristics of A PONZI And PYRAMID Schemes
These are some of the warning signs that you might be dealing with an illegal scheme:
- Promises of very high returns/interest
- Guarantees that you “can’t lose money”
- Little verifiable information on company and owners
- Difficulties in withdrawing your funds
- Social signup links with high bonuses
- Sense of urgency to “invest now”
What is MLM?
Multi-Level-Marketing (MLM) is also known as Network Marketing or Referral Marketing. It has been around for a very long time but some people, it is still an unfamiliar territory. e.g Trevo, Helping Hands, Bit4Bits
MLM is a very good way of starting a profitable, full-time business with little or no investment. It is also a good method of starting a second or part-time business to run alongside your existing business, career or lifestyle.
In most cases MLM involves selling a product or service which is produced and supplied by a ‘mother’ company. You take on the responsibilities of selling the products and introducing other people to the company – Networking. You get paid commission on the products / services sold by yourself and a smaller commission on the products / services sold by the people you have introduced to the company. In addition to this, you often get a percentage commission based on the sales of the people who- ‘the people you introduced’- introduced… and so on…
However, it is not a ‘lazy man’s’ way of making money. In order to build a successful business, like any business, one must invest a great deal of time and effort into it.
There is a wide variety of good quality Referral Marketing companies from all over the world to choose from. They offer products and services from a wide range of industries: health, telecommunications, household products, technology, e-commerce, adult industry etc. It would be advisable to choose a product or service that you are interested in!
- Little or no startup costs with the potential to build a substantial business.
- Often uses a proven business formula.
- Low risk.
- A great deal of support and advice often given.
- Flexible -can be run on a full-time or part-time basis.
- Business can be run from your own home.
- Builds your confidence and increases your communication skills.
- There may be restrictions on your business practices e.g.. Recruitment, advertising etc.
- Your business heavily relies on the success of one ‘mother’ company and its ability to deliver its products / services on time.
- You may not feel comfortable selling to your peers.
Difference Between MLM And PYRAMID/PONZI Scheme
- Provides products and or services of real value
- Low startup costs that often include tools to help sell company products and or services
- Apply to out earn anyone above you
- Earnings are based on your efforts
- Comprehensive training on products and services
- It explain how the system works by presenting open data
- No product or service
- All values are monetary
- It promises LARGE earnings with LITTLE EFFORT
- Poor or no-existing training
- Aggressive in approach
- It robs Peter to pay Paul