Is it a pyramid? A question I have been asked many times, after all who wants to be involved in one of those? But what actually is a pyramid scheme? Are multi level marketing businesses pyramids? Or is your day job one?
Firstly the definition of a pyramid, according to Wikipedia, is: ‘A pyramid scheme is a non-sustainable business model that involves promising participants payment, services or ideals, primarily for enrolling other people into the scheme or training them to take part, rather than supplying any real investment or sale of products or servicesto the public. Pyramid schemes are a form of fraud.
So, do MLM businesses fit into this? In my opinion, in the majority of cases, the answer is unequivocally not. (Although some sail a little too close to the wind for my liking).
MLM businesses are, in most cases, a simple direct sale structure based on commissions only.
Let’s look at a more common form of pyramid, the corporate one.
Taking an example of a car dealership. There are ‘Multi Levels’: junior sales people, sales people, senior sales people or supervisors, a sales manager, a dealer principle, perhaps an area manager and then an owner.
How does one get to move up the levels? Someone has to move up above them, leave or die for a position to open up as there are only a limited number of positions, right? Just like a real pyramid, there is only room for one at the top and that never changes.
What about training? In the corporate pyramid, does the boss train you in everything they know? Of course not! Because you would make their position less valuable. If you know what they know, then perhaps their boss will want to replace them with you. Bosses train you in just enough to keep them in their position! Is it right that your talent is restricted because your boss wants to keep their job? If they train you too well then perhaps you will leave and get a similar role to them in a different company. No, it’s much safer and profitable for them to keep you just where you are.
Ah, ‘but what about job security in the corporate pyramid?’ I hear you cry. With over 1500 people being made redundant every day, I think you would agree that job security is a thing of the past. Things are not like they used to be when someone worked in the same company for 40 years. We live in different times.
What about the guaranteed salary that you get from the corporate pyramid? You don’t want to work on commission only! Well, consider this: Everyone is paid on commission whether salaried or not. Let me explain: a salary is simply a pre agreed commission where you exchange your service, time or skills for a set amount of money, right? Just like a sales person has a pre agreed commission based on the service they deliver. The difference is that the sales person can control what they earn by the amount of time and effort they put in, whereas the corporate pyramid employee cannot! If you don’t believe this, try not showing up for work or not delivering the service that you have agreed to for your employer – I am sure they will be happy to take away that pre agreed commission very quickly!
So what are the options? Corporate Pyramid Employee, where you sell your time and skills for a pre agreed amount, where you cannot control the amount you are paid by the effort you put in and you have to work and holiday when you are told to, or allowed to? Or a self employed person where you control your time and effort and have direct influence on what you earn?
Who would you rather have deciding how much you earn or how much time you spend with your family, what you train in and when you take holidays? You, or someone higher up in the multi level corporate pyramid?