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I found an article from a MLM lawyer that I thought explains the old question: Is This a Pyramid or a Legitimate MLM Business by Jeffrey A. Babener. Here is an excerpt:

What to Look for (in MLM)- A Checklist

So, what do you look for with respect to legitimacy vs. pyramid? Here's a good checklist to consider.

First, Product and Price
Does the company offer a high quality product for which there is a strong demand in the real world marketplace? Is the product fairly priced and priced competitively with similar products? Can the product be demonstrated, and does it stand out when you show it to friends? Is the product proprietary to the company, and available only through its distributors? (Have you ever noticed that you can't buy Avon products in stores or Shaklee vitamins at pharmacies?) Is it backed up with a customer satisfaction guarantee?
Is post-sales service or customer assistance available? Do the people who participate in the program buy the product enthusiastically based on its own merits, even if they don't participate in the compensation program?

Second, No Investment Requirement
Can you participate in the company's program without having to make any investment other than purchasing a sales kit or demonstration materials sold at company cost?

Third, Look at Purchase and Inventory Requirements
Can you become a distributor or sales representative without having to fulfill a minimum up-front purchase or inventory requirement? (When you are pitched to put thousands of dollars of inventory at the very beginning, run fast in the opposite direction.) Does the company's compensation plan discourage inventory loading? Garages and backrooms filled with product serve no useful purpose to anyone.

Fourth, Look at the Sales Commissions Sources
Are sales commissions paid only on actual products or services sold through distributors in the network to the end-user or ultimate consumer? (This means that products don't end up in basements and closets. They are used, because they have genuine value.) Does the compensation plan avoid paying commissions or bonuses for the mere act of sponsoring or recruiting? (If it pays headhunting fees, it is illegal.)

Fifth, Check the Buy-Back Policy
Will the company buy back inventory and sales kit materials from distributors who cancel their participation in the program, as long as these items are in resalable condition? (This policy is required in states that have adopted multilevel distribution statutes.)

Sixth and Very Important, Look for Retail Sales
Is there an emphasis on actual retail sales to end-consumers? Can the company demonstrate efforts to market products to the ultimate consumer? Do the company's distributors have ongoing retailing requirements to qualify for commissions? What is a "retail sale?" The industry and many MLM statutes include both sales to nonparticipants and purchases in reasonable amounts for personal use by distributors. Some regulatory groups, including the FTC, have historically rejected personal use as a legitimate retail sale. Stay tuned as this debate continues. The legislative trend is definitely supportive of the industry position.

Seventh, Expect an Active and not Passive Role for Distributors
Are distributors in the company required to actively participate in the development and management of their networks? (Many of the MLM statutes require that distributors perform bona fide, supervisory, distributing, selling, or soliciting functions in moving product to the ultimate consumer.)

Eighth, Watch Out for Earnings Misrepresentations
Do the company's literature and training materials scrupulously avoid claims of income potential that is promises of specific income levels other than demonstrations of verifiable income levels within its program? (The Federal Trade Commission, attorneys general, and postal inspectors all have their eyes on the matter of earnings representations. The acceptable approach emerging is that there should be no earnings representations unless they are based on a verifiable track record of the average earnings of distributors. For instance, a company should have statistics to show the percentage of active distributors and the average earnings of active distributors.)

Finally, Look for Good Training
Does the company offer its independent distributors solid training opportunities in sales and recruitment? Are different levels of training offered to match the increasing levels of experience and responsibilities of distributors?

The Journey Begins
OK, is this the end of your journey? Obviously not. You have now looked at some legal issues and its time to move on to some solid business analysis. But it's a great start.

To view the article in its entirety visit MLM Legal

Folks in MLM love to stories. This story "Network Marketing business and the Carpenter" is by Garth Coward.

Here’s a story about a carpenter, but it could be about you and your network marketing business.

An elderly carpenter was ready to retire. He told his employer-contractor of his plans to leave the house construction business and live a more leisurely life with his wife enjoying his extended family.

He would miss the paycheck, but he needed to retire. They could get by. The contractor was sorry to see his good worker go and asked if he could build just one more house as a personal favor.

The carpenter said yes, but in time it was easy to see that his heart was not completely in his work…he had forgotten why he had loved building homes for most of his life. He resorted to poor workmanship and used inferior materials. It was an unfortunate way to end his career.

When the carpenter finished his work and the builder came to inspect the house, the contractor handed the front-door key to the carpenter. “This is your house,” he said, “my gift to you.”

What a shock! What a shame! If the carpenter had only known he was building his own house, he would have done it all so differently. Now he had to live in the home he had built none too well.

So it is with us. We often work on our networking business in a distracted way…unfocused, unclear why we got into the business in the first place.

Why are you in the network marketing business? When your WHY is clear it will help you build your business and get you through the tough times.

Garth Coward
MLM Mentor

250-655-0946

When you first looked at MLM business you saw a great opportunity to make money, regain your freedom, have some fun and meet interesting people. Now you might be asking yourself, 'wish it was as easy as it looks?'

Have you experienced MLM is hard work filled with rejection. Do you find yourself being stressed to perform with minimal income? Is the pressure of maintaining a monthly quote robbing you of sleep?

You are not alone. Many Network Marketers feel that way. As a matter of fact, 95% of the general population cannot follow the suggested training by heavy hitters. Why? Because it does not come natural to us.

Network Marketing is not about following someone else's ideas. It is about discovering your own ideas and following them. It is about being you. It is about finding stragegies that make you feel comfortable. Your success has to do with you and how you nuture and build relationships.

The MLM business is all about people skills. I am talking about people skills you already have!

To discover what will work for you, ask yourself "What do you personally enjoy?" and "What is important to you?"

Don't do things that makes you feel uncomfortable... or say phases that give you palpatations. Live by your own rules.

As you build MLM business and do what comes natural, you will have a lot of fun. MLM will become a way of life and folks will be attracted to you.

All the best,

Monica

The top 3 reasons folks fail in MLM business is explained in the following article by Deana Miller:

During the short time I have been involved in the Network Marketing world I have become aware of one thing. When people look into a business opportunity from home they are so full of dreams of success that they overlook three important reasons of possible failure.

We get hyped up about a business from home because we can be our own boss. We don’t have to do the nine to five routine. Think again!

Do you have the discipline to follow the basics of Network Marketing?

Can you make yourself get up in the morning and do what needs to be done during the day to get positive results in a home based business? Do you have the organization skills?

The three major reasons people fail are;

*NO SKILLS

Do you have the skills to do a business from home? Do you know how to advertise with pay-per-clicks, ezines, blogs or a great press release? Do you know the Colors to Success, or how to be a Color Profiler? Do you know anything about a 5 Pillars Company? How about getting leads? Oh, this is a subject unto itself! Do you know how to retail? Is talking on the phone easy for you? Network Marketing is about relationships. Are you aware that listening is a skill?

Lets say you have all the above skills. You know all about advertising and so on. Now to find a company. You find one and you are off to a big start. Then suddenly, for no reason you are terminated. Terminated! Yes! Maybe for listening to another company leader tell you what a great deal they have, trying to convince you to join their deal, only to learn you were turned into your company headquarters, which in turn can and will terminate you because the P&P’s say so. You think this is far fetched? There are companies with such wording in their P&P’s.

*DO NOT READ POLCIES AND PROCEDURES

Read, and reread your Policies and Procedures. Remember if any company wants your signature on the bottom line before you have read your P&P’s, I don’t care if they are selling gold at $1 an ounce, read the P&P’s first. Read them until you understand them. If you don’t, and something bad happens, no one is to blame but yourself. You can save yourself so much frustration and eventual failure. Get with your upline, or find a mentor that can help you understand your P&P’s. Find the bullet points. Maybe there are some
“gotcha’s” that will work against you down the road.

Read your Compensation plan. Understand them before you buy into a company. Will you be getting a great reoccurring income? Make sure your P&P’s don’t say words like “ongoing” or “termination”. You say they really don’t mean those things that they write in P&P’s. What did they write them for? You bet they mean them. Why would anyone sign an agreement with a company who could terminate you for listening on the phone to another person talk about their company? Why would anyone sign an agreement with the words “ongoing?” READ, READ, READ.

*DO NOT BELIEVE YOU DESERVE IT

We were all made with the same inner craving to succeed. We want to achieve a better life. We have a dream to be wealthy, to have a big house, to be the CEO of a company, or whatever it is; we have a dream of wanting and needing. And you know what? You deserve it! You deserve to have everything you have always wanted for you and your family. Preparation, research and asking questions of other network marketers is a safe way to approach a new business. Talk to someone who has been in the marketing business for a few years. You deserve your dream. You deserve to be wealthy. But do the preparations first. Your road will be so much smoother.

What to do?

Make the most of it. Don’t fall short without the skills and the knowledge of what you need to do to succeed. Don’t waste your time with the companies that hide “gotchas” in their P&P’s. Go ahead buy the product if you like, but don’t join them. Join a company that has the 5 Pillars from the beginning. These companies think about their distributors because they have been in the trenches themselves. It is the only way you will make it. Ask the thousands of people who have worked for years to build a company only to have earned a few hundred dollars. Ask them about the wasted time they spent building for nothing.

Am I scaring you away from network marketing? I hope not. When you open the door to the marketing world be prepared. Only you can choose what you want. Only you have that special dream. Don’t throw your dream away on worthless companies that are here today and gone tomorrow. Stay away from the hype, the front loader companies or a one product company.

Take your dream and go with it. Let your business opportunity from home be fun. Let it be profitable. Learn before you begin your business, so there will be no chance at failures because you deserve it . Don’t let failure be in your equation. Learn first so the three big reasons for failure are not part of your business opportunity adventure.


May success be yours.

Deana Miller
The MLM Lady