In the previous post, I wrote about those Free Workshop, Seminar, and Bootcamp Scams. In this post, I will be discussing the network marketing scam, also known as the MLM scam or multi-level marketing scam. Of all the residual building strategies, this is probably the most non-upfront one. What I mean by that is many people who are a part of MLM seem to not want to admit they are part of one unless they are already making a ton of money.

The reason for this is because, as a sales strategy, you don’t want to reveal you’re in one of these in fear of having to answer questions to a potential recruit if you’re not trained to do so. That and because sometimes it’s awkward if you’re pumped up about a business that you haven’t made a dime with. Another reason is the stigma network marketing has. Most people see it as a flat out scam where you get your friends and family to join and make residual income off of them. Technically, it’s true unless if you recruit online to strangers and build a whole internet business out of it.

Different Types

There are two types of recruiting strategies. One is offline – recruiting friends and their friends and their mom’s friends and anyone who makes eye contact with you. The other way is online – setting up systems and websites and network structures to sell internet surfers on the idea of your home based internet business.

A Scam or Not?

So, is MLM a scam? It depends on what you mean by scam. In the previous post, I mentioned how sometimes you could be getting scammed without even knowing it. If they are legal but the vast majority never make money, does that mean it’s a scam? If the company is legit but its sales people oversell the value, is it a scam?

Part of the reason network marketing has a bad reputation is because in the olden days, you have to buy products, stack them in your garage because you found out that no one wants to buy your junk and because it’s a company requirement. It was filled with meetings on a weeknight in people’s living rooms or hotels. There was a lot of raw raw and hype involved.

That type of MLM still exists today but more and more people are moving to the internet to do their recruiting to avoid those endless meetings and having to see everyone they meet as dollar signs. As with anything, there are the scams and there are the legitimate ones.

How to Spot MLM Scams

1. They focus on recruiting with not much focus on the product or service.

You want to represent a company that has a product you would actually recommend to your friends and family even if you weren’t getting paid. If you wouldn’t recommend it to them, then you are purposely selling people junk to make a quick buck. That doesn’t create value. Business is all about creating value if you want to stay in the game for the long term.

2. They oversell on the dream.

People join these things mainly for one reason, to make money. So how do they recruit people? They do it by selling them a dream. It’s all about appealing to people’s need for financial freedom, respect, and even love and connection. They do this by bashing on jobs, saying residual income is the best income and the network marketing is the best way to get it. They basically make you feel pain in staying the way you are and pleasure in joining them. Watch out for any exaggerated claims of making $10,000 by the 2nd month or some other large number or short amount of time.

Here’s the truth. Assuming that you joined a reputable company that truly provides something of value, it will take time for you to make decent money. The fact is that at least 90% of the people who join these things never make their money back. Of the 10% remaining, at least half of them could be making more money working at Mcdonald’s.

That being said, there is a real opportunity to make thousands of dollars every month or every week but it is a lot harder than most of these salespeople make it out to be. (They’ll never call themselves salespeople or recruiters. They all have fancy titles like “business owner”, “manager”, or “marketing directors”.)

3. The company started 2 weeks ago.

A lot of these companies will tell you the company just launched and since they are on the ground floor, this is the best time to get in. If you wait too long, you’ll be on the bottom. Don’t believe it. They may really be new, but if the company is truly legitimate, it wouldn’t matter when you join, you should still be able to make money. Generally, if you’re going to go into network marketing, you want to go with a company that has a track record. One that has been around for at least 5 years since many of these companies go bankrupt within the first few years. Building up all the residual income and seeing it all disappear will be pretty depressing.

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So network marketing is one of those ways of building residual income that requires a lot of research. Read reviews online about the company you are thinking of joining. Keep in mind that for any company you are researching on, there will be a lot of negative reviews from people who joined and failed. The biggest issue with this type of business is that it attracts a lot of money hungry, unethical people who will stretch the truth just to get you in.

Whatever the amount they say you will make in whatever time, cut the amount by at least half and double or triple the amount of time given. There are good honest people out there who make this a real business. Unfortunately, they are the minority and the rest are just out for your money.

Obviously, I’m not in any MLM companies. The way I make my money is with an internet business. More specifically, I build websites and drive traffic to them. I have no problem telling people I’m an internet marketer or that I run an online home based business. I don’t need to lie about my title or anything else.

You can learn what I do by downloading a free 2 hour video which will show you what you need to know: Massive Traffic 101 (you’ll see an article, the download link is at the end of the article.)

Final word: If you are doing something to create residual income but are ashamed to tell people, then that should be a clue that you’re not doing the right thing. You can’t lie to your conscience.

In my previous post, Avoid the Scams, I wrote about how not all scams are the easiest things to spot. In this post I want to talk about the free workshop, seminar, or bootcamp shows that are being ran all over the country.

These are those things advertised on the radio or the newspapers. Basically, a company will run some free event at some hotel to show you the secret of making money through various ways like with an internet business, real estate, stock investing, etc. These things are really just a 1-8 hour sales presentation. It can even last several days. A lot of them will tell you tickets to these events are normally several hundred dollars but you’re “special” so you get to go for free. No one really pays for these things in most cases.

The Process

So what happens is that they have some professional sales person talking to you about how he/she used to be broke or some other sad story with the point to make you connect with them. Their goal is to make you drop your guard by coming across as an honest, average guy who became successful and all he wants to do now is to give back to the community. They may even throw in the fact that their children are part of the business too and how they are so proud of them. Some might even cry right there in front of you.

Once you trust them, they start producing feelings of pain inside of you. They know that most people who go to these things are broke so they will hit you with that fact in order for you to want to “make a change” and buy their program. The price of their product or service and how they present it will depend on how long their free seminar is.

If it’s just a few hours long, they will typically sell you on some 3-day event that may cost just a few hundred dollars. If it’s already a 3-day event, they will sell their package deals that may run up to $50,000 or more depending on the business that’s being sold. You read correctly. The ones that last a few hours where they sell the 3-day event is a gradual sales technique.

How They Get You

What really happens is that instead of showing you their real prices, they will make you commit to a small price first since they know that once you put money in already, you’re more likely to put more in.

This is why the easiest people to sell to are existing customers and the way they do it is called the upsell. You experience this all the time. What do they ask you at any fast-food chain after you place an order? “Would you like fries with that?”

With these workshops, the same thing applies. At those 3-day events, they never give you enough information to actually go out and make money. Instead, they overload you with a ton of non-essential information just to confuse you.

After 3 days of this BS, once your mind is worn out, they introduce to you the “coaching” programs. They might bring up “real customers” who have made money with the program to tell you their stories about how they were just like you and just a short time ago, they were sitting in your seat, and because they made the decision to buy, they get to stand before you.

Since you already spent your time and money, you’re worn out, and you feel lost as heck, you are now the perfect victim. Those “real customers” are mostly just sales reps who get paid a commission. Even if they claim they don’t, you can be sure that they are getting rewarded in one way or another.

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There are different variations to this scam and not all of them are actual scams but like the warning signs from my previous post says, if they are promising you a quick way to riches, chances are they are full of crap.

Again, the free workshop, seminar, or bootcamp scam can vary. It can be a simple internet business program where they promise to “do everything for you” for only $100 or something. After you buy, you will find out that the ones who make the big bucks went for a larger package that cost thousands. It’s all part of the upsell. No one is going to fall for these things if they talk about the expensive packages and deals first. It’s because they start small and build up that many people fall for these scams.

In the next session, I’ll be discussing MLM or network marketing and discuss how you can spot a scam from a legitimate home based business.

Next Post: MLM Scam

When it comes to creating an internet business, or just making money online in general, there are TONS of scams out there. Many people believe that they can smell a scam a mile away and that people who fall for scams are just plain stupid.

Let’s not be too quick to judge. Scammers have gotten a lot smarter and sophisticated over the years. Many people get scammed and don’t even know they’re getting scammed. If you want to make money online, or better yet, build residual income, you need to know how to spot them to avoid wasting both money and time.

I’ll lay out some that I know of but keep in mind that there are literally tons of others and in different variations. This will be spread out over several posts. The reason I am doing this is to help you avoid the residual income opportunities that will just residually make you more broke.

What I’ll talk about in this post are some of the warning signs so that you have a base to better understand the other posts about specific scams.

The Psychology Game (Warning Signs)

Let’s face it, many of these con artists are flat out amateurs who make you wonder how anyone can possibly fall for their schemes. You know the ones I’m talking about – those “jobs” that only require you to hold money in your bank account for some company overseas that claim they are trying to expand to other countries. All you have to give them is your bank account number. “What? People actually fall for this?” Seriously, right? But the sad fact is some do.

Putting that aside, let’s talk about the professionals. These are the ones who use psychological tactics. They prey on our desire for wealth, financial freedom, power, and respect. They will use words like:

easy money, instant wealth, secret, fast cash, retire young, retire rich, security, power, fame.

They will advertise their product or service with images of exotics cars, yachts, mansions, beautiful happy people with perfect bodies and blinding white teeth, and stacks of cash.

Advertisers do this all the time. Have you ever seen a beer commercial that didn’t have a sexy woman in it? Just like how drinking beer is more likely to get you a beer belly than a night with a super model, getting these programs or products is more likely to reduce your net worth than to increase it.

When ever you see these signs, proceed with caution. That being said, the picture on this site signifies “secret”, but as I stated in a couple of my posts, there are no secrets. Everything you need to know to make residual income with an internet business and make your life the way you want it is available for you for free. You just need to take enough action to make it happen.

In the next post, I’ll be talking about the scams that rip people off anywhere from $1,000-$60,000.

Next post: Free Workshop, Seminar, Bootcamp Scam