MLM Business Model - Pyramid Scheme Or Legitimate Business Model?

Anyone involved with an MLM business has certainly heard the negative comments from friends and family. It's not a legitimate business. It's a pyramid scheme. It's a scam. The industry as a whole is plagued by misconception, much of this as a result of disreputable companies using less than legal methods. Pyramid schemes and Ponzi schemes are the most well documented of these as they have been used, and continue to be used despite their illegality. As many people tend to group multi-level marketing in with these it can be difficult to overcome the negative perceptions. This can create a challenge for anyone looking to build a legitimate MLM business. However MLM is a successful and legal business model used by many well-established businesses including Avon, Tupperware, and Amway.Though direct selling has been around in various forms throughout history, the modern multi-level marketing (or MLM) business model really developed in the early part of the last century when some of the earliest direct selling companies, such as The Fuller Brush Company, became established. This model was legally challenged in the 1970's when Amway, one of the largest MLM companies still to this day, was taken to court and accused of running a pyramid scheme. After a three year court battle, Amway was exonerated and the MLM business model was legitimized. Today, MLM businesses (also known as Direct Selling) are a dynamic segment of our economy. On a worldwide basis, direct selling businesses account for almost $120 billion in sales and have shown consistent growth over the last 10 years.Product categories covered by companies using this business model are varied. As shown below personal care leads the way and can account for the reason companies such as Avon, and Mary Kay Cosmetics are household names. According to the Direct Sellers Association of Canada, the top four categories for direct selling are:1. Personal care products (cosmetics, skin care, jewelry, etc.)2. Home/family care products (cleaning, cookware, cutlery)3. Nutritional/vitamins/wellness4. Leisure/educational product (books, encyclopedias, toys/ games)The list, by no means, ends there. Today MLM companies can include telecommunications, travel, satellite providers, financial services, knowledge based companies and self-improvement. The opportunities are endless. MLM companies allow anyone the opportunity to start a business of their own. The cost of entry is low and the businesses can be tailored to individual needs.Before becoming involved with an MLM opportunity, it is important to ensure it is legitimate. There are still ruthless companies or individuals who are, in fact, running a pyramid scam and trying to pass it off as a legitimate business. After the Amway court case, a number of safeguards were put into place to protect us from such companies. They are known as the Amway Safeguard Rules and you can determine if the opportunity you are exploring adheres to these rules by asking yourself the following three questions.1. Are you expected to sell a product or a service in order to qualify you to sign on additional distributors?2. Does the company require that you sell the majority of the inventory you order before allowing you to place additional orders? This is sometimes known as the 70% rule.3. Does the company offer to buy-back unsold, unopened inventory or products if you decide to leave?