How To Avoid MLM Scams – 10 Signs

MLM Scams

With so many different homebased business options available. The one people are presented with most is MLM or Multilevel Marketing. Sometimes also referred to as Network Marketing or Direct Selling.

While MLM is a legit business model to follow for a homebased business. There are plenty of shady opportunities posing as MLM.

So, you must be sure to do your due diligence and research before committing to any opportunity. So, with that said here’s 10 signs on how to spot an MLM scam.

What Is Multi Level Marketing?

Multi-level marketing is a business model used for the sale of products and/or services by individuals not employed by the MLM. Usually referred to as “Distributors”.

The compensation plans of MLM’s typically payout in 2 ways.

First is by simply selling the product or service of the company and earning a commission for those retail sales.

Also, a distributor can earn addition income by presenting the same business opportunity they’re involved with to other people. This is known as “Recruiting”.

These people are then placed in your business (downline distributors) and you can earn bonus money from their efforts as well as additional bonus money by climbing the ranks within the companies compensation plan.

Compensation plans will vary from company to company. But the one constant is that the compensation plan is pyramid-shaped. With people at the top of the pyramid making the most money.

Thus, a company may look like and legit MLM business opportunity but in reality it’s a MLM pyramid scheme.

So before you make any commitment and sign on the dotted line here’s 10 signs, red flags if you will that what you’re not being presented with legit opportunity, but a MLM scheme.

1) No Product

This is probably your biggest red flag telling you what you’re being shown is a scam. They have no real product.

If the focus is just on recruiting people and that’s the only way you’re going to make money. Then you know for sure it’s a scam.

A legit multilevel marketing company has actual products. And as such you can make money just by selling the products if you wanted to. The whole point of having a legit MLM business is to get a product or service into the hands of the consumer.

While recruiting and building a team can be part of the overall business where you can earn money from your downline who is also selling goods. Recruiting is not the sole focus.

2) Ridiculous Product Claims

When it comes to crazy and outrageous claims of what a product can do. It’s typically found in the health and wellness market.

Yeah, sometimes it will come from the company itself. But in most cases it’s the distributors that make these crazy claims. When you find reps making these types of claims it’s something you should really take into consideration when looking at the opportunity.

A company is built on quality products. And as such if a company is promoting products that just seem to good too be true. This is a company you should shy away from.

You certainly don’t want to be caught up in a company that ends up in litigation because of their products or service.

For example, a MLM company called Neora, formerly known as Nerium was (has) been sued by the FTC because it is alleging it operates as an illegal pyramid scheme. And also, falsely promotes brain health supplements.

Just imagine if this was a company you were involved with. And you’ve put in all the hard work to build you business. Litigation like this can destroy your business overnight.

So be sure to do your homework and due diligence before getting involved with any homebased business opportunity.

3) Pressured To Buy Stock For Bigger Commissions

Now there are startup costs when getting involved with an MLM. But that cost is relatively low. And that’s why one part of getting into an MLM can be so appealing.

However, the programs you want to avoid are what are called “Pay to Play”.

This is where you are pressured or enticed to buy more inventory and in doing so you can earn a higher level of commissions and have access to additional bonuses within the companies compensation plan.

A legit MLM will not have pay to play. With a legit MLM you typically have to buy what’s called a starter kit. Some companies may have serval options all with different costs.

But no matter which starter kit you purchase you are not limited to what you can earn simply because you bought a lower priced starter kit.

And due to this practice it’s now law that legit MLM companies are required to buy back inventory. Now just because they have to do that. Does not mean you want to go ahead an buy a ton of inventory right from the start.

Buy what you need to get started. Then this way you’re not going have a spare room full of products you can’t sell before you truly understand the business you’re getting involved with.

4) Expensive On-Going Training

If you’re told you need to buy additional training material in order to be successful with your business this is a red flag.

Along with the guidance and training from your team and upline sponsor. Most if not all legit MLM company provide free training.

Nowadays many companies provide free replicated websites and with that provide you access to the back office of your website where you can find online training in the form or text, audio, and video. Some companies even hold weekly or monthly live training webinars and conference calls.

Also be mindful if you’re pressured to attend annual conventions. While these can be informative and fun. They can be very expensive. And in no way should you not attending have any bearing on the success of your business.

Plus, if you’re not making any money with your business yet. Going into debt over these conventions makes no sense.

5) Not Transparent – Shady

If someone is taking to you about a business opportunity but they are vague about the business or are unwilling to provide you any clear details of the business opportunity, including the name of the company – just walk away.

When it comes to legit MLM companies yes many don’t want people to advertise their name. But that’s not because they are shady. They do this to protect their brand.

But good reputable distributors (reps) for a legit MLM companies when recruiting people. A legit MLM has no problem with you telling people exactly what the business opportunity is all about, including telling people the company (name) you’re associated with.

If you’re not getting this basic information when it comes to the business opportunity. Like I said, just walk away.

6) High-Pressure Sale Pitch

When being presented with the business opportunity are you getting the feeling that you’re under a lot of pressure to make a decision right now?

Maybe you’re told if you don’t make the decision right now you’re going to miss out on special pricing for your start up kit. Or you’ll miss out being higher up within the company.

Any high-pressure sales tactic like that is a definite warning sign.

If you’re dealing with a legitimate company and a reputable distributor (rep) they will be more and happy to allow you to take the time to make a decision. Whether that be wanting to talk it over with your family, or maybe you just want to sleep on it.

Either way you should never feel pressured to get involved with any business opportunity.

7) Unrealistic Or Bold Income Claims

When it comes to multilevel marketing you’re earning money through commissions. And what you earn depends how much product you sell on a monthly basis. As well as on the number of people that you recruit into your distributor downline.

Now, if someone is telling you that they can guarantee you can make for instance $10,000 a month. Then it’s very likely the business opportunity you’re being presented with is a scheme.

Now, sure there may be the opportunity to earn that kind of income. But no one can guarantee that kind of income especially when we’re talking about earning money through commissions.

So, if the person you’re talking to (recruiter) is making those guarantees. This is a company you don’t want anything to do with.

8) Not Getting Solid Answers

When you’re being presented with the business opportunity don’t be afraid to ask the hard questions.

And if you don’t get the answers to those questions or you get chastised for even asking them or not being positive about the opportunity. That’s a big red flag.

A reputable distributor of a legitimate multilevel marketing company wants you to know everything about them. They want you to see the compensation plan, they should provide you with what’s called an income disclosure statement.

An income disclosure statement if you’re not sure what that is shows the average annual earnings of distributors over a 1 year period.

The bottom line is a legitimate company wants you to be informed. So, if your questions are not being answered or their being glossed over. This is probably someone you don’t want to be involved with.

9) Better Business Bureau Unresolved Complaints

Now, the reason why I’m mentioning this is because it’s a good resource to get a real feel for a company.

Now, when it comes to home-based businesses the Better Business Bureau routinely gives these types of opportunities a very low rating simply because their work at home businesses with no employees. It’s not based on any study or investigation regarding the company.

Nevertheless, by going to the Better Business Bureau you can see how the company is managing complaints. Because the reality is no matter what the company every company get complaints.

And if the company is responding to the complaints and making a concerted effort to resolve those complaints. This is a good sign. That means they’re willing to engage with their customers and they want to make sure their customers are happy.

And on the flipside, if they fail to respond to complaints and don’t offer help of any kind. That’s a huge red flag.

10) Somethings Just Not Right

You know that feeling you get in your gut? Or that little voice in your head when things just don’t seem right?


This is your intuition talking to you. If something feels off, whether you think it’s a scam or not. And things just don’t feel right.

Then no matter what the opportunity is or what you’re being told by the person presenting the opportunity, it’s not right for you. So, walk away.


When it comes to any home-based business opportunity the best thing you can do is listen to what the person is presenting to you. And then don’t make a decision at that moment.

Step back, do your homework, do you do diligence and find out as much about the business opportunity as you can. And ask a ton of questions. And then and only then make your decision.

If it is a true home-based business opportunity, the opportunity itself is not going anywhere. It’s just a matter of if you’re going to get involved or not. And the person presenting the opportunity respect your decision no matter what it is.

I hope you found this information helpful. And of course if you have any questions please feel free to leave them below.

I believe in you!

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