Harking back to the new MLM book I’ve been reading (which could be excellent, except for the glaring errors and the dangerous blind spots and gaps in the author’s knowledge and experience), one of the most alarming aspects is something common to many network marketers: they stumble into the stadium, see the waiting crowd, abuzz with anticipation, so they leap the high wall into the relatively small central arena and start waving the red cloth they find there to try to catch everyone’s attention.

No sense wasting an opportunity, right?

It’s only when the raging, rampaging regulators — officials with REALLY sharp horns and powerful muscles — barge into the ring, to the cheering of the crowd, that they realize what kind of suicidal scenario they’ve blundered into. In this bullring, the crowd is definitely on the side of the bull, and they want BLOOD!

And it’s all down, yet again, to ignorance of the dangers and desperate, blind opportunism on the part of the make-shift MLM “matador”.

What red rags are YOU waving wildly?

The one that caught my attention is a common misperception amongst network marketers about what are often referred to as…

• monthly quotas
• minimum monthly purchases
• maintenance limits
• autoship orders

They’re not all the same thing, but they’re often mistaken for the same thing — and that mistake is to perceive them as a minimum monthly personal purchase that YOU must buy from the company to qualify to earn a bonus or a specific bonus level.

Wrong.

Yes, companies set minimum personal qualification levels for bonuses. That’s perfectly sensible, ethical and legal.

But those minimum amounts do NOT have to come from you, personally. The amount can be made up of personal purchases for your own use, plus sales to your retail customers and/or preferred customers.

In fact — and here’s the real danger — it is ILLEGAL for a company to require YOU to make a personal purchase at all in order to qualify for bonuses or other rewards.

That action alone puts the company in breach of almost every known anti-pyramid selling law in the world, and is usually the #1 test applied by regulators looking for illegal pyramid selling schemes.

This misperception arises amongst network marketers who want to avoid selling.

(Never mind that any network marketing distributor organization is, by definition, an outsourced SALES department for the MLM company it works with.)

So they focus on recruiting consumers who buy at wholesale prices — and then expect to make money from this kind of leverage-less arrangement. So any mention of a minimum personal monthly purchase, or of an autoship order, is interpreted by these people as meaning a minimum personal purchase for their own use.

That’s on a par for misperception as people talking about “you get paid from your downline‘s earnings”.

Wrong again.

Monthly bonuses are paid by the company from the company’s own share of the wholesale revenue from sales made by you and your downline team. You don’t earn a single red cent from your downline members’ earnings.

To talk and write on the basis of these kinds of seriously sloppy misperceptions is akin to waving a red rag at a fighting bull. Your should NOT be surprised is you — or your company — ends up being investigated and prosecuted for promoting an illegal pyramid selling scheme.

The penalties are extremely painful. In my country, Australia, fines start at $110,000 per offense. For companies and repeat offenders, they rise to $1.1 MILLION per offense. (That means per person you recruit using that approach!)

For a more detailed explanation, download my FREE ebook on this topic: “Seller Beware!”

In a nutshell…

There are some simple precaution that can protect you from these mistakes. They include:

• DON’T recruit for consumption. If you don’t want to sell, find an opportunity with a Preferred Customer program that allows consumers to sign up for wholesale prices (and often free shipping).
• Get yourself some retail customers. If you don’t know how to do that, get yourself a copy of Kim Klaver’s terrific book, “If My Product’s So Great, How Come I Can’t Sell It?” (softcover or ebook). Seriously… this is the best book available on retail selling in MLM. Get it here. (Skip to page 3 of the 6-page store.)
• Do NOT place orders for personal consumption in order to meet the minimum qualifying requirement. If you can’t make it on sales volume, you don’t have a viable business. End of story.
• Don’t talk to your prospects or recruits in these incorrect terms. Learn the proper perceptions and terminology and stick to them. Don’t wave red rags at regulators!

Hope this helps.

John

Author Profile  Consults to managements of direct selling companies, small business and home business owners. Writes regular columns and feature articles for various business media, online and offline. Author of several best-selling business books. Presents seminars and workshops, webinars and other training programs. Creator of Fourth Generation Thinking, Selling, Business Systems. Read more from this author