Color of Money

Be wary if asked to recruit distributors

The Washington Post/August 22, 2004

When it comes to your money, trust your gut. That's what I told a reader who was being recruited for a business opportunity.

He wrote: "I was recently approached by a co-worker with what seemed like an intriguing business venture. She said that she had started an online business with the help of a 'mentor' and suggested that I meet the mentor. I met her at a coffee shop and the two of them talked a lot about business in general and how great their product is."

So far, nothing seemed amiss.

The reader continued: "I listened intently as they showed me how I could make/save money by ordering through my own online business and that I could make even more money if I got others to set up their own online businesses. The more businesses you help to start, the more you make. The pitch was that if I did 'x' and I got six other people to do 'x' and so on, I could quit work in three to five years."

Now here's where the reader's gut started to quiver -- as it should have.

"I was curious and asked to see the actual products they have for sale and to see the system in operation. They pointed me to some Web sites. I was given a few CDs and a tape, which went on and on about how great the business is and how much money everyone is making. I was told that all I had to do was come to a meeting and all my questions would be answered. I have not attended a meeting yet and may do so out of curiosity, but I am leery at their evasiveness."

The reader wanted to know if the business opportunity he was being offered was legit or just another pyramid scheme.

Turns out he was being recruited for a legitimate company called Quixtar, the online arm of privately held Alticor Inc. Headquartered in Ada, Mich., Alticor is also the parent company of a more well-known company: Amway.

Quixtar operates much the way Amway does. You earn income by selling consumer goods such as health and beauty products. "And, if you register others into their own businesses powered by Quixtar, you may earn bonuses based on their efforts, too!" the company says on its Web site.

Robin Luymes, manager of public relations for Quixtar, said he's sure there was no subterfuge intended in the recruitment of the person who wrote me. "We try to get people together in a room to get the full story from somebody who is an expert presenter," he said.

Ultimately, what the reader was being offered was a chance to join a multilevel marketing business, an MLM for short. This type of business strategy typically promises that if you sign up as a distributor, you will receive income for both your sales of the plan's goods or services and the sales of people you recruit as distributors, said Edward J. Johnson III, CEO of the Better Business Bureau of Metro Washington, D.C.

Some multilevel marketing plans are legitimate. However, others are just illegal pyramid schemes.

Before you sign up for a multilevel marketing opportunity, even what appears to be a legit one, heed these warnings:

"A legal MLM should only pay commissions for retail sales of goods or services, not for recruiting new distributors.

"Be leery if you're being pushed to purchase products yourself or invest in expensive training or marketing materials.

"Be cautious of plans that claim you will make money through continued growth of your "downline " -- that is, the number of distributors you recruit.

"Ask for proof of any claims about the company's products or finances. If you become a part of the MLM, you become legally responsible for the claims you make about the company, its product and the business opportunities it offers.

"Don't pay any money or sign any contracts if you do attend an "opportunity meeting," which often use motivational techniques to hype recruits.

"Don't sign up before you've verified the information you're given. "If someone offering you a business opportunity is evasive and won't give you any hard figures or background on the company or information about its finances, you should cease transaction with that person," says Sheila Adkins of the Council of Better Business Bureaus.

Here's my bottom line: If you can't be straight up with me from the get-go, if you need to use a ruse to get me to a meeting or to buy a product, take your business someplace else.