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Educational Consumer Tips

Multi-Level Investments - BBB Tips for Investors

Author: Better Business Bureau

GUIDELINES FOR INVESTORS - Be ware if the start-up cost for the investment is substantial. Legitimate multi-level marketing companies usually require a small start-up cost. Pyramid schemes, on the other hand, pressure you to pay a large amount to become a "distributor." The promoters behind the scheme make most of their profit on the signing up of new recruits. - Find out if the company will buy back inventory. If not, watch out ... you could be saddled with unsold inventory. Keep in mind that legitimate companies that require you to purchase an inventory should offer and stick to inventory buy-backs for at least 80 percent of what you paid. Some state laws require 90 percent buy-backs.

- What is the consumer market for the products or services? If the company seems to be making money by recruiting alone, you will want to stay away. Remember, multi-level marketing depends on selling to consumers and establishing a market for quality products or services. Pyramid schemes, however, are not concerned with sales of the products. Rather they focus on profits to be made on volume sales to new recruits who buy the products in order to participate in the scheme.

A CHECKLIST - Before investing, get all the facts about the company, its officers, its products. Find out the start-up cost and the company's buy-back policy.

- Get written copies of the company's marketing plan, sales literature, etc.

- Check with others who have experience with the company and its products or services. Are the products or services actually being sold to consumers?

- To check on a company, contact your local Better Business Bureau, district or state attorney general's office. Also, you may want to contact the Direct Selling Association, a national trade association representing legitimate in-home sales companies, many of which engage in multi-level marketing. Other Contact Information - Direct Selling Association, 1275 Pennsylvania Ave., N.W., Suite 800, Washington, D.C. 20004, phone (202)347-8866, fax (202)347-0055, web - Ohio Attorney General's Office Consumer Protection Section, State Office Tower, 30 30 East Broad St., 23rd Floor, Columbus, OH 43215 phone (614)466-8831, toll-free phone in Ohio (800)282-0515, fax (614)995-0123, web Our BBB also has further detailed tips on Multi-Level Marketing, (How to Tell a Legitimate Opportunity from a Pyramid Scheme). These are available upon request.