MLMs: Almost a sure way to lose money


If you're like over 90% of the people who get involved in multi-level marketing, you're going to lose money. The sad thing is that most people get involved in MLMs because they want to make money.

Below is the story of one college student who lost thousands in an MLM. These companies are known for preying on some groups of people who can least afford to lose money: college students, stay-at-home moms, single parents, people looking for some extra income to pay down debt.

Why are these ventures so expensive? They often involve the purchase of expensive inventory, lots of "business tools", attendance at expensive seminars, and all sorts of small costs that add up quickly. Sure, I've heard the phrase that you can't make money unless you spend money. The problem is that the chance of actually making any money in MLM is very, very slim.

Pyramid Scheme in Disguise
Pyramid Scheme in Disguise

Pyramid Scheme in Disguise

And don't forget the most attractive part of multi-level marketing: Trying to recruit friends and family. Most people are wise to the "come and listen to a great presentation about a fantastic opportunity" line. The only opportunity you're really giving them is a chance to lose money. Spare them and yourself the agony!

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.