Get-rich-quick schemes: caveat emptor

There are good network marketing companies and bad network marketing companies. Unfortunately, many people join the bad ones.

By Bruce Seah
12 June 2010

Thousands have been misled, given false hopes and promises by rogue marketers who promised them the moon and left them in the mud. The purpose of writing this article is to warn the public about the predators out there who will appear again and again as long as there are people who are looking for a quick way to create riches in the shortest time.

Thousands have lost their life savings because of these scam artists, who are out to cheat others with their get-rich-quick schemes. People are typically promised a very high rate on return on investment, which financial institutions are not able to give. These investment programmes and seminars promise easy ways to create wealth.

Many people think that network marketing or multi-level marketing is one of the get-rich-quick schemes. This is a legitimate business with over 50 years of history and it is highly recommended by many successful entrepreneurs such as Robert Kiyosaki, Robert Allen and Mark Victor Hansen. But the industry has suffered from bad publicity because some companies that offer get-rich-quick schemes and money games disguised themselves as network marketing companies.

There are good network marketing companies and bad network marketing companies. Unfortunately, many people join the bad ones.

There are two critical factors for success in network marketing: choosing the right company and doing the right things.

Those who didn’t make money from network marketing companies or found the business requires too much effort, flocked to investment seminars on such subjects as forex, options, stocks and shares, which promised easy money from investment coaching and wealth-creation systems. These too, have a high failure rate.

Then came the next wave: Internet marketing, which promised easy ways to make money online at a click of a mouse.

In their seminars, Internet marketers flash their six-figure earnings on the stage and sell the idea to the audience that they too started from scratch and the people in the audience can do it too.

The truth is that Internet marketing is very tough. Over 98 per cent of those who try it don’t make money because of two critical factors: they get stuck in the technical aspects of it and they don’t get proper coaching and guidance.

Thousands in Singapore have invested their hard-earned savings in the hope that these so-called ‘Internet marketing gurus’ were true to their word and will deliver what they promised. But the word soon got around that it wasn’t so: most people were not able to earn a decent part-time income from the Internet.

So who ended up making the bulk of the money? The promoters and organisers who raked in as much as 40 per cent to 50 per cent of the seminar fees and packages bought by the participants. These self-proclaimed millionaires added hundreds of thousands of dollars into their pockets while their students didn’t even make enough to recover their seminar fees.

In many instances, people who have been bitten but are now twice shy avoid seminars that used to cost thousands of dollars but are now offered to them for free. These free seminars usually have back-end selling, where at the end of their talk, speakers offer other seminars which cost thousands of dollars. Some of these speakers use hard-selling techniques and give irresistible offers that cause people to buy on impulse – which they later regret.

If you feel that you have been misled or that there were gross misrepresentations, you can make a report to Consumers Association of Singapore (CASE) or if you think it is a cheating case, you can make a police report. But prevention is better than cure, so do your due diligence and ask around first before committing to any programme.

Usually, speakers will use sales tactics, such as the fear of loss, to make you decide on the spot to sign up, so you can enjoy discounts and bonuses.

But it is only wise to get a second opinion from people with experience in attending a particular seminar on whether they found it useful.

Here is a common modus operandi of some money-game companies: They will make sure that they will pay out handsomely in the first year to those who join, so that these ‘investors’ will become evangelists and spread the word about how much money they made through the programme. So, in the second year, the company will typically enjoy exponential growth and rake in the money. But in the third year, the management will close the company, most likely due to investigations by the authorities. But by then, the directors would have made their money.

Usually, the directors of these companies plan for their exit from the very first day of operations and put in place loopholes to avoid getting into legal trouble. Therefore, always check on the integrity and track record of the directors involved in any of these ventures.

Here are 10 simple questions to ask:

1. What is the percentage of success?

2. Does the company offer good support and follow-up sessions to ensure success?

3. Since the speakers are so confident, is there a money-back guarantee?

4. Are the speakers themselves qualified? Do they have integrity and a good track record and reputation in the market?

5. Does the home-based business offered to you involve ‘front loading’ – that is, schemes where you are encouraged to order products up front that you are not able to consume or sell in a few months, so that the leaders promoting it earn high commissions?

6. Is the company at least 10 years old? The hard fact is that out of every 100 companies, only four make it to the 10th year. Your chances are much better if you work with an established company.

7. Are the products being offered by the company over-priced? Are they competitive compared with those of other companies?

8. Do the products come with a money-back guarantee?

9. Is the compensation plan offered by the company simple, generous and easy to understand?

10. Does the management of the company comprise people of integrity?

In short: Look before you leap!

The writer is a veteran network marketer with 16 years of experience and has written three books on network marketing: ‘Break Free! – There Is A Better Way To Earn A Living’, ‘Why Network Marketing?’ and ‘How To Be Successful In Network Marketing’. For a free ebook on ‘Why Not Do A Why-Not-Do Business?’ go to: http://www.BruceSeah.com

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