Have you ever received that call from a friend who you haven’t caught up with in a while inviting you for a sit down out of the blue? Their voice is animated as they speak to you about an opportunity they discovered which seems too good to be true. And why is that? Because it probably is. It may not even be someone who you lost contact with a while back, it might be a really good friend or family even. It’s even possible you dug this idea which seemed like a fix to a lot of life’s problems and soon you became that person who calls up people you haven’t seen in a while to tell them about this incredible opportunity.
What we are talking about here is a pyramid scheme. Several have unsuspectingly fallen victim to these opportunities to get rich, presented by people they trust. That is actually what the business relies on referrals from the top going down. The interesting thing is that the few success cases at the top will be extremely hyped for the sake of making those at the bottom feel like it is all possible and within reach. Now there is a difference between legitimate business and a pyramid scheme. The fine line lies between the Multi-Level Marketing business plans (MLM) and the Pyramid Scheme, and unbeknownst to you A Pyramid Scheme can be packaged as an MLM to make it seem completely legitimate and legal but there are a few differences to note.
The big difference between multilevel marketing and a pyramid scheme is in the way the business operates. The entire purpose of a pyramid scheme is based on recruiting other potential people into the plan. Because every new participant brings in their entry money with them, the money travel up to the original recruiter. So the new recruit is paying money for being recruited. On the other hand as The Balance puts it, the entire purpose of MLM is to move product. The theory behind MLM is that the larger the network of distributors, the more product the business will be able to sell. Thus the emphasis will be less on recruitment and more on the value of the product.
Ignorance may be bliss in some situations but when it comes to protecting your future and your finances, knowledge is a weapon. So what are a few ways to check off a pyramid scheme before you are pulled into its clutches?
- You will be required to pay an upfront sign-up fee to register. Sometimes it will be disguised as a mandatory initial investment. The whole idea of to get money you must first give money.
2. The biggest thing is that you will get your money from signing other people up. If profit relies heavily on recruitment and the money the recruits pay to join the company instead of on sales of products to customers then this is a tell-tale sign of a scheming get rich quick scam.
3. If you are required to buy/sell useless inventory that you don’t necessarily need or want to promote the business, e.g. information booklets, promotional banners, flyers, DVD’s etc. then it is probably a Pyramid scheme.
4. Which Magazine gives warning of another sign, when “You’re asked to sell goods or services through franchises or sub-distributers”
5. Finally if something seems too good to be true it probably is. Be critical, you’re allowed to be doubtful even when it comes to friends and family.
One of the most recent MLM posers is the “Public Likes” frenzy that has apparently swept over Kenyans. Venasnews shares how Safaricom recently suspended the M-PESA Pay Bill account which was 135079 after customers complained about what they referred to as the “fast growing Pyramid Scheme”.
According to Nairobi Wire, the idea of Public Likes was to present itself as an online paying job where one is Paid o Click (PTC). Upgrading one’s account ensured more Adverts to click on. The cheapest account upgrade is Ksh. 4,500 then Ksh. 14,000, and the mother of all account upgrades is the Ksh. 90,000. The scam paid off even more once an upgraded account recruited other people and got them to upgrade their accounts.
More and more Kenyans have begun to agree that it is a Pyramid Scheme but for confirmation feel free to use the checklist above. The point is to always be safe with your investments in future, when offered seemingly too good to be true opportunities it is okay to be sceptical. Always, always check and recheck if a business idea is legitimate or a scam to rid you of your money.
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