Author: David Van Sambeek Date: January 12, 2013.
The above image is actually the pyramidal structure of every type of business that you shop at every day, the church you go to on Sunday and the government that rules your country.
It is NOT a PYRAMID SCHEME!
And because a company transacts online instead of from a physical premises does not make it an illegal pyramid scheme! It just means that the owners are savvy enough to cut costs, aim for a bigger target market and pass savings onto their customers.
And yet, they are vilified for this by people who accuse without establishing the facts.
Despite all the media attention surrounding multi-billion-dollar fraud schemes that have left hundreds, possibly thousands, of investors broke, I have noticed that many individuals, including those in the media, haven’t grasped the differences between an illegal pyramid scheme, a ponzi scheme and a legitimate network marketing or retail sales business (and NO, they are NOT the same thing).
In this article, I will address the differences between ponzis, illegal pyramids, multi-level marketing companies and retail sales companies.
So, what’s the difference…?
The Ponzi Scheme
A ponzi scheme can be defined with one simple statement: “taking money from “new” investors to pay “old” investors.” Ponzi schemes usually promote and solicit for what appear to be real investment opportunities. Popular ponzis use valuable assets to entice investors into parting with their money, e.g. gold mines, oil drilling, diamonds, and beach-front real estate. Some ponzis may own the asset they are soliciting for investment, and others are simply promoting the opportunity to invest in an asset that doesn’t even exist.
From this you can see that the soul of a Ponzi Scheme is investment. The ponzi mastermind comes up with some sort of new opportunity that pays incredible rates of return. Regardless of the specific details of the plan, a ponzi scheme always has a mastermind who ends up taking from one investor to pay another.
The Illegal Pyramid Scheme
In its most basic form, an illegal pyramid scheme exists where an individual is recruited into the scheme by someone. The new recruit enters the matrix at the bottom and the recruiter moves up a level and keeps moving up as new people join at the bottom until the recruiter exits at the top with a large sum of money. At some point the amount of money to be paid out far exceeds the scheme’s income so the pyramid collapses and the people at the bottom lose the money they have put in. Take note that this article is using the term illegal pyramid scheme. A common misunderstanding among the general public is that all businesses with a triangular or pyramidal structure are illegal pyramid schemes. This is not true. Many Multi-Level Marketing (MLM) or Network Marketing (NWM) businesses and retail businesses have a legitimate network of distributors, salesmen and agents, selling a real product or service to the general public. Although their distributor structure may resemble a pyramid, this does not mean that the NWM or retail company is operating in violation of the law. The company becomes an illegal pyramid scheme when they pay distributors ONLY for the recruitment of others for their advancement up the ladder.
In other words, in an illegal pyramid scheme, the person does not remain in one position forever. They move up level by level as new recruits enter the scheme until they either cash out or lose out.
In addition, pyramid schemes have no products for sale in return for the money paid in.
In contrast, businesses with pyramid structures DO sell products and services and they form the basis of all legitimate businesses, churches and governments.
All illegal pyramids must inevitably collapse because of the size restraints associated with the pyramid’s exponential growth.
What to Watch Out For…
If you find yourself being solicited to invest directly into a new company that promises huge returns on your investment funds, do your due diligence. This company could be a ponzi scheme looking for the next round of funds to keep the ponzi alive. On the other hand, if you are getting a sales pitch for a new MLM / NWM (Network Marketing company) or retail sales company, make sure you understand what the company is selling.
- Are the products being sold at a fair price? (BizHub: YES)
- How are the distributors being paid? (BizHub: From commissions on product sales)
- Are there any real retail sales to customers outside of the company? (BizHub: YES)
The multi-level marketing industry is a great way for members of the public to start their own businesses selling products or services to consumers, but do your homework on the company before getting involved.
Retail sales are what we all grew up knowing as the main or only way to buy goods and services. Salesmen and -women earn commissions for making product sales to customers.
We now hope you will be able to tell the difference between a ponzi scheme, an illegal pyramid scheme, a legitimate Network Marketing company and a legitimate retail sales company like the BizHub Central online shopping mall and Income Plan, so you can identify the first two as opportunities to avoid and the latter as an opportunity to embrace.
For more information on our Income Plan, go to:
BizHub Central SA…
- Is a legitimate retail sales company, not an illegal pyramid scheme, even though it does have an Income Plan with a pyramidal structure, as all businesses, governments, churches and institutions have.
- Pays commissions when subscribers sell our products and services, so it is a strictly legal retail business paying commissions on sales to consumers.
- Subscribers do not move up a matrix and out the top when new subscribers arrive as in a pyramid scheme. They stay where they are, so these 2 elements alone prove that BizHub Central cannot be called an illegal pyramid scheme.
- Does not inflate product prices to accommodate referral commissions. All products are sold at or below normal market rates to the general public. Commissions are taken from the Selling Price set by the supplier, as would happen if an employed salesman made a sale for a company.
- Does not pay commissions on recruiting new Affiliates. It pays commissions for sales of products made by our agents from our Shop and for sales of current and new services.
- Pays commissions taken from its own profit margins to reward subscribers for bringing us new business. It does not load extra cost in top of the price to pay a MLM network.
- Uses its salaries and commissions budget, normally allocated for salespeople employed by a company, to pay customers for sales resulting from successful word-of-mouth, media and online advertising. In this way, we have a much bigger sales force and everyone who markets our business successfully gets a percentage of our profits for their efforts. “Our best advertisement is a satisfied customer.”
- Does not make unrealistic claims regarding potential returns. All commission and bonus payouts are a maximum of 55% of turnover derived from the introducers’ marketing efforts, creating an equitable split between BizHub Central and its Subscribers. This percentage is broken down into smaller percentages so a larger number of people can be paid a reasonable return for having been directly or indirectly responsible for a sale.
- Allows members of the public to purchase products and services from our online Shop and therefore, by definition, cannot be described as an illegal pyramid scheme.
- Has been sanctioned and endorsed by some major corporate companies to market their products and services. These companies would not associate themselves with a ponzi or illegal pyramid scheme for fear of tarnishing their own reputations, which means that they have done their due diligence on BizHub Central and have given us a clean bill of health.