Standard Business Practices Vs. Network Marketing

I keep reading about how MLM companies are pyramid schemes. Is your current j-o-b a pyramid? Does your boss make more than you? Does the company owner make more than your boss? Can anyone show me how the format of any company is not a pyramid scheme?

In both formats a person starts with an idea. They formulate a business plan. They plan a way to distribute an item or service. They do this only because they feel they can make money with their idea. In most instances, no matter what any employee does, they are never going to earn more money than the person above them.

Each company has one product, one idea, and one dollar. They earn that dollar profit and start to divide it. Out of that dollar Mr. Conventional Business Owner pays all his expenses and keeps what is left. He started the business to earn an income, so naturally he is going to look for the most inexpensive ways to do things and how to keep the major portion of that dollar in his pocket. As he begins to grow, he leaves his home office and opens a business with a factory, a storefront or professional office space.

He hires an additional salesperson to help get the word out about his new business. Now he has duplicated his efforts and productivity. In that same 8 hour work day, his product has been exposed to twice as many people. He pays his salesperson 20% for their effort and pockets the other 80%. He sees that he has a winning product on his hands and hires more salespeople to cover larger territories. He is now paying 20% commission to 50 sales reps, 1 covering each state.

They are all independent contractors, so they are all paying their own taxes and expenses. He is now earning 80% of 50 people's efforts. Gee... All the money from the sale of the products is funneling up.

A few years go by and he is hearing from his salespeople that everyone in their territories who needs, wants and can afford the product have already bought it. The market is saturated with his product. Sales growth stops and starts declining.

He decides to expand the business and develop more products. To do that he needs to get investors because he was busy buying the largest house in town, a plane and expensive cars. His wife long ago stopped looking for sales in the stores and bought what they liked. He finds the investors, but they want a hefty portion of the profit when his new products become successful. He launches product number two and his sales force, still only earning 20%, hit the streets and sell this product.

He is able to produce the product a little cheaper, so the price to the consumer is lower. In doing that, his salespeople are making less money with product number two because of the lower price point. They are doing the same work to introduce the new product to their customer and making less money. On top of that gas has gone up, so their expenses are higher. They start working longer hours to generate new customers to bring home the same amount they made on product number 1.

The new product is wildly successful and his investors, under the terms of the agreement, are making 30% + on their money. Mr. Conventional Business Man pays the investors, his expenses and pockets the rest. Same thing happens again. Everyone owns it. The market is saturated.

When he approaches the investors for more money, they are happy to give it to him, expecting the same return the next time. Prices have gone up by this time. He checks out the prices in Costa Rica and decides he can fulfill his investor's expectations by moving his factory over there. He can have the phone lines transferred to India. He thinks about his buddy at IBM and gets in tight with Watson, so he is able to lay off his research and development team since Watson can tell him what to do.

He can video chat and e-mail with his customers, so he really doesn't need those 50 sales people who are now making more money because they are overseeing the additional 500 salespeople he hired after the second product was so successful. He streamlines the company, lays off 1, 000 people who have been with him for the last 25 years and continues to make his investors happy, keep his kids in the best schools and buys his wife a new BMW.

Enter Ms. MLM. She comes up with an idea. She decides to charge a higher price for her item. She gets a team together to go out and sell the idea. They all look over the product that Ms. MLM is distributing and decide to use it. They buy it for themselves and like it well enough that they tell a few other people. One of the original team shares the product with one of his friends from the above company, who was laid off when it was restructured.

He explains to his friend that there is enough profit built into the product so that if he wants to earn something to subsidize his unemployment, he can afford to give him a little bit out of his share of the profit. Ex-employee tries the product and likes it. He buys it and tells a few of his friends from the old company. They all begin to buy the product also.

Ms. MLM is just tickled that her original team member shared the idea with his friend and gives him a bonus. She knows nothing about this guy's friend, but she calls him up and tells him if he wants to go out and promote her stuff to go ahead. She would compensate him just like his friend.

She calls her original team member and tells him how happy she is with him for the referral and offers him an additional bonus for his efforts. She tells him if he knows of anybody else looking to make some extra money and they start selling her product, she will pay them as well.

The original team member is so excited that his friend's purchase was the reason for the bonus; he calls him up and offers to share a part with him. Now you have two happy people. Mr. ex-employee hears back from his counterparts who got laid off that they liked the product and wanted to buy some more. He passes on the same information, "Sell some for me and I'll give you a bit of the profit."

Ms. MLM is so impressed that sales are increasing so fast, she calls the original team member up and tells him she is going to give him a larger bonus. He is ecstatic. He calls the original Mr. ex-employee and again tells him he wants to share a part of the bonus with him.

Mr. ex-employee is so excited, he calls his friends that he originally introduced the idea to and offers them a bit of his windfall for their assistance in helping him get it. All, but a handful of company A's employees started using and telling their friends about Ms. MLM's products.

Ms. MLM was so happy that she was making so much money; she gave out bonuses to everyone who had helped her become so successful. They in turn, called all the people who had helped them get the bonuses and offered them a share. Everyone kept using Ms. MLM's products and telling their friends.

Meanwhile, Mr. Conventional Business Owner was stressed out over trying come up with new, improved cheaper products to make his investors happy. He was dealing with lawsuits filed by former employees who had sued him and taken away his plane and his wife's BMW. He starts drinking heavy and taking antidepressants. He dies in a plane accident while flying over to Costa Rica to check on his manufacturing plant. His wife discovers he had let the life insurance lapse and loses the big house on the hill.

Meanwhile, Ms. MLM takes all the people who helped her become so successful on a wonderful vacation to Paris. When they get home, she throws a big party and passes out keys to cars for the people who started with her, worked hard in promoting her business and helped her become so successful.

Which would you rather?