What is a Pyramid?

Sadly you will very often hear the following comment when you present your business to others:

“But this looks like a Pyramid!” This misconception is the reason why South Africans remain poor. This is why they will keep on spending 80% of their life unhappy at work. The saddest thing is that they do not bother to educate themselves better, they are not willing to let go of the past and grasp the opportunities of the future.

 It is true, there were a lot of pyramid schemes and a lot of people lost money in it.

 So the first thing you must do is to educate your potential client and teach him the difference between a pyramid and network marketing.

 The law states various things about running a legal network. The three most important ones are:

1.                   The business must have a product or render a service

2.                   The network must be limited in its levels in order to prevent the first one in to earn the most (it      must be a equal opportunity business)

3.                   The network may not be sustained out of the registration fees of members

WOW, that is a nice pyramid!

Million dollar question: Can the employee at the bottom EVER earn more than the CEO at the top while he is in level 5?????

If you listen to people comments about pyramid schemes any successful big business should be 100% illegal!  The above example is not an equal opportunity business and the first one in earns the most money!

You can see from the from the examples above that network marketing is not even close to being a pyramid scheme.

But where do they get the money to pay the commissions

This is why people are skeptical about network marketing. They do not understand the concept and they do not understand where the money comes from. So for them it sounds to good to be true and then they get all the excuses they can think of not to get involved.

Explantion: I can get people to market a product for me. I decide that if I sell the product for R150.00 I can afford to spend R40.00 on commission. So now I can get people to market my product for me and pay them R40.00 commission on each successful transaction they have.

With the scenario above we go back to traditional business. If the consultant does not sell anything today, she does not get any money. So if she goes on maternity leave for six months, she does not have an income for six months.

So now we decide to split the R40.00 in 4 pieces. We will now rather pay 4 people R10.00 each than paying one person R40.00 per sale. We create more jobs for more people. We tell the lady in this example (lets call her Cynthia)  that if she refers another sales consultant to the business we will pay her R10.00 of each sale that person makes. And that person can do the same and the next one can do the same. We continue that up to four levels. So now Cynthia gets paid for the effort she does AND for the effort of the people signed up under her. She just started her own business. She now has consultants working in her business and she earns a portion of their commission, she now has consultants working “for” her but still each one runs his/her own business.

So now Cynthia can actually go on maternity leave for six months and still earn.

So the money to pay the commission must be built into the product or monthly fee for the service. This is also a good way to see if a network marketing business is legal and sustainable. You must be able to see that the commission money is paid by the product or service. If we market a product which will cost you R100.00 per month we can most certainly not afford to pay you commission of R400.00 per month. If you see something like that you know you must run.

So network marketing is nothing else than the distribution of commission or the distribution of wealth. We do not pay one person big commissions, we pay several people with the same commission.