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Red Flags when Researching an MLM Company

  • Posted by Admin
  • December 2, 2014 6:45 PM PST
Red Flags when selecting a new MLM or Network Marketing Company

1. No Physical Address or Contact Numbers
The Internet has made it simple for new home based businesses to create a presence without having any real infrastructure or substance. While not all mlm businesses require a physical address, those that are offering goods or services to reps and consumers would be expected to have some traceable location. The lack of a phone number makes it all but impossible to pursue any customer service, commission, or other representative issue.

2. Executives with a trail of short lived, closed companies behind them.
Every story is a success story when you hear them from a rep selling on a new deal. But how successful can the executives of a new company be if this is their third or fourth new mlm company in as many years?

3. The Vague Executive Bio
No company names, or other traceable details about their supposedly stellar careers. Phrases like "Has had fifteen years of success in the Network Marketing Industry" are meaningless without specific facts to back it up. They may have been successful in collecting a salary check and filling the company coffers, but wouldn't you expect them to name the various network marketing companies they've "built from the ground up" if all they've left is a trail of happy, successful reps?

4. The Bigger, Better Biz Opp
Repackaging a network marketing business opportunity that has failed elsewhere does not a success story make. Sometimes a business opportunity that has failed elsewhere is rewrapped in a new website, a new name, a new comp plan and sold as a new, viable opportunity. Often, the failures are blamed on poor management, etc., when perhaps it is the "opportunity" at fault.

5. Answers to Due Diligence Questions that do everything but answer the Question
We continually run into this as we research mlm companies. Simple questions like "Where is your corporate office" that are answered with questions like "Why do you want to know?". Or answers about the business stability that garner responses like "Of course this is a great mlm opportunity, you can tell just by looking at our palatial offices."

6. Payment Accepted by Check or Money Order Only
Eliminating the ability for reps to pay for product with a credit card eliminates their ability to dispute charges if the company fails to deliver.

7. Offshore Address
Speaks for itself.

8. No Tangible Product
Without a tangible network marketing or direct sales product, it is difficult to show there is something being sold to an end-user other than the opportunity - which can be the defininition of Pyramid Scheme.

9. Minimal or Non-Existent Refund Policy
Any legitimate mlm company will stand behind its product or service. A lack of a refund policy, or one that expires in a very short period are often questionable situations. Others may incorporate a non-refundable setup charge, or non-refundable Rep Kit fee.

10. Stock Hype
"We're a publicly traded company, so we must be legitimate." New network marketing companies that "go public" before or shortly after their launch typically do so by doing a reverse merger - acquiring the public "shell" of a dead company. Or, a "parent" company "aquires" the new company to add value to a traded stock.

While none of these items might individually flag an opportunity as "Stay Away", several of them together might be cause to take a closer look at the opportunity and do further due diligence - if the answers are available.


  • Roberto Carrillo
    Roberto Carrillo This is so TRUE, but even companies that start of as being legit like Ameriplan, they too turn sour. Many people were let go including me for no reason. I do believe in the Network Marketing Industry and did find a very good company that is bringing to ma...  more
    December 3, 2014 - 2 like this
  • The TeamNYC Group
    The TeamNYC Group agreed. we never know until the 'ball of yarn' unravels before our eyes.
    April 9, 2015 - 1 likes this
  • Mellisa Lozinski
    Mellisa Lozinski Good to know! Good thing none of these points apply to what I'm doing now.
    September 27, 2015 - 1 likes this
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