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MLMs should be quite straightforward. The salespeople are recruited to sell large quantities of merchandise to people outside the company. Pyramid schemes rely on exciting promises and buzzwords to cover up the fact that they don't have a legitimate business model. Their actual model would not entice nearly as many people to buy in. Business models of MLMs should be easy to understand. For instance, they might have a successful line of hygienic products. Since products like shampoo are inexpensive to produce in mass amounts, there is often a considerable markup for the consumer. Use this method to walk yourself through how the business makes money. Business models for pyramid schemes are confusing. They often include fantastical promises about revolutionizing their industry or introducing a 'miracle product.' More importantly, they emphasize the process of recruitment and promotion over the actual product. Don't get lured into the job until you understand how the company makes its money. This is the biggest giveaway with pyramid schemes. They often don't even mention what product you'd be selling, but only talk about recruitment and making money off the downline. The products they do sell are often ridiculous and unsellable, picked for the allure of getting rich selling them rather than actually using them. MLMs have useful everyday products that have been sold door-to-door and on the internet for decades. Some examples of phony pyramid scheme products are 'miracle cures,' unfamiliar health products at seemingly high prices, or low-cost, high-yield investment opportunities. Often, pyramid schemes offer products with a low profit margin. The real money is to be made from recruiting new members. Since these details may not be apparent to someone outside the company, you will need to use these other criteria to make a decision. The product may not be a dead giveaway. Let's say, for instance, there was a pyramid scheme that sold inexpensive DVDs. This seems like a legitimate product. But how much profit can you hope to make off each unit? It may be hard to tell. If there is high reward for recruiting members in addition, look for other signs of a pyramid scheme. Is the company sustainable? Stable businesses depend on a cycle of production, marketing, and sales. Money goes out and comes in. If money only seems to be coming from people inside rather than outside the business, it is not self-sustainable. If you get a briefcase of popular cosmetics, it may be a safe investment. If you merely get the opportunity to sign other people to work for you, it is probably a pyramid scheme. It has to be a viable business opportunity for everyone from the downline to the executives.
Look at the business model. Do research into what products they sell. Find out how employees make their money. Look at the cash flow. Find out what your contribution gets you.