Difference between Companies with viable business models and Scams / Un-viable business models (Ponzi)
Author – Admin- Strategy India
• Genuine Direct selling companies – the distributor/s earn their commissions only when the products or services are bought by them to consume themselves or to sell to others.
• Ponzi Schemes – the earning to the network depends on new recruitments.
• Genuine Direct selling companies – the products promoted have established market value.
• Ponzi Schemes – products which are very cheap to produce and have no established market value. It means that the person who is not related to the business would not purchase the product at the price the company is promoting it at.
• Genuine Direct Selling companies – the cost of entry (the cost of beginning to trade in a particular market for the first time) is quite low.
• Ponzi schemes – the cost of entry is quite high.
• Genuine Direct selling companies – also may have an exit option.
• Ponzi schemes – do not have an exit option.
• Genuine direct selling companies – a newly joined person can earn more than the person who had joined above and/or earlier than him.
• Ponzi scheme – the person who had joined earlier makes most of the money.
• Genuine direct selling companies – focus on sales of products/services and therefore have good amount of product trainings.
• Ponzi Schemes – focus on meetings which get them new members.
• Genuine direct selling companies – their business model is based on retailing of the products/services to the consumer and rewarding the distributors equaling to results.
• Ponzi Schemes – have no commercial, legitimate function, and no real trading takes place. The money from new members is distributed among the ones joined earlier. In other words – Money Circulation or Money Rotation.
• Their claim to generation and distribution of money is from external sources like Forex trading, trading in commodities, Stock market, Surveys, Blogging, Time shares, Emu farming, Goat farming, investing in gold or land, etc.
• Genuine direct selling companies – have compensation plans which pay out (from the margin allocated per product for distribution to the network) their network of distributors on the basis of sale of products.
• Ponzi Schemes – take money from people against promise of a high returns in the future. Their compensation plan is unsustainable since it assures returns which fully depend on getting investments from new members.
Note: Though a direct selling company may have all the features of an ethical company with a viable business model. But actual intent can only be discovered by doing a forensic audit by a team experienced in direct selling forensic audit.
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