Multi-Level Marketing Is Shaped Like a Pyramid…

MLM’s triangle shape makes it a pyramid, so MLM is a scam, right?

Sometimes uninformed people think the shape (polygonal base or triangle) of an MLM company makes it an illegal pyramid scheme. This is false.

Many organizations are pyramid-shaped without being a pyramid scheme.

For example:

  • Your family tree is shaped like a pyramid.
  • The US government’s organizational chart is also in the shape of a pyramid – it is called the chain of command.
  • Even traditional business organization is pyramid-shaped – it’s called management.

The reason almost ALL organizations are organized in a pyramid shape is that a single person can only manage a finite number of people before they become overwhelmed and need other people to do some of the work.

Picture this: if you run a daycare center, how many kids can you keep track of before you become overwhelmed and need to hire an assistant? If you hire two assistants, that becomes the shape of a pyramid (triangle). In MLM, a person enrolls a handful of people and trains them to sell products and to enroll others. This is because a single person can only handle so much activity before they require another person to lessen their workload.

The pyramid shape of an MLM compensation plan does not mean it’s an illegal pyramid or scam.

pyramidshape_small.jpg

Does this look like a pyramid? Click it to find out if it is…

Multi-level pay plan

Sometimes uninformed people think that if a company pays “multiple levels” then it’s an illegal pyramid. Not true: many franchise companies pay multiple levels. In typical sales organizations, managers get a percentage of what the sales reps sell. This is multi-level marketing, whether it’s called that or not.  The fact that an organization pays on multiple levels does not make it an illegal pyramid scheme.

Recommended next page: Are people at the top of an MLM company making all the money?

Tim Sales

About the Author

Tim Sales

Tim’s experience in building his own downline of 56,000 network marketers helped him develop his signature training series. A public relations ambassador for the network marketing industry, Tim has also dedicated his time to debunking the false information spread about the network marketing industry.

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Sid West

this is great info. thank you.

Patti Roney

Tim, I think education is freedom and the lack of education concerning this shape robs people of a great experience in this industry! Thank you! I hope everyone will click on your example and read it in full-size!

Lyn Stanley

I never thought of “regular” companies being a pyrmaid shape. But you are right! Thanks for the information.

Doug Lee

good info.

Jonathan Charles

Knowledge is power! Way to put out great knowledge for people to obtain great power…

Steve Stearns

I use similar examples all the time to help others understand how they can change their lives. The Department of the Treasury is a great one. The real power of the shape comes when anyone in it has the same ability to succeed with the right amount of effort.

Albert Watkins

Great info!

Stephen Nott

Bill Gates, Alan Sugar and other CEO’s run corporate pyramid companies. Good example!

Valencia Burton

If you take a good look at just about any company, you would see just how true this is – there are usually many bosses!

Gavin Chapman

‘Education’ using clear logic with integrity is Tim Sales’ hallmark. Conventional sales and marketing sells people using the power of ’emotion.’ So does ‘hype and hope,’ unprofessional CattleClassMLM. In professional/FirstClass MLM we distributors are looking for long-term business partners and so we must remember that ‘those convinced against their will, are of the same opinion still.’ Education such as here cuts through the hype. Finally, despite the very best education and will in the world, MLM is not for everyone. I admit that I sometimes have difficulty remembering that.

Shirley K., California

It seems to me people don’t bother to ponder their surroundings and are then vulnerable to “street” talk. You have done a great in showing us the truth in business structure and it’s rationale. How novel to think so many people don’t know what structure they are working within!

Ulf Paxby. Sweden

Great information! Thank you, Tim.

Patty Jones

Good graphics, thanks, I’ll use this one for sure.

Patty Jones

Thanks Tim!

Jacob Camacho

It is an elemental structure of our society, ever heard of ‘follow the chain of command’? Our own military forces are organized this way.

J. Ayre

This is just the explanation I needed to help me to clarify the position for my future customers and associates. It ties in nicely with the Brilliant Compensation video, too. It will be helpful in stopping negativity in its tracks!

Donnie D.

Thanks for the example. Keeping it simple really helps to explain to others.

Deann

This is one of the best things I have ever read. It has helped build my confidence when talking with prospects and has even helped in my marriage! My husband felt all MLMs were pyramid-schemes and I could not get him to drop it – until I shared this with him. He is still not 100% on-board but he is mor eopen-minded, and no longer so cynical and doubtful. Thanks!

Rolf Hefti

Eye-opening!!!

Ada Ofodum

Well there you go… Tim this is great! I love this explanation and I’ll be sure to share this with anyone who gets confused about MLM. Thank you 🙂

Rodger Burney

Excellent information that most people don’t know, please continue to keep us informed.

G. Hotep, California

Thanx again for such great info!

Rachel Forrest, TN

this is great- i can FINALLY stop wrestling with the notion of whether my business is a scam or not, I’m going to show this to everyone i know who doubts me!! 🙂

Anny Williamson

Very good information,it covered just about everything you could want to know about the MLM business,

Kees

Again this is BS.
In mlm all the people in the piramid do the same thing.
In a real organization the people add value differently. Not all are salesmen.

Cheryl Henderson-Khalid

Hi Tim, I found out about this great site while listening to your Mastermind session with JMF. So many people don’t understand the importance of critical thinking and finding out facts BEFORE they make a decision.

And in response to Kees, in my organization many serve as business coaches, mentors, teach advertising techniques, work as personal trainers to help people overcome their past, while others help people understand their product line better as well as sell. The real difference is that in a good network marketing company, the compensation far exceeds what you’ll ever get in a traditional business.

F.Denise F, Columbia SC

In MLM you can make more than the people two levels above you. You will never make more than the executive two levels over you in a traditional job.

PhilP

Wow!
Great explanation!

It’s logic now to say we prefer receiving 1% of the effort of 100 people instead of making 100% of the effort ourself!

Jim

Thank you for giving our industry a reasonable voice

gogo54

I work at the bottom of the “pyramid” in a traditional business. It is not presented to me as a forever growing pyramid. I know that I am at the bottom.

In MLM I am told, that the pyramid can exponentially(!) grow forever, and it just isn’t true. And if I can’t recruit in MLM, then I can’t make a living out of it.
Yet if I am at the bottom in a traditional company, I can still make a nice living.

stay at home moms

I rarely comment on blogs but yours I had to stop and say Great Blog! Great great share here. I will bookmark this website =)

work at home mom job

Awesome – Thanks for sharing! I read your and John chow blog daily!!

Milagros oporta

thank you too much, I have been in MLM By three years, Before I did not know anything about mlm, I love people, I was always involve in sales in my spare time because I love the product it was good to get extra money, knowing people and sharing with them the product. For that reason I got so excited to be able to find a company that give me the oportunity to have my own business with small inversion and the best thing to pay me to do my job over and over again, the business is telecomunication, every time that pay my phone the will pay me commition but the best if you invite someone to do the same they will pay you commision over and over again. For me it was the best thing That I have been listening. I say to my self if I need to work 10 years, 15 year why not to work for a company to pay me for all my work over and over. I am spanish from Nicaragua, I did not know all the negative think that people think about MLN. I am living an AUSTIN TX. We are the pioneer in this mlm can you imagine. I have been very difficul to share with spanish community that NOW I am very focus on bilingue or english speaker. I so greatful to be on MLM, I am committed to learn about the network marketing to become professional and become a leader to the spanish community around the world, I do not know if you think american people need that, how people for latino america will need this kind of business.Thank you so much for this important information

MLM New Method

Thanks for more info,
I am currently searching for more info
about mlm, for my new mlm
business. And i am really wondering if this
business will suit for me. will it be a
success or a failure. Your post can really be a great help.

kiko cadorna

Thank you so much!!!
This is the best article i ever read in MLM!

sookdeoboyz

very good topics

Rolf Bogner

Absolutely wrong! MLM is not an “illegal pyramid” system nor a “l e g a l p y r a m i d”, it is a network organized business system. A Network is never a pyramid. The comparison and justification of actual pyramids (state, enterprises, church, school, military, etc.) is absolutely wrong! MLM is neither structurally / morphologically nor functionally a hierarchical pyramid, MLM is abslut the shallowest form of organization ever: MLM is a absolutely h e t e r a r c h i c a l dynamical form of organization and consists of independent self-organized autonomous units. The organizational structure is (network typological) a dynamical star with dynamical trees and branches roughly comparable with a family tree w i t h o u t a l l the h i e r a r c h i c a l functions of organizations like e.g. traditional enterprises. The tree structure is only the temporal and spatial sequence of affiliation and serves strategic purposes of the construction of business expansion and calculation of income and forms the basis for the application of the marketing plan. That’s all. There is no Master-Slave structur or Function, the main mark of a hierarchical pyramid.

Chadwick

After looking at a few of the articles on your site, I honestly appreciate what you are showing me. Thank you this information will help me a lot as I move forward in my own network marketing business.

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