Thinking of going solo and flying high with an online business? Read this first to understand the risks …

 

Network marketing is a legitimate business. It’s based on providing people with real, legitimate products they need and want at a fair price. While some people do make a lot of money through network marketing, their financial benefit is always the result of their own dedicated efforts in building an organization that sells real products and services.

Since it is a legitimate pyramid scheme, the more you recruit the better it is. But how does the recruitment process work? There is no HR standard whatsoever. If they think you could make them some money, they will try and recruit you. Every single person has the potential to make good money with network marketing in the short term, with the so-called family network. The pitch to the family can be made in any way, they will buy the product regardless, just to support your ‘new project’.

People that are trying to recruit you, if you’re successful, will support you in the short term by pushing you to sell your products to your family members, and then leave you on your own to run your network marketing ‘business’.

The first problem you will encounter though, is that you are running this business as a self-employed person. You will not be an employee of this network marketing company that promises you six-figure earnings.

This means you simply have no fixed salary, no minimum wage and you don’t have any legal rights that ordinary employees are usually granted by their employers. But, the network marketing companies make it clear, you get what you put in. That is fair enough.

Anyways, you still have to think a bit more about it: for instance, in the case where you get injured and are not able to wok, you will not be able to claim sick pay, how will you support your family then?

However, the main problem is that you are not actually running a business. You will probably not have a company registered at Companies House, and therefore will be open to legal actions from literally anywhere.

In company law, there is a principle which says that if you are running a company, you will be able to hide behind it. This basically means that the company will be your shield in case of lawsuits. If your company gets sued you (as a physical person) will be able to simply walk away from it, while the company itself (the name on paper and all the property associated with it) will deal with the consequences.

That said, as a self-employed person with no company as a shield, you will be unprotected from possible lawsuits; for example, where a business transaction goes not as expected.

To elaborate: if I have a business and like the product you are selling and decide to buy it from you on a regular basis, I will write you up a contract stipulating that you will have to provide me with 100 units of that specific product every first day of the month. If you fail to deliver the goods on time for any reason, I the buyer, under s.51(1) of the Sale of Goods Act 1979, will be able to bring an action against you to request damage for your failure to deliver me the goods.

The point here, is that you will not be able to escape my claim, you must fight in court, and possibly spend the entirety of your ‘six-figure earnings’ on just one court case.

You may think, this is unlikely to happen. But I listed just one scenario out of the hundreds you can end up in.

In my view, this is absolutely foolish. If you work as a network marketer, you are simply taking unjustified risks. You should take risks, because after all business is about risk-taking, but it is also about risk assessment and opting for reasonable risks after a thorough analysis, not ones that could cost you everything.

Good luck to everyone!