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May 15 2010

Why do entrepreneurs fall for network marketing scams?

Last year, I completed a thirteen-month certificate in entrepreneurship a local Community Business Partnership. The program covered topics like marketing, finance, communications, business law, and QuickBooks accounting. Overall, the courses, instructors, and students were quite good. There was a strong bond between we dozen students, and everyone had his or her own independent business idea.

But since the program ended, I've received two odd phone messages from ex-classmates. Both were along the lines of "I want to talk to you about something; call me back."

I called the first person back, and she said she was hosting a networking event for entrepreneurs at her house. I couldn't make it that night but thought it was a nice idea. Then she started talking about a telecommunications "business opportunity." She never really explained what it was but told me I should come to this presentation to see if it was the right opportunity for me. Lesson learned: Don't respond to vague voicemails left by people you don't know well. (By the way, this is a good reason to always leave a substantive voicemail if you want your calls returned: "Call me back" could be seen as the opening to a scam.)

The second time I got a strange voicemail, I was a little wiser and emailed the caller back. She'd said something in her message about wanting my help, so I wrote that if she told me how I could help her, I'd get back to her. (My wife has an editing business that I'd talked about in class, so I thought maybe she needed help with a written piece.) Her response was that she'd started a part-time job with an insurance company, and she and her rep wanted to come talk to me for an hour about the company. So at least I avoided another weird phone call by emailing her back.

Pyramids in Egypt

I have to admit that I don't know enough about either of these "business opportunities" to say for sure whether they're scams, network marketing, multilevel marketing schemes, legitimate businesses, or what. But the fact that I can't tell you what they're really about after these people contacted me about them is the whole reason I don't trust them.

When you're trying to interest another person in your business, you have to be able to get the gist of your message across in a thirty-second elevator pitch. That's what we learned in the communications class for the certificate program, which both of those students took.

If she can't tell me in a few sentences what her business is about, why should I spend an hour listening to her about the details? Either she's a poor communicator, in which case the hour will be an exercise in frustration, or her "business opportunity" is a scam, and she'll try to influence me to buy an overpriced service, or join her network of sales reps, or both. I imagine it's like those timeshare "seminars" where they offer you free Disney admission if you listen to their pitches until you either buy a (rip-off) timeshare or want to scream!

I know all kinds of people are prone to falling into these kinds of traps, in which they try to influence their contacts to buy into something of questionable value. They never explain what the business really is or what's in it for me.

What particularly disappoints me in these cases is that the people were entrepreneurs who should've known better. The whole point of taking these classes was to start your own business, so why were they willing to become a cog in someone else's business? As my second classmate wrote, "This will allow [me]...to gain more knowledge and credit as a business owner." If you want to gain more knowledge and credit as a business owner, start your own business! I'd be happy to give a fellow entrepreneur, especially one I knew well, advice or some help for their own business. But if it's not your business, and you see me as a target rather than an adviser, count me out.

There is a fine line here: Virtually every entrepreneur leverages their connections to help publicize or build their business. I think that's fine, as long as the entrepreneur is just asking for a bit of time and presenting something that they honestly think is in their contact's best interest.

What do you think: Are aspiring entrepreneurs more likely to fall for these kind of network marketing scams than the population as a whole? Why do you think that is? Have you, as an entrepreneur, ever pitched your friends and then felt you'd made them uncomfortable or abused their trust?

Share your experiences: Have you ever been bamboozled into sitting through one of these hour-long pitches?

Image credit: Pyramids: Wikimedia commons.

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