Pyramid businesses, what are they and how?
If they offer you something that seems too good to be true, what they offer you probably isn’t real. A large percentage of the world’s population seems to like things easy., which leads many people to believe things that are not true. Pyramid deals are schemes that offer things that are too good to be true.
All over the world thousands and thousands of people have been victims of pyramidal businesses producing as a result that the person remains in economic canalla. Despite this, this market in which few have benefited, continues to genera millions of dollars a year leaving large numbers of victims along the way
What is a pyramid business?
A pyramid businessalso called pyramid scheme or pyramid scam is a business model in which the participants recommend and capture They (refer) other customers with the ultimate goal that those new customers provide benefits to the older customers. These businesses are illegal in many countries around the world.
In this Business Type the number of new customers is required to be greater than the number of existing customers; for this reason it is called a pyramid. The pyramid business They work as long as new clients are enrolled, which indicates that when clients stop enrolling, then the business falls, producing losses for many clients.
This business system is managed as long as new clients are affiliated in a sufficient number to benefit the previous ones. If this saturates, lprofits begin to decline and there will be many customers with no profit. For a pyramid business to work, it is necessary that it follow the shape of the pyramid.
Types of pyramid businesses
Business or pyramid schemes are divided into two types: open pyramids and closed pyramids.
These two types of businesses or pyramid schemes are described below:
open pyramids
In this pyramid scheme the participants or clients cknow the structure of the business and its operation. This type of business works because many users are not informed or understand the saturation concept (excess supply of products), or because they bet on these high enough in the pyramid to receive the benefits before saturation.
An example of open pyramids They are the cells of abundance. The cells of abundance are presented as a fast financing system that promises huge percentage profits, such as 800%. Example: Here investors are asked for an amount of €10,000 and the profit is €80,000. To make a client win that amount, 8 people are needed to invest €10,000.
closed pyramids
This pyramid scheme It is based on the fact that a person or institution functions as the door of the system and owner of the pyramid, but is presented as a investment broker, However, it is not. All the management of this type of pyramid is done through said person, who receives the investments and pays the promised interest.
An example of closed pyramids in a ponzi scheme. The Ponzi scheme is a pyramid scheme in which pay interest on an investment using the same money invested or with the money of new investors. Hyip schemes are a type of ponzi scheme.
How do pyramid businesses work?
He pyramid business operation It is based on the two types of pyramid businesses that exist.
The operation of these business schemes according to the type of pyramid business is presented below:
open pyramid
In this pyramid schemel a usuario A is referred by a usuario B (this usuario is already part of the pyramid business), who has a list of previous participants, for example: Y también, D, C. Usuario B has to make sure that usuario A pay an amount X at the head of list Y también, and delivers a new list to usuario A, for A to refer several more participants.
In the new list, usuario Y también is eliminated, usuario D goes to the head and usuario A is added, the new list being DCBA.
The quantity X, the list size N, and the number of people to be recruited P are all fixed, and the expected profit is X. P ^ N, which implies a expected return of the investment of P ^ N .100%. The higher the expected return, the faster the objetivo population perro be saturated.
closed pyramid
This pyramid scheme has an owner who manages the investments and payments. The closed pyramid It is afín to an open pyramid, where new users pay the earnings of previous users, but with several differences. Below are these differences:
1- The users they don’t have the knowledge that they are users of a pyramid scheme although they might be suspicious. Normally, the owner of the pyramid sells the iniciativa that there is a highly profitable investment.
2- The amounts may not be fixed, neither the number of referrals (recruited), nor the size of the list; but, it is equivalent to a short list with a short number of required affiliates.
3- The owner of the pyramid it takes a huge chunk of the proceeds before paying off previous investors.
In a afín scheme to the open pyramid with N = 2 and P = 2, for every $100 invested the usuario could expect $400. Despite this, the pyramid owner promises to return $300.
Characteristics of pyramid businesses
Businesses or pyramid schemes have a equipo of characteristics that represent it.
The main characteristics of pyramid businesses are presented below:
1- Big income is promised in a short time: The fact of paying a profit based on 8-10% is relatively easy at first. This is because whoever has made an investment does not usually ask for all of their money shortly after making the investment.
2- They ask you to refer more people: Even though they don’t ask for it, they may mention that they need to refer more people for the business to work properly. If you hear something afín to this, be alert that it may be a possible pyramid scheme.
3- You are not clear where the profitability comes from: The generation of money has to have an origin, but they do not provide you with a clear or well-explained explanation of where they obtain the returns.
Signs to know when a business is pyramidal
There is a signal series that cánido indicate that the business is a pyramid, so it is important to know them. Below are these signs:
1- No trust who offers you huge profits for your money in a short time.
2- Reject invitations to participate in chains, investment clubs, donations and any proposal that comes through physical flyers or on the Internet.
3- You must be aware to any sign of business in which they demand money and the linking of friends and family in a mandatory way to increase their profits.
4- No invest your money without fully understanding the operation of the business, as well as the scope and content of each document they receive and sign.
5- Do not trust the business structures unclear and offer little information about their business model.
6- If they do not inform you with enough clarity where the resources they promise you come from, if said earnings do not have a valid justification, refrain from delivering your money.
7- Verify that the entity that offers you good investment options is recognized and monitored by market authorities.
8- Do not trust people who attest to the large profits received by those schemes business, since many times they do it to excite third parties and give credibility to their business model.
9- Remember that the administrators Most of these schemes avoid using the term ‘pyramid’ or ‘pyramid scheme’ to detalla their business model, presenting themselves as ‘mutual aid’ or ‘support’ mechanisms.
10- Refuse invitations to participate in meetings, groups or popular networks in which they propose good businessand in which many times their administrators ask to deliver the money through money transfer companies.
Unsustainability of pyramid businesses
The pyramid business I am very unstables, since they work with several levels of depth (3, 4, 5, 10,… levels of depth). The main problem with this business scheme is always the same, the last participants who join or those who do not know how to promote always lose their money.
An example of this problem is presented below: The vast majority of these business schemes they do not have more than 10,000 referrals, with which by following the pyramid you will have 1,200 users recovering their investment, 216 users making some money, 36 users making a lot of money, 6 users making a lot more money and 1 usuario making a huge amount of money.
The manager of the business making a lot of money and finally 7,776 people totally losing their money.
forced matrix
To combat this problem, the “forced matrix” which means that even if you do not know how to promote, if you register at the beginning you will have the possibility of get some money. Example of forced matrix of 6: your sponsor, yourself agregado 5 people, your 6 referrals and 30 referrals, your 36 referrals and 180 more referrals.
This indicates that if you don’t know how to promote but your referrer does, once he fills the 6 levels below him (that is, he gets you and 5 more referrals) all other referrals you get they will sit below you and the other 5, so with a good “referral” you may earn some money.
Relationship of pyramid businesses with multilevel
The obvious difference is the definition. Multilevel Business or Network Marketing (network marketing), while a pyramid business is known as a “pyramid”.
Another of the main differences is that one is legal (multilevel) and another is fraudulent (pyramid).
registration cost
For business legal MLM, the registration cost is affordable for the person, since the objective of these companies is to get clients to sell their products and/or services. In this direct sales system, people benefit from their sales and those generated by the people in their network.
in business or fraudulent pyramid schemesThe cost is normally high, since their main objective is to get people to invest in the business, not clients.
Products and/or services they offer
In MLM businesses you cánido find a wide range of products and/or services of great quality to distribute among your clients. In addition to this, they offer you a money-back guarantee and comply with the regulations of the countries in which it operates.
In business or pyramid schemes generally there are no such products or services. This business is always focused on something illegal and in terms of permits, they will always tell you that they are in process, etcétera.
Compensation plan
In multi-level businesses, your percentage of profit depends on what sell to your customers, agregado an plus amount that your marketing network offers. With this compensation plan, normally the one who works the most earns the most.
In pyramid businesses, your profits are generated by recruiting people to the business, who become investors.
Time to see results
In legal multi-level businesses huge economic results cánido be seen in the medium and long term. Some honest network marketing companies teach their distributors that their own sales are to cover the financial needswhile the profits made by network marketing are to fulfill your dreams.
Fraudulent pyramid schemes use the promise of “get rich overnight with little effort”. They apply the motivational therapy system to brainwash their investors to fall easily and bring more new victims to the business.
Taxes
Legal multi-level businesses always disclose their taxes and they issue a purchase invoice to their affiliates for all the products and/or services they sell to them. In this way, for the payment of commissions they require their affiliates to comply with all the tax regulations that apply in each country.
Fraudulent pyramid schemes do not declare all their income, and what he declares is disguised as donations to avoid paying taxes. In this way they do not usually provide invoices for their sales.
Conclusion
Business or pyramid schemes they are a reality that exists both en línea and sin conexión. They are in charge of looking for people in economic need and who have the objective of make a lot of money in a short time. It is for this reason that you should be very careful with the business offers you receive, especially on the Internet, since they are frequent.
Before entering any business you have to know all the conditions and consider the different aspects to see if it is worth going into this one or not. If you see that something is not clear and no matter how many questions They don’t give you a convincing answer.it is best to have a conservative attitude and not venture into risk with that investment.
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