A new post about pyramid schemes on UnhappyFranchisee.com dissects the sales pitch of one alleged scam (YourTravelBiz.com) and contrasts it with the reality of the situation – all in nifty chart format. Check it out:
If you’re not familiar with the term, a pyramid scheme is a business scam that generates money primarily by enrolling other people into the scheme, without any product or service being delivered. Eventually, the whole scam collapses under weight of its own deception, and everyone but those at the very top (who made a ton of money while the scam was rolling) lose.
As UF points out: “The key to detecting a pyramid scheme is to look to use of the products or services at the end user-level – not the growing numbers of enthusiastic investors. Even if thousands of individuals are buying $1500 starter kits of revolutionary herbal supplements, you want to make sure end users are buying and using the stuff. The reality may be that the totality of company sales is furnishing garages and spare bedrooms with pallets of aging alfalfa.”
A Ponzi scheme is a similar type of scam that involves promising or paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any actual, viable business. The Ponzi scheme is always doomed to collapse because there are little or no underlying earnings… just the same money being spread around before the perpetrator skips town.
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