Many South Africans have fallen prey to unscrupulous con artists who punt pyramid schemes as direct-selling opportunities. Don't become another victim.

Many South Africans have fallen prey to unscrupulous con artists who punt pyramid schemes as direct-selling opportunities. Don't become another victim.

Direct selling means buying a product from an agent at a given price and selling it to the public at a higher price. The agent usually recommends the selling price.

There are two main kinds of direct selling: direct marketing and network marketing.

Direct marketing is when you buy a product from an agent and sell it to the public without recruiting your own sub-agents.

Network marketing usually requires you to buy a product to sell, but you are also expected to recruit others as your sub-agents, thus creating a network. These people must also recruit their sub-agents and that's how the network grows.

Different companies impose different limits on the number of people who can join below you.

Network marketing lures you with passive income, the money you get as commission from the sales made by your sub-agents. The more people you recruit, the more commission you earn. You can earn this money sitting at home doing nothing.

But don't be fooled by the promise of passive income rolling in. Rely on your selling abilities, for that is what business is all about.

If you fail to recruit others you earn no income.

Be careful to distinguish a pyramid scheme from a genuine direct-selling opportunity.

A genuine direct-selling opportunity must have a physical product to sell. You must believe in the product because you can't sell something if you don't believe in it. Ask yourself if you would recommend it to your family and friends. If you can't, don't bother trying to sell it.

Examine the culture and practices of the company's leaders. Are they ethical? What is their main source of income? Do they have a product, or are they just selling information on how to make money?

If they don't have a product rest assured that they are not genuine and they are pushing a pyramid scheme. Don't join.

Pyramid schemes usually have nothing to sell but memberships and there is no direct benefit to being a member. You only benefit when you bring in more members, which becomes increasingly difficult.

Even if the scheme nominally offers a product, check if it can be sold, or if you will be stuck with stock that won't sell.

Check whether the company has changed its compensation plan, which describes benefits and obligations. An outfit that is forced to change its compensation plan shows a weakness and is a clue that something is remiss with the scheme.

The people who set up these schemes are often master salesmen but shady characters. Check how long the company has been in existence and check its success history. This insight can help you make the right decision.