There are some opportunities that truly are too good to be true.
One of these opportunities, called multilevel or network marketing, is a way of selling goods or services through distributors. These plans typically promise that if a person signs up to work for a company, he or she will receive commissions for their sales as well as those who he or she recruits to come to work for the company.
“We’re not offering jobs,” said Matthew Barnes, a former OSU student who took an offer to work for a local network marketing company. “We offer students a chance to make some money working on their own.”
Several of these companies have come to campus to recruit Ohio State students, claiming that students can go into business for themselves, work at their leisure and stay enrolled in classes if they choose.
Pam Park-Curry, the director of undergraduate career services at Fisher College of Business, said the college does not endorse companies that require students to invest their own money when getting started.
“We look at every case separately, but we always tell students that we’re very skeptical of any company that makes you pay to get involved,” Park-Curry said.
Park-Curry also said the Fisher College of Business normally does not allow these companies to participate in their student job fairs.
“We always do a very thorough check of all the companies that participate in our job fairs,” Park-Curry said. “It’s very important for us to bring quality companies in and protect them against companies that might be trying to exploit them.”
The lack of endorsement has not stopped companies from trying to recruit OSU students. Some companies have attempted to sneak into job fairs or pose as students to come onto campus.
“We’ve had several instances, including very recently, when we’ve had young people, either in the dorms or around the business school, passing out business cards and trying to recruit students,” Park-Curry said.
Some multilevel marketing plans are legitimate. However, others are illegal and are known as “pyramid schemes.” These schemes involve a system in which commissions are based on the number of people someone recruits. Most of the product sales are made to these distributors, not to consumers in general.
The underlying goods and services, which vary from vitamins to water purification systems, serve only to make the schemes look legitimate. In this system, no products are actually being sold. Instead, the money comes from a chain of recruiting new people, who then recruit new people and so on.
Network marketing companies recruit people to do two things: sell their products and recruit more people to sell. When someone becomes an associate for one of these organizations, they make money, in theory, by selling their products and earning a commission on those sales. But what draws most people to these companies is the chance to make money without having to sell because they also earn a commission on sales made by members they have recruited.
These companies are recruiting students to get involved in “an exciting business opportunity.” But this opportunity has a price.
Most companies have buy-ins of about $400, which gets them in the company and gives them access to a product they can try to sell. Another important part of a network marketing company is the recruitment of other people. As a person recruits more new people into the company, they move up to a new “level,” which allows them to collect a larger percentage of the money they make for the company.
These networks have proven to be risky over the years because the vast majority of participants lose money to pay for the rewards of a select few.
While Curry admits there are some legitimate network marketing companies, she suggests interested students should do as much research on a company as possible before investing their money.
“We can’t ever forbid a student from going to work for one of these companies,” Curry said. “We just want them to be careful and do their homework.”
In many cases, consumers spend a lot of money to “build their business” by participating in training programs, buying sales leads or purchasing the products themselves. Too often, these purchases are all they ever see for their investments.
While many companies promise a chance at big profits, they will admit it takes time to start working. Most companies note the average wait for this profit is between three and five years.
Several students on campus say they have been contacted on campus but have turned down offers to join these companies.
“I had a chance to join several companies that were involved in network marketing,” said Rich Galzarano, a graduate of Fisher. “I didn’t get involved in them because I figured after working hard for four years, I wasn’t going to take a risk investing in a company when I had a chance to work for a solid brokerage firm like Morgan Stanley or Merrill Lynch.”
In a poll of about 60 OSU students, most said they did not know much about these companies, but they would be hesitant to put in their own money.
“It just sounds like a big risk,” said Ryan Mills, a senior in biology. “I know it doesn’t sound like a lot of money, but to a college student it definitely is.”
While these network marketing plans can be risky, several students have taken the opportunity to get involved and are happy with their decision.
“I listened to what they had to say and got advice from some people that I trust,” said Eric James, who took a job at a local network marketing company a few months after graduating high school. “I thought it was worth the risk and so far I have no complaints.”
