Pre-Paid Legal Small Business Opportunity: Pyramid or Legit MLM?

Pre-Paid Legal Small Business Opportunity: Pyramid or Legit MLM?

Pre-Paid Legal is a network marketing company that specializes in the sale of legal services, which its representatives sell as legal insurance as clients can have attorneys on call by paying monthly premiums at varying rates.

There are two ways that people interested in this company can become involved. The first is to purchase the services as noted above, and the second is to become a sales representative, which allows one to purchase any of the insurance policies, as well as sell them, while having the opportunity to build a network of other people doing the same, potentially earning them a substantial income.

Is Prepaid Legal a Pyramid Scheme?

Network marketing companies can sometimes become confused with a pyramid scheme, and pyramid schemes are sometimes promoted as networking opportunities.

A network marketing company is an entity that allows people to become salespeople for a product or service while allowing them to bring others in to do the same, bringing them a percentage of their profits. It is like franchising in that when the McDonald’s corporation sells a franchise to someone they will pay a percentage of what they take in to the corporation.

A pyramid scheme gives off the appearance of a networking (or franchise) opportunity, but its differences come in two areas:

A networking opportunity that has a high registration cost is usually a pyramid. “High” is a relative term, so here is an example. If a person pays $500 to get involved with a company and a small percentage of that $500 goes to administrative costs while most of it goes back to the new representative by way of product information and goods or services, then the opportunity is legitimate. But if $200 goes to the company for administrative fees and $200 goes to the sponsoring representative as a referral bonus, the opportunity is a pyramid scheme.

Additionally, products have to be competitive in the marketplace. If they are not, then this could be considered a deceptive trade practice because even the lowest person in the network is supposed to receive value for being involved with the opportunity. Overpaying for products and receiving little value for registration would be contrary to this.

Pre-Paid Legal costs $249 to get involved with. $69 goes toward registration fees. Its services are said to be of good price for the value one receives, making it a legitimate networking opportunity.

How Many People Make a Good Living off of Prepaid Legal?

The numbers of who and how many people make a “good living” off of Pre-Paid Legal is unknown partially because some people can live on less than others.

But if one was to speculate off of other networking statistics, an Amway Global Platinum IBO earns about $48,000 in commissions before business expenses, which cost the average networker $8,500 a year. To build this kind of group, one might need as many as 100 people in his network. Given the attrition rate between people not being serious, or falling out for other reasons, one might reason that about 1/250 people reach this level.

If one was to think of networking opportunities as being universal, then about 0.4% are either making good incomes, or good supplemental incomes, in Pre-Paid Legal, proving that making a good living is possible, but, like many things, improbable.