All the concepts based on which the pyramid scheme is working seem too simple and usually, it is represented in front of investors in a disguised manner. Therefore, it is better to stay aware of all its working elements and how does it exactly work.
Let us take a peek at the working of this Pyramid Scheme and learn more here.
How does the scheme work?
As we can identify from the name of the scheme that it should be in a pyramid structure and works from top to bottom hierarchically. It starts from a person who is at the peak of the pyramid and he is the only recruiter of the pyramid who needs to add people. An investor needs to convince a person to invest by paying certain sum of the money.
An upfront amount of money is available for the real recruiter and to recover the same payment, the recruited person needs to hire or add more people so he or she can get their share in the same manner. The upfront payment will be divided among other people of the pyramid scheme at uppermost levels.
If the recruiter has immense convincing power, then they can easily hire some people and get a significant amount of profit from the same. A small investment will be highly beneficial for them to get some desired revenue level, as they want to earn.
Each of the recruiting members will get a small share from it and also, the recruited person will get a portion of investment when they recruit a person, it is known as initial payment.
The process will get continued till the time it needs no support anymore. At such a moment, the people at the apex of the scheme will start earning a huge profit amount but the others at the base will begin suffering from huge loss. People are also making money from postcards.
The Bottom Line
At the end of the Pyramid scheme, we found that there is a catch of no longevity. The scheme works for a certain period and it will stay for long if the people involved in the scheme are highly convincing and can control their team members effectively.
Usually, the scheme is not a thing that can be wealthy. Thus, it is a way to earn profits in a short time. That is why it is not a long-term earning methodology and works for a short period only.