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Before You Join: Six Questions to Ask

Erik Dryer | Stone | Getty Images

Multi-level marketing companies offer promises of riches to those who sign up. But keep these six questions in mind before you do:

1. Can you make a sustainable profit from just selling the product, without having to recruit a single person?

2. How much of the product is sold to retail customers, that is, customers who aren't also distributors in the network?

(Read More: From High Energy Clubs to Dashed Dreams: Herbalife Tales.)

3. Does a company's compensation plan incentivize you to buy large amounts of products to qualify for a more senior position in the network and bonus checks?

4. How long does it take to make money and how many distributors do you need to recruit to make money?

5. What's the failure rate and average compensation (for part-time/full-time involvement)?

6. Are the expenses of promoting and running the business higher than the average distributor compensation?

P.S. If you can't get straight answers to these questions, you may want to consider another line of work.

—By CNBC Markets Producer Karina Frayter

  • Herb Greenberg is the editor of Herb Greenberg’s Reality Check, a subscription newsletter for investors focused on risk.