This transcript was generated from the episode audio and may contain minor errors.
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Is my business idea a pyramid scheme? That is the question we're gonna look at today's episode. It's not often that somebody calls in and says, "Hey, like I'm just wondering, "am I running a pyramid scheme here?" But that's basically what we've got here. I mean, we get all kinds of questions on all sorts of topics, but I don't think we've had this one before until today. As I say, it is a safe space.
You can ask anything. And in fact, better to know upfront if your idea is problematic in some way. So what exactly is our brave caller trying to do? Like what is their business model? Let's see if we can figure it out based on the information that they provide.
Perhaps give them some encouragement or some redirection toward a different business idea, perhaps. Welcome to Sida School School. It's Chris Guillebeau, your host every day, taking questions and answers while taking questions, giving answers, providing case studies, tips, ideas, all designed with the goal of helping you start an income generating project. Something you can do without quitting your job and with a skill you already have. All right, with that in mind, detailed question and my answer coming right up.
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Hi Chris, this is Claire from Seattle and I found your show last year through iTunes. I have an idea. I wanna create a fashion review network that gives out points to people who post in the app. The points can convert to real money and the more people use the app or refer their friends, the more points they'll receive, which of course can eventually turn into money. My friend, however, told me that this is basically a pyramid scheme and I've always liked Egypt but I don't wanna do anything shady or unethical.
So I thought I'd ask you first. Is this idea actually a pyramid scheme? If so, what are the characteristics that cause you to think that? Thanks. - Well, Claire, as I said in the introduction, it is a brave question.
Better to ask this question than to not ask it. Like if you're wondering, is this business legit? Probably better to investigate that rather than just assuming. And in this situation, I'm not sure we have enough info in the brief description to say whether we can apply that label pyramid scheme or not. But I can tell you exactly what it depends on.
The answer depends on the answer to this question, which is what is the actual product? Like what are we actually making? So Claire says it is a fashion review network that gives out points. Is there a real product or service beyond those few words? If there is, then it could be legit.
Nothing at all wrong with a loyalty program. Nothing wrong with affiliate programs or referral programs or incentivizing buyers in some way. I mean, that's just capitalism, right? And by that, I mean like the good kind of capitalism. It's just buying and selling.
It's the world that we live in. But if the revenue model is like, get a bunch of people signed up and if you couldn't keep doing that, then everything would fall apart. Then that's kind of the definition of a pyramid scheme. If you're paying off the original buyers with whatever the new buyers contribute, that is a pyramid scheme. So my guess is that Claire is not setting out to scam people here.
If so, she's probably not gonna ask, is this a pyramid scheme? But perhaps she hasn't fully thought the idea through. So I would just keep thinking. I would focus less on that referral engine. That could be a feature or a component.
But I would focus more on the product and use case. So it's always good to ask, how will this business help someone? That's just a very simple way to approach the whole thing. And if you don't have a clear answer, then you probably don't have a great business idea. Whether it's a pyramid scheme or not is almost irrelevant.
Like, how will this business help someone? Just think about that. Make sure you have a good answer to that. And then you're most likely gonna be on the right track. Listeners, let me know what you think about that or anything else, and come check out the resources on the website.
You can download or stream the entire history of the show. Almost 3,400 episodes now completely free. All that is on the website, sidehustleschool.com. The new episodes, seven days a week. They come out wherever you get your shows, Apple, Music, Spotify, any other network.
And of course, always free as well. My name is Chris Guillebeau. You are listening to "Side Hustle School." [Music]
From the Onward Project.
