# Would this be a prymid scheme?



## MisterPerfect (Nov 20, 2015)

If someone is manufacturing products to sell and paying for them but decides to pay a manufacturer to make the pieces for them, and than sales people who sell the product and get a cut based on how much they sell. Everyone gets a percent of what they sell but the person who gets the most is the head, since the head person is the one actually purchases the pieces to be manufactured. 

The pieces will be parts that will be made into something else. Like lets say the head is buying pieces to build a computer but instead sends the computer to be built by someone else but knows where to get the parts cheaply. So they will buy the parts and give it to someone else who will put it together, and than all the built parts will be sent to sales people to sell. 

The manufacturer will get 30percent of profit and the sales men will get 5-10% each depending on how much they sell. Everyone is getting money out of what is sold, and the head is getting whatever is left after paying for new pieces and whatever other cost it takes like licenses and paying its workers the small fee. The head will be responsible always to pay for pieces to manufacturer and the income of all workers will vary based on how many can be made and how much can be sold.


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## LandOfTheSnakes (Sep 7, 2013)

What's a prymid?


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## MisterPerfect (Nov 20, 2015)

LandOfTheSnakes said:


> What's a prymid?


https://en.wikipedia.org/wiki/Pyramid


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## LandOfTheSnakes (Sep 7, 2013)

MisterPerfect said:


> https://en.wikipedia.org/wiki/Pyramid


No, that's about pyramids


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## MisterPerfect (Nov 20, 2015)

LandOfTheSnakes said:


> No, that's about pyramids


Yes, DUH! Now take that word and add "Scheme" you get the word.


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## LandOfTheSnakes (Sep 7, 2013)

MisterPerfect said:


> Yes, DUH! Now take that word and add "Scheme" you get the word.


I was asking about the word "prymid" in your title.


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## Razare (Apr 21, 2009)

It's not really a pyramid scheme in how that term is used.

What that business is, is called a "middle man". Every industry has middle men, but usually you want to cut out middle men unless they add value to what they're selling, making them worth it.

Sometimes, middle men will do a great deal of research, price shopping, and negotiation on your behalf. For example, if your company wants to buy a wide assortment of parts, but all small quantities, you need to deal with a middle men. Middle men purchase in bulk, and then sell individual components to those who don't use a lot. In this instance, they'd likely mark up the products at least 30% and up to 50%. But the value to the customer is they didn't have to buy more supply than they could ever use.

Also, the company I work at is a middle man for a product. But companies use us, because along with the product we are reselling them, we install the product, we stock parts for the products, and they can call us for phone support. If they dealt directly with the manufacturer, they'd have to install it themselves, figure out what parts they need themselves, and so on.

There are a lot of reasons for middle men, but they work the best when they're adding value to the final product. If there is no value added, the smart businesses will bypass the middle men as soon as then spend 10 seconds doing any research online.


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## MisterPerfect (Nov 20, 2015)

Razare said:


> It's not really a pyramid scheme in how that term is used.
> 
> What that business is, is called a "middle man". Every industry has middle men, but usually you want to cut out middle men unless they add value to what they're selling, making them worth it.
> 
> ...


The purpose is if the main person has to sell and build all the products themselves they sell less products. If they give a portion of the pieces to someone to build, plus build there own or give it to multiple manufacturers and multiple sale men they can sell a lot more product than doing it on their own. 

Now they actually go over this problem in big bang theory. Penny starts a business but it takes too long for her to do it herself and she cant keep up with demand. She convinces her friends to help but they still are having problems finishing in time. The purpose would be initially pay the start up fees, see how much a manufacturer can make in how long that would take. Than find sales people and see how much they can sell and add more manufacturers or more sales men accordingly. 

Since the head man will be getting most of the profit and not spending a lot of time on sales and manufacturing they have free time to do other things with their time and wont risk being burned out trying to sell and build the parts themselves but still making a decent profit from their investment and with the constant flow of sales they will have constant money to invest and always have money in their pocket. Also if say the person with the original business plan is not a good sales man or does not have a ton of contacts they can hire someone who is more popular and outgoing to book up the sales for them.


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## ShadowsRunner (Apr 24, 2013)

Razare said:


> *It's not really a pyramid scheme in how that term is used.*
> 
> What that business is, is called a "middle man". Every industry has middle men, but usually you want to cut out middle men unless they add value to what they're selling, making them worth it.
> 
> ...


Yes it is.

Same difference, but only different titles and names.


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## ShadowsRunner (Apr 24, 2013)

oops, oh my gosh, oh my gosh I made such a fool out of myself.

I am sorry guys, I didn't read this. I just was like, I don't, I'm silly. I'm so silly. Just forget what I said

No, that's not a pyramid scheme.

Sorry, sorry I just felt like rustling sum' feathers a bit. You all carry on now, ya hear?


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## Razare (Apr 21, 2009)

Edit: Oh sorry I see you retracted.

Yeah, I mean I can see how people might see businesses as pyramid schemes, but they technically different.

https://en.wikipedia.org/wiki/Pyramid_scheme

Most pyramid schemes wont pay you normal wages to work for them either. They'll lure you in as an associate and make you work a ton for free, and you have to work your way up the pyramid.

Maybe this is what he meant? That the people who do manufacturing would work for free as an associate? It's illegal in the US, pretty much. It's fine if they're doing sales and work on commission, but if they're making the product for the company to sell and you pay them nothing, it's illegal.


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## MisterPerfect (Nov 20, 2015)

Razare said:


> Edit: Oh sorry I see you retracted.
> 
> Yeah, I mean I can see how people might see businesses as pyramid schemes, but they technically different.
> 
> ...


No, the manufacturer get 30% of anything made from sales, and sales people get 10%. So the more they sell the more money the funder, and the manufacturer will make. The funder gets whatever is left after sales person is paid, and manufacturer is paid, and they have paid all other expanses. So everyone is sharing money from the same pot. However no one has a set income since the profits are souly dependent on how much they sell and how much the manufacturer can make at a time. If the manufacturer cant make enough the funder will make some part time, and probobly hire a second manufacturer.


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## Razare (Apr 21, 2009)

MisterPerfect said:


> No, the manufacturer get 30%


I was going to say you're wrong, but when I went to do the math, I realized you're right. Manufacturers would get about 30% of the retail cost in most instances of small products. 1/3 goes to wholesalers, and another 1/3 to retailers, in a full mark up environment.

But, why you want to call 30% manufacturing cost a pyramid scheme, though isn't quite sinking into my head!


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## flamesabers (Nov 20, 2012)

Pyramid schemes usually have a few red flags that make them distinguishable from legitimate business operations. For instance:

1. You're required to buy the company's products or otherwise pay a fee to work for the company.
2. Unless you're a starting person in the company, it's virtually impossible to make a decent wage from the commission structure no matter how much you work.
3. The company has little or no screening processing for choosing who to "hire." 
4. There is a greater emphasis on recruiting new people than selling the actual product(s).
5. The company makes promises that sound too good to be true. (i.e. you can make loads of money from commissions without having to put in a lot of hours). 
6. The company has an insanely high turnover rate due to the number of new recruits and subsequently quitting when they realized the company is running a pyramid scheme. 
7. The company has been previously been involved in legal lawsuits regarding accusations of running a pyramid scheme and/or has changed its name an unusual amount of times in recent history.


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## tanstaafl28 (Sep 10, 2012)

No, A pyramid scheme is a scam. You invite people in with the promise that the more people they get to buy in the more money they will make, but in reality, it only makes money for the people sitting at the top. 

What you demonstrate is a distributed manufacturing process. It seems like everyone gets a cut from the process, so nobody is really getting scammed.


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