Is Multi-Level Marketing (MLM) a Good Opportunity for 8pm Warriors?

“I’ve got a business opportunity to talk to you about.”

I’ve learned to hate that phrase…

Years ago I promised myself that I would always listen to anyone who wanted to discuss a business opportunity, without exception.  There had been several times when leaders ignored an opportunity I brought to them, and one time I started a successful business to take advantage of the idea myself.  They missed out.

I don’t want to make the same mistake myself some day.

And so I find myself regularly approached by eager 8pm Warriors looking to tell me about their “big opportunity”.  Unfortunately, it’s usually Muli-Level Marketing (MLM) or Network Marketing like Amway, Quixstar, or Market America.

I still respectfully listen to the pitch for a while, but I usually end up stopping them with a earnest plea to do something profitable with their passion.  After all, they just wasted their gas, money on samples, marketing materials, and time.

Today, when I read Robert Vander Roest’s blog post “Is MLM a Scam?”, I felt compelled to share my thoughts with more than just the poor guy who came to visit.  Here they are…

Because I deeply understand and appreciate the motivations for finding a way to make dreams come true, I’m going to offer some respectful, but pointed advice for people looking to be successful through MLM:

Don’t do it.

You can make more money with your time.  99% of people who try MLM’s lose money.

There are people with billions of dollars to invest, and you can watch them to see what sort of business is a wise investment. However, I’ve never seen a successful entrepreneur decide to join an MLM, and they have larger reputations and more resources to make it work.

Why?  Because, recruiting recruiters to recruit more recruiters isn’t a real business, and neither is buying product from yourself to make money.

Hear me out.

If any part of your “opportunity” includes buying from yourself while recruiting distributors to recruit distributors, and you don’t work for a recruiting firm or HR department of a wildly successful startup, you need to be skeptical.  Think about what it means to recruit just four levels of 18 people recruiting 18 people…etc.

You —> an eager, talented 8pm Warrior

18 —–>  your closest friends who believed in you

324 —–>   their closest friends who heard you were an 8pm Warrior

5,832

104,976 —–>   more people than the population of Green Bay, Boulder, or Berkeley

If you are talented and passionate enough to be the patriarch of an organization the size of a mid sized American city (without losing anyone along the way), I’d like to personally introduce you to some very wealthy investors that would make your dreams come true for accomplishing a similar task with a real business model.

Need more facts?  Check out Dr. Jon Taylor’s research on the topic

The bottom line is that you can find similar “products” online somewhere for cheaper.  Save your money and find a way to use your 8pm Warrior passion to sell something that people want…leaving you with your money, your pride, and most importantly, your relationships.

Don’t just be passionate, be proud of what you do!

Have a proud night,

Aaron@Biebert

Published by Aaron Biebert

I'm a director, film/video exec producer, leader & 8pm Warrior. I am passionately chasing my goals at all times. I'm listening. Let's talk!

13 comments on “Is Multi-Level Marketing (MLM) a Good Opportunity for 8pm Warriors?”

  1. Aaron

    If I may be allowed to present a couple things since I too have direct experience with regards to MLM businesses.

    And I have seen the good, the bad, the ugly, and the downright bizarre.

    First off, not all MLM are created equally. Heck, not all MLM are created legally. But just because one schiester rips off everyone in his network, does not automatically mean all MLM’s are evil or (as some would say) a pyramid scheme.

    You’re right a business that is just in the business of recruiting for recruitment’s sake is not only bad, but I think it’s illegal (i.e. an actual pyramid scheme)

    And anyone who tells you that you can make money without any effort is either a moron or is lying or both.

    As far as “finding similar products…cheaper” well, I guess that depends on your definition of similar. And as we all know sometimes cheaper is not better (otherwise the expression “you get what you pay for” would have no meaning.) Don’t get me wrong my middle name is “wholesale” and I’m all about getting the biggest bang for my buck, but I’m also looking for VALUE not just lower cost.

    In the spirit of full disclosure… I am currently involved with a MLM business and let me say thank you for not going on a tirade bashing the concept. You were very calm and respectful in your comments, please allow me to be the same even though I disagree with you on certain points.

    I signed up with the Quixtar business several years ago and I have maintained my relationship with the corporation when they transitioned back to the Amway Global name.

    Please hold your ridicule for a moment as I have already heard it all and most of it is incorrect in my experience.

    #1 I have never been required to purchase a single product or service that I didn’t want or need.

    #2 I have never been required to attend a single meeting, workshop, or conference.

    #3 I have never been required to purchase a single piece of literature or marketing material from the company or the people that showed me the program.

    #4 I have never been required to recruit someone or sell a product to someone.

    #5 I have never spent any amount of time doing anything in relation to the business that I didn’t want to do.

    Is the Amway business a legitimate business? Yes. I believe it is and so does the BBB and the Chamber of Commerce. Is it for everyone? NO. Absolutely not. Are their people who use it to take advantage of other people? Unfortunately I’m afraid their are. But not just in MLM, in almost every industry this happens (ever hear of Bernie Madoff?)

    But here’s what the vast majority of people do not understand.

    The Amway corporation is just that “a corporation.” They are, more specifically, a manufacturing company. They produce products such as multivitamins, laundry detergent, cosmetics, etc.

    The owners of the Amway company, the employees in their customer service department, the drivers of their trucks, are only responsible for supplying the distributor networks and the end customer with the products they manufacture (or is some cases distribute for a 3rd party supplier).

    It’s the distributor networks (or business teams) that the average person is exposed to or get’s involved with.

    It’s the people in those networks that create the positive or negative experience that the average person uses to define (correctly or not) what the Amway company is.

    I’ve heard all the Amway horror stories. I’ve heard about the people who supposedly “lost their shirt” because they bought a garage full of products. I’ve heard about the people who were called “losers” by their upline because they didn’t attend a weekend conference. I’ve heard about the people who lost all their friends because they tricked them into coming over for a “dinner party” that was actually a recruitment meeting.

    I’ve heard all of those, but I’ve NEVER experienced it, or seen it, or heard about it from anyone associated with the business team I was associated with.

    If I can use this analogy it may help people to understand the relationship… The Amway Corporation is like the NFL or the NBA. They are the company logo that everyone sees. But inside of the NFL there are the individual football teams and each team has a coach and each coach has his own philosophy on how to go about the “business” of playing football. But the executive and employees of the NFL do not go tell the coaching staff of each team HOW TO play football. Yes they have a few rules and guidelines ALL THE TEAMS must follow, but by and large, they leave the day to day operation of the team to the team owner and coaching staff.

    Be it good or bad, the same is true with Amway. They are the company that supplies the product, and they have a few guidelines that all of the individual business teams must follow, but for the most part they are not involved in the day to day decision making processes of the people who use them as a way to make money.

    Now, you may ask:
    Am I making the “big money” in Amway? The answer is no. But have I lost money? Again, NO. I have spent money on products and services that I wanted and felt were a good value based on my needs and I have never spent a dime on something I didn’t need or want.

    Do I have to go out and sell a bunch of products? No. I do have a couple people who like a couple of the products and I purchase the product at wholesale (a benefit of being involved) and sell it to my customer at retail (thus creating a profit – the goal of any business).

    But here’s the deal: ANY legitimate company that wants to create a profit has to (I repeat HAS TO) sell a product or service that someone wants or needs at a competitive price.

    Have I recruited a bunch of people? Again the answer is no. I have not recruited a single person in 10 years. But like I said before, I’ve never been required to do so or ridiculed because I haven’t. And I don’t have to recruit someone else in order for me to make money.

    I’m sorry for the length of this post, but I’m not going to apologize for being involved with the Amway corporation or the business team that showed me the program. I truly feel bad for you and anyone else who has been exposed to either an over zealous, overly excited individual who did not have their facts straight or the person who used less than ethical means to build a business. But you know what, I feel bad for the people who “lost their shirt” when they invested money with Bear Stearns and AIG, but I still have my shirt.

  2. James, thanks for the thoughtful and honest response. I’m glad you recognize that I chose not bash anyone. In reality, it was a very difficult post to write, taking me nearly 4 hours (didn’t get it finished until 1am).

    In response, I guess my first thought would be (more later potentially):

    “Why do you spend the time and energy on your Amway project if you don’t make any money?”

    Do you love it that much?

    Aaron@Biebert

  3. Aaron

    I didn’t say I don’t make any money, I said I don’t make the “big money.”

    I’ll admit, I got involved initially because I had dollar signs in my eyes and I wanted to get hog-nasty, stinking filthy rich. Fortunately, I had an upline mentor who calmed me down and explained how the business really worked.

    It didn’t take me long to realize I’m not the type of person that is comfortable having lots of people looking to me for leadership, so I choose the route of creating customers to create extra money.

    Amway has some great products. There are things we use here at home that are a great value due to their quality and cost/use. And they offer products that are a)easy to sell, b)in demand in the marketplace, c)competitively priced with other brands & d)offer enough retail profit to make it worth my effort. [Not to bore you with the details, but there is one product they carry in particular that with a relatively moderate group of repeat customers can generate anywhere from a couple hundred to a couple thousand a month in profit and bonuses without having to recruit anybody – I’m a bit of a nerd and have done the spreadsheets to figure it all out]

    Now, I won’t get hog nasty rich, but having the option to add money to the family budget without having to get a part-time job is a good deal in my mind.

  4. James,

    Are there any good statistics out there about what percentage of Amway representatives actually make money vs. lose money? I’ve had friends who were burned extremely badly by Amway / Quixtar, and I’ve never seen anyone make more than minimum wage at it unless they have many people underneath them who are experiencing losses. Everything you said in your previous post sounds nice, but unless I see the data (I’d love to see those spreadsheets of yours), I’m reluctant to change my opinion of the company.

  5. @Jacob

    I’d be happy to answer any questions you (or anyone else) has if you are willing to have an open mind and set aside any preconceived ideas that you may have developed over the years.

    However, out of respect to Aaron & his blog I don’t feel that this is the venue for such a dialog.

    I have created a contact form using Google Docs. Leave me a note with the best way to contact you and we can move forward with the discussion. https://spreadsheets.google.com/viewform?hl=en&formkey=dGdlNUs1cm1hUkhTbVZuUWdJZVI0RGc6MQ#gid=0

  6. James, I don’t mind. This is a good venue for discussion about the topic. It sounds like you might have some good info to share.

    Please do.

  7. Very well Aaron.

    Let’s start with a disclaimer of sorts. First off, my intent is not to attempt to recruit anyone for the Amway business. I am not trying to sell anyone a product or service offered by Amway or it’s partners. I am also not on a crusade to single-handedly change the opinion that someone may have about the Amway business (well okay maybe a little bit).

    Like I mentioned previously, my (primarily positive) experience with the Amway business and the (possibly negative) experiences of others may very well be worlds apart and everyone views the world through the lens of their environment and their experiences.

    I also want to point out that there are concepts involved in the building of an Amway business that are difficult to convey within the context of a series of written comments such as these.

    Let’s also agree on a couple “definitions”

    The Amway business is a business. It may be untraditional, but it is a business. And like any business, it requires a certain amount of effort doing a certain set of activities. It is a business that sells a product. The goal is to sell that product to a customer for a price x-percent higher than you paid for it, thus creating a gross profit from which you would deduct any additional operating expenses (if any), leaving you with a net gain of X-dollars.

    Your mechanic is no different, he buys tires at wholesale, sells them to you at retail and makes a profit. Or he sells you his services and expertise as a mechanic by performing maintenance on your vehicle and he bills you for his time.

    There are only 2 ways within the Amway business model to create revenue. The first is selling products directly to a customer base that you have to develop (friends, family, perfect strangers, doesn’t matter). The 2nd way is to sell products directly to a customer base that you develop and to put together a network of people who do the same thing. (It’s a little more involved than that, but I’m trying to keep it simple).

    To answer the first part of Jacob’s original question: “Are there any good statistics out there about what percentage of Amway representatives actually make money vs. lose money?”

    According to the documentation published by Amway Global, “The AMWAY opportunity is unlimited, but individual results vary. The average monthly gross income of active* IBOs was $115 (U.S.) and $181 (Canada) based on the most recent independent survey. Some earn less, while others earn much more.”

    *Approximately 66% of all IBOs of record were found to be “active.” An “active” IBO is one who attempted to make a retail sale, or presented the IBO Compensation Plan, or received bonus money, or attended a company or IBO meeting during the survey year.

    So that means that only 66% of the people involved are even trying to do something with the business. I’ve never understood the other 34% – if you aren’t going to try, why sign up?

    Now in my personal experiences, there have been months where I made less than the average and months where I made more than the average (but that’s what an average is, isn’t it?) but everything I made, *I* made it. And I was paid according to the amount of effort I put into the business. If I only sold 1 item, I only got paid for selling 1 item. If I sold a dozen of something, I got paid for selling a dozen. And the beauty of the Amway business is that they offer products that are consumable – which means when they run out, your customers will need to buy more and if you do YOUR part and follow-up and keep in touch with your customer base, you won’t have to work as hard finding NEW customers.

    Now, as far as those who lose money… I don’t have any stats on that, but let me ask this… How long were your friends involved? Because regardless of what their sponsor or business team told them the Amway Corporation has a 6-month buy back policy on any products that you buy and (unless it’s changed, but I don’t think it has) you have a 12-month buy-out option (full refund of your sign up costs) if you decide to not pursue building the business in your 1st year.

    As far as the spreadsheet, unless you understand how the compensation plan works with regards to retail profits and the tiered commissions Amway pays out, you may not be able to follow it, but I’ll give you a quick synopsis.

    A couple years ago, Amway partnered with an Energy Drink company and as I’m sure you are aware, the energy drink market is HUGE. And in my opinion, they have the best energy drink on the market hands down!!! Anyway, the drink comes 12 cans to a case and is priced as good or better than any of the other competitors out there (seems like I saw Red Bull at a gas station for $2.99 the other day for the small can). What my spreadsheet shows is a profitabilty matrix of… if I have “X” number of customers who buy an average of “Y” number of cases per month my retail profit plus my commission from the company will be “Z”

    And all of it was based on my individual efforts, it did not account for any products being sold by anyone “under me” – which like I mentioned in a previous post, that is an area that I have not focused on.

    I know I probably have done very little to change anyone’s opinion about the business, but I feel that the people who have had a bad experience with Amway probably fall into one or two categories…

    1) They were approached by someone who was really excited but didn’t know how to properly present the information (Amway doesn’t teach people how to present the program, they leave that to the sponsoring IBO and their associated business team).

    2) They were tricked into going to a meeting. (Again, Amway doesn’t do this – as a matter of fact they have a strong policy against this sort of thing – this would be the work of a less than ethical business team, although I have never seen or heard of anything like this from the people on the business team I’ve dealt with for the past 10 years).

    3) They were coerced or compelled to buy a lot of products and spent a lot of money on stuff they couldn’t use or didn’t need. (Amway does not condone this and has a 6-month buy back policy – plus the Federal Trade Commission and Direct Selling Association has a strict policy against this sort of activity as well).

    So chances are, it was not the Amway Corporation that created these feeling of ill will, it was most likely an individual (an independent business owner or a business team), who knowingly or unknowingly acted in a manner that resulted in the bad experience. You know I’ve said for years, that if it weren’t for people and computers there would not be any problems in this world, but people are people and most computers are disposable these days, so whatchagonnado?

  8. James,

    Thanks for the explanation. Unfortunately, gross revenue isn’t very meaningful when determining whether a business is successful or not. If I’m buying $300 of products from Amway each month in order to generate $115 per month, that’s not sustainable in any way.

    What matters is net revenue, also known as cash flow. Do you know what proportion of IBOs are cash flow positive?

    Perhaps an even better question would be “What proportion of Amway’s revenues come from IBOs instead of customers who are outside the business?”

    To answer your questions, my friends were primarily burned by spending money on motivational tapes and books. Even if you exclude those expenses, though, their “business” never even came close to breaking even because they bought products from themselves in order to meet Amway’s minimum monthly sales goals. (If you go below the minimum, you’re not eligible for a commission check for that month.)

    Jacob

  9. Jacob

    I may be wrong, but I believe for the purposes of Amway’s information the $115 gross revenue refers to the IBOs income from the Amway company “before taxes.” They do not withhold taxes, but every IBO is sent a 1099 at year end if applicable.

    But, you are absolutely correct. Someone spending $300 in order to earn $115 in NOT sustainable (if only our gov’t would figure that out). You are also correct that there is a minimum threshold in order to qualify for a monthly bonus.

    Obviously there is a certain amount of pride and credibility that goes along with someone purchasing products from the company they represent, but only buying the products for yourself and your home is not a requirement and in my opinion is not a real business, but more like a wholesale buying club or a hobby.

    As a business owner, you are allowed to create outside customers. In fact, it is encouraged that you do so. #1 You earn the retail profit on the sale. #2 You are legitimizing your independent business in the eyes of the FTC and IRS because you are actively moving a product or service to someone outside of your home or office. And #3 you are using someone else’s money (that they were going to spend somewhere on those types of products anyway) to grow your business.

    As to your question “what proportion of IBOs are cash flow positive?” I can not answer that question.

    I don’t know if that question can actually be answered with any sort of hard data – I would imagine there are too many variables involved in defining that query (worldwide there are thousands of people that sign up on a daily basis – their numbers not mine). And I don’t work for the Amway Company so I don’t have access to any sort of “internal documents” along those lines if they even exist and I’ve never seen anything published other than what I shared previously.

    As for your other question “what proportion of Amway’s revenues come from IBOs vs outside customers?” Again, I don’t have access to any sort of data other than from my own personal business.

    Are their IBOs who never create a customer and never sponsor a downline IBO and never make any money? Yes, I run into them all the time. But (in my opinion) that’s like getting a gym membership, never working out, and wondering why you don’t lose weight.

    Are their IBOs (like myself) who “shy away from” sponsoring downline but create customers? Absolutely. Does every customer order products every month? No. But my personal business has approximately 20-25 outside customers (just signed up a new one today).

    Are their IBOs who never create a customer, and sign up a bunch of people downline, who don’t create customers? Yep, but that too, in my mind, is unsustainable. There’s no foundation. Almost nobody is making any REAL money. And that is probably where the connotation of the business being a pyramid scheme comes from.

    I’ll close with this… Like I said previously, I’m not trying to convince anyone of anything. Most people have their opinions on certain topic (politics, religion, etc) and regardless of the amount of “facts” you put in front of them, some people die believing what they want to believe. But questions were asked (hopefully out of a desire to have them answered factually) and I presented the best that I could based on the knowledge I have on the topic.

    However, I did find a very intersting YouTube video that may be of benefit to some people. I do not know the gentleman in the video and I don’t know which MLM business he is associated with, but his points are pretty good regardless. http://www.youtube.com/watch?v=FclI8hGQgb4

    @Aaron – Thank you for allowing me to contribute. I hope I have presented informataion that has been beneficial to you and your readers. I enjoy your site and your concept of the 8pmWarrior.

    If anyone wants to contact me directly for more info they can send a text to my Google Voice account at 864-381-8326.

    Please do not send spam or solicit me for other MLM opportunities. I’m satisfied with what I’ve got right now. Thank you.

  10. You are very welcome Mr. Bond. :-)

    Thanks for the kind words and for being an 8pm Warrior. Even though I think MLM is a poor use of social and monetary capital, I still think its great that your passionate about something.

    Most don’t give a rip.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.