I usually open medium and ramble on about my thoughts sporadically without any real structure or plan. This post is different. I felt the need to write this post in the aim of helping out at least one person.
Recently, I've had a few people I haven’t heard from in ages popping up and asking me how i’m doing. Strange. Maybe they’re suddenly interested in my life?
I give them the benefit of the doubt and reply, thinking to myself *what do you want from me*
“Sam! So I have a really great business opportunity I’d like you to get involved in, all you have to do is come to a meeti..”
At this point I exit the chat and don’t read on.
So whats going on?
This is all the result of Multi-Level Marketing Companies such as: Herbalife, ACN & Veema dangling unrealistic yet highly-desirable goals in front of young ambitious individuals and claiming they’re easily achievable. The thing these companies strategically don't do is dangle the average income figures in front of these individuals (not so appealing).
Before reading on its worth defining the term pyramid scheme. There are many variations to the definition but I will be referring to the most robust definition:
“An organization is deemed a pyramid scheme if the participants obtain their monetary benefits primarily from recruitment rather than the sale of goods and services to consumers”
After reading that definition ask yourself this:
Have people approached you to get you involved in a business opportunity (selling the product) or were they trying to get you to buy the product?
I’m guessing its selling the product, which equals another recruit for them. Cha-ching.
When looking from the outside-in Multi-level Marketing companies appear to be obvious pyramid schemes & I’ll admit I was screaming/tweeting “pyramid schemeee!” before actually anaylsing the companies.
Typically pyramid schemes involve selling a worthless product however ACN is slightly different in this sense. The products being offered are legit goods and services people do need such as internet, gas and phone providers. This allows ACN t0 sit in somewhat murky waters between a legit business and a pyramid scheme.
There are two ways to make Money via ACN. The first is to sell the goods & the second way is to recruit new sellers. The problem with ACN is that the goods provided are not competitively priced. This makes it ridiculously hard to sell large volumes of product to make your initial investment back (You can read more about their pricing strategy here). This therefore leaves you to rely on the second, more ‘profitable’, revenue stream which is recruiting new sellers for ACN. ACN have narrowly avoided being labelled as an outright pyramid scheme by selling a valid product but they have priced it in such a way that makes it near impossible to recoup your initial investment of £399 from solely selling the product. Smart.
Another major red flag for ACN is that they do not publish their IBO’s (Individual Business Owners) average incomes like Herbalife are required to.
If everyone’s making so much money with ACN.. Why not be transparent? Where are the figures yo!
If you owned a legit business and wanted to hire more people wouldn’t you share your amazing average income figures for potential recruits??
Surely that would be the easiest way to convince them they’re on the path to riches. Numbers speak louder than rags to riches stories for me anyway.
An independent investigation into ACN conducted found that: fewer than 1 in 200 even recover the initial investment. (Worth mentioning: This investigation did have a small sample size meaning it may not be 100% accurate.)
“ If you look at it, the payment structure is very carefully crafted such that a relative few super-successful individuals make meaningful money and the vast, vast majority do not. Their profit is likely wholly dependent on the £399 start-up fee they receive from recruits, most of whom never earn it back.
Your friend is inviting you to a meeting because recruiting others is a crucial part of theirpay, it is basically the only way to make money. The odds of earning enough money to justify the effort you will have to put in (and the annoyance as you pester your friends and family to join/buy from you) are incredibly small.”
Moving on to Herbalife:
Well well well.
Herbalife is another multi-level marketing company that has been on my radar for a while now. Herbalife is easier to objectively analyse as as their documents are not hidden somewhere in a safe like ACNs!
Anyway enough talking let’s go through the hard facts (Again kudos to Herbalife for publishing them!).
Ta-da: Herbalife’s Statement of Average Gross Compensation — — (A statement explaining how much Herbalife paid to Distributors in 2012 on average) Full Document here
After some digging, the stand out figures are:
“88% of Herbalife’s distributors earned no payments from Herbalife in 2012.”
“only 3.67% of distributors received more than $1,000 for the entire year.”
These two statements validated my initial thoughts and skepticisms about the Herbalife structure.
I’m sure when they’re pitching to young people like you & I in those swanky hotel meetings they ‘fail’ to mention the likely outcomes but are sure to mention the unlikely rags to riches story.
Coincidence, no. Misleading the youth, yes.
Herbalife ticks all the correct boxes of a Pyramid Scheme by definition and famous investors such as Bill Ackman have even bet against the company growing in the future.
Guess how sure Bill is? He has short sold $1,000,000,000 worth of Herbalife stock.
My take on it
Money tends to make people go blind. This blindness is the vital fuel that allows multi-level marketing companies to make millions in pure profit year afteryear. The cult-like following these MLMs have amassed is crazy. Recruits defend the respective companies strategy like their life depends on it and fall back on their rehearsed pitches, carefully crafted to play on peoples materialistic goals when all else fails.
I don't agree with the deceptive ways mentioned in this article but I can definitely see why they do it. Financially speaking, It’s a great business plan.
When there’s a winner there’s always a loser.
The only question is:
Who do you think is winning… the Executive Board or Us?
(This post wasn't intended to categorize or judge the legalities of these companies but to simply explore the “business opportunities” presented by them)
Samuel Wood | samuelwood.co