How Multi-Level Marketing Will Leave You Broke

11 minute read

Updated 11/23/2011

Do you hate pumping gas? The routine feels like such a hassel to me. I have to fight to find a free pump most times, and if I do find a free pummp, then I’ve got to make sure I pull up to it with the tank on the right side. You’ve gotta get out of your car, walk around, go thru all those annoying menu’s on the pump. Or worse yet, go inside and prepay. Ugh, yuck.

So you’re probably wondering what pumping gas has to do with Multi-level Marketing. Well there I was, minding my business one fateful afternoon when young man on the other side of my pump decided to pitch his MLM to me.

“Wow, nice Audi, what kind of gas mileage does that thing get?”

“I manage to get about 21-22 city and 27 highway” I replied.

He replied unusually enthusiastic with an “AWESOME MAN!”

“Hey, can I ask what you do?”

Ahh… my favorite question! So I responded; “I hike, camp, rock climb, go kayaking, build websites, read, stuff like that.”

The puzzled expression on his face was a dead give away I had just given him a curve ball to his usual elevator pitch.

Pausing for a brief moment, he replied; “Oh wow, good deal man. I’m actually working with a business team out of Raleigh, North Carolina, helping folks develop web based businesses. We’re actually looking for some sharp folks like yourself who are looking to earn some extra income. Do you keep your options open?”

Carefully thinking over my reply, I realized this was a ploy to get me to come see some MLM plan. More than likely he was your typical IBO with Amway.

“Do I keep my options open? Well who doesn’t keep their options open! Especially if you believe that we live in the land of opportunity. But I’ve learned to carefully evaluate those opportunities and to recognize dead end opportunities without wasting my time. And I’m afraid I’m all to familiar with our pitch. So, to answer your question, I’m not open to your offer at this time.”

From the look he gave me, I knew I had just sunk his battleship.

Has this happened to you? Have you been approached by some young adult, who appears well dressed and genuinely polite?

If you where genuinely dumb enough to say yes, chances are you’ve given your phone number to an IBO. He or she will most likely call you within 1 to 2 days to setup a time to do an in-person meeting. The entire point of this quick meeting is to gauge your interest in coming to see his “business plan” and meet his “business partners”. (Just know that I’ll be using the word “BUSINESS” loosely.) During this entire process the individual will pretend like they’re being selective about who they let in on their opportunity. (It’s a lie, they’re desperate and need you to succeed.)

If you’ve already allowed this individual to schedule a time to come meet you, I’ll save you the trouble now. He/She will come over, show you some fancy little brochure and ask if you are interested in making an extra two to three thousand dollars. If you say yes, then chances are you are going to an open meeting where some person will speak to you about how to make money while drawing circles on a white board.

At the end, you’ll either sign up, or realize it’s a big fact pyramid scheme.

A little background on my perspective

I’ll give you my perspective on the subject since I was once a dumb IBO with “Amway”.

Now I will be honest, Amway is not a scam. Nor is Amway a pyramid scheme. If it was, it’d be illegal and shut down. At the same time, Mary Kay and Avon would also be shut down. They all share the same basic business model with a few variations.

Second thing I will add here is that there are a lot of really decent and honest people in these systems. And just like with anything, there are dishonest people as well. No avoiding that, it’s just a reality of life.

It is also possible to make money with these systems. However, you need to be well aware of some serious flaws within these systems. I personally believe you have greater chances of winning the lottery than making it in Amway.

Most people in Amway are going just short of broke. If you attend one of these business meetings you’ll be presented with a display of just how easy it is to get setup in business for yourself and to start making money. They’ll draw some circles to show you how fast you too can be a millionaire. They tell you all you have to do is get 6 people under you and then you’ll be rich. They’ll probably even give you a book called Rich Dad, Poor Dad. (Which by the way,  Mr. Kiyosaki was sponsored by Amway to write that book.)

And they’ll tell you all about the wonderful support and training system you’ll be getting with this new business. And how you’re going to be a part of a TEAM. Everyone will hold hands, and mentor you and invest in your success. It will be flowers and rainbows and unicorns.

But there is a BIG FAT LIE right in the middle of this whole “Business System” that you won’t see at first. Most people don’t realize there are TWO businesses at work here. If you sell products, you get a portion of those sales. That’s a no brainer. If you sign up other IBO’s, you will get a portion of their sales.

Training Cd's from Larry WintersThe REAL SCAM and the scam that Amway itself turns a blind eye to on a regular basis is the training systems. You see, to become an IBO you have to be registered by another IBO, called your “upline”. Once registered you can sign up all of your friends and anyone else you’d like. The people under you are called your “downline”. Now generally once registered you’ll be a part of some business team. You could always go rogue, but I doubt many people ever do that or know that they can. Besides, it’s the team that is providing all the training you are going to receive to run your business successfully. (Supposedly)

Once you join up and start going to these weekly meetings you will be reminded over and over again how important it is to cut off negative associations and to listen to the CDs promoted by the training system.You’ll be encouraged and reminded over and over again that you need this training to be successful in business. According to them, you can’t succeed in your Amway business without listening to their CDs, without attending their seminars and 3 day conferences. You will also be told to buy books from their system and sign up for over-priced web hosting, voice-mail and a half dozen other useless services you could get elsewhere for free.

However, the money spent on this per month still seems trivial to the average cost spent on getting a traditional business off the ground. Most IBO’s never realize how much money they are actually spending in comparison to how much they actually make in Amway because the money invested is so low. Until you start to add up the money spent over the course of a year do you begin to see the real damage being done. The average IBO is typically in the red.

Let’s do the math, from my experience. (numbers from 2006)

It cost $151.00 dollars to register, and I also had to buy my 100PV (Point Value of products purchased from Amway to get paid) which was $175.00. **I was also signed up on the book/CD program which was **$60.00 a month.

The very first month I had spent a total of $368.00 **(Not counting the open meetings).

Each Tuesday I was suppose to come attend a weekly meeting, it cost $4.00 dollars to attend.

$4 x 52 weeks = $208 (If an important speaker came out, I had to pay $6).

Now lets add up 11 months of 100PV and 11 months of the books/CDs.

$175 x 11 = $1925.00

$60 x 11=$660.00

Then there was the 4 major conferences every year at $110 dollars a ticket  which equals **$440.00 a year.

So far that’s $3619.00. I haven’t even included how much money was spent on gas and food yet.

Do you see where this is going yet? If your Amway business doesn’t earn you over $4000 dollars a year, guess what? YOU ARE BROKE!!!. YOU MIGHT AS WELL DO THIS WITH YOUR MONEY:

The problem here is that the whole system is promoted like it is the most cost-effective way to do business. The truth is, it isn’t. You will be spending more money a year running your Amway Business than you are likely to ever make. Check Amway’s own stats. Most of their IBOs never make more than $100.00 a year.

Thinking about quitting then? You will be brainwashed to believe the people who fail or quit the system are weak and don’t want their freedom from the 9-5 bad enough.

BULL CRAP. I have watched good people in this system work and work only to ruin their lives. My previous upline for example, ruined his first marriage and has been in the business for longer than 10 years and still isn’t “FREE” from his job. He still works a JOB and pours money and time into Amway, believing that someday he’ll be on a stupid island with a bunch of other dummies.

So where is all this money coming from that these Kingpins, the Diamonds of Amway, are always talking about? Well it’s not Amway, because they limit how much you can make. You can only ever make $32,000 dollars from Amway. The real money-maker is the books, CDs, and conferences. That is where all the real money is that THEY are making off of you. I would attend a conference with a stadium of thousands of IBOs and listen to a fat man on stage tell me he put the whole event on just to make me successful. Bullcrap. How do you think a concert works? What’s $110 x 5,000 IBO’s. Answer: $550,000 dollars. More than enough money to bankroll production and have lots left over.

The  real kicker though was the local business meetings. I took it upon myself to find out how much money it cost to rent out the space they where using. I don’t want to get anyone in trouble, but by my estimation at $4 a head with about 500 IBOs in Va Beach, they where raking in $800 dollars every Tuesday after expenses. Whose pocket did that end up in? Yes, the guy in charge of the meetings.

You see, it’s not Amway, it is the training systems that are the real scam. I figured this out early on, but I, like many other people, stuck around because I believed in the other things they promoted. Things like helping people get free, living better lives, and fixing broken marriages, etc. I saw the business have a positive impact on the lives of people. Truly, at each conference I went to, I saw people give their lives by the hundreds to Jesus Christ. How is that not a good thing? But the sad fact remains, there is a darker, more damaging side to MLM.

The truth about the real money is never openly disclosed. Most people never truly succeed at this business, and I suspect 98% are going broke.

If you are in Amway right now, I URGE YOU to examine what you’ve accomplished and how much you’ve actually made. Put everything down on paper.

Are you genuinely profitable?

**(I would love to hear your thoughts on the matter below in the comments. I will allow all comments so long as you are not directly insulting me or another person. )