Product Costs DoTerra has a monthly personal volume requirement of either 50 units or 100 units. This means to receive bonuses and to remain active.This amount often corresponds to the wholesale cost of products but sometimes is less (like with special kits). Shipping costs ($3.99-$24.99) […]
Sometimes it’s our best friends who get us into the most trouble. Just in time for the holidays, gift scams are back! If you hear about a game or project that seems too good to be true it probably is. These chain letters and mail […]
The most recent income disclosure we could find on the Thirty-One Gifts website was from 2015. However, an internet search leads various copies of a 2017 disclosure. It is difficult to find or cannot be found on the Thirty One Gifts official website. Below is what we found.
An important thing to note is that none of the data takes into account expenses. When evaluating business opportunities, most people are interested in profit. Profit is the amount of money brought in (revenue) minus any costs and expenses. A ThirtyOne participant would need to earn more money than these expenses in order to have a profit.
Expenses for Consultants can be several thousand dollars annually. You should factor in estimated expenses when projecting potential profits. Such operating expenses could include advertising and promotional expenses, product samples, training, travel, telephone and internet costs, and miscellaneous expenses.Thirty-One Gifts 2015 disclosure
Is it worth your time?
A recent survey found that most multi-level marketing participants earned less than 70 cents per hour. The 2015 Thirty-One Gifts income disclosure statement disclosed the average hours worked and average annual income by consultants at different ranks.
Right around 80% of consultants in 2015 made on average $548 and worked an average of 7 hours per week. This amounts to about $1.50 per hour before considering expenses. If the expenses do reach even one thousand dollars as the disclosure indicated (“several thousand dollars annually”), consultants at this rank are losing quite a bit.
At the director level average income divided by average hours reached $10. Only 2% of participants are at director or higher levels. And again, that’s before expenses. It’s likely the case that minimum wage jobs, temporary work, or gigs are more lucrative.
Turning to the 2017 disclosure. We see that the top 1% of earners made more than $10,000. The disclosure lets us know that these consultants had an average tenure with Thirty-One Gifts of over six years. That’s a very long time. Looking only at these participant’s earnings in their most successful years is a form of survivorship bias.
The 2017 income disclosure statement does not break income down by rank, does not include information about average hours per week worked, or time to reach that rank. It’s likely that the difference in presentation accounts for the differences in the data rather than a significant change in the income for distributors. The numbers still stay in the same ballpark.
Most consultants are not earning much money from Thirty-One gifts. After considering expenses that most consultants are spending more than they are earning. The average earnings and corresponding average hours mean that consultants work very hard for the income. We recommend exploring other business opportunities and looking for profits per hour that exceed the minimum wage in your area.
False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes, by Robert L. Fitzpatrick and Joyce Reynolds, explores the history and cultural context of MLMs and pyramid schemes. It isn’t a great book for understanding the intricacies of today’s multi-level marketing companies. It explains why […]
Probably the most common question we hear: “Is this MLM actually a Pyramid Scheme?” Unfortunately, there usually isn’t a straight forward answer. What is a pyramid scheme? “A pyramid scheme is a business model that recruits members via a promise of payments or services for […]
Young Living sells essential oils and other health and lifestyle products. The company says that it is a ‘Multi Level Marketing’ plan. However, MLMs share lots of qualities with pyramid schemes so it can be difficult to tell the difference.
The US Government’s Federal Trade Commission has information about pyramid schemes to help. “Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure.”
Some tips to watch out for
- Large profits are based primarily on recruiting others not on the real sale of goods.
- Recruits are forced to buy more products than they could sell.
- People at lower ranks make excessive payments for inventory that accumulates in their basements. See: inventory loading, bonus buying
- Many schemes will claim product sells like crazy, but sales are only occurring between people inside the structure or to new recruits. Lack of retail sales.
- Prices for products are inflated. Outrageous product claims.
- Commissions for recruiting new distributors. Especially when there is no legitimate product or service, or separate up-front membership fee.
How does Young Living stack up?
Let’s look at the tips above and look carefully at the compensation plan and the income disclosures for Young Living. Also, we’ll look at what participants frequently say.
- Large profits are reached at the higher ranks. At these ranks, a member must be recruiting other members. The income disclosures do not show large profits from real sales alone. The compensation plan also mentions to “focus on helping others create their success.”
- New recruits must purchase expensive starter packs. The default pack is a “standard premium kit” for $160. Some are as much as $260. The basic kit is $45.
- Recruits are encouraged to order inventory monthly via auto-shipment in the essential rewards program. This can lead to extra inventory that can’t be sold.
- Returning merchandise has fees and limitations.
- You cannot become a consultant without purchasing a starter kit.
- There is not technically a direct commission for enrolling a new distributor. However, you do make a commission when a new distributor purchases a starter kit. In this way, there is a commission for enrolling new distributors.
- Distributors frequently make unbelievable product claims. Most commonly, the oils are a miracle cure. There are limitations on products being sold on various platforms and in the state of California.
Pyramid schemes will disguise themselves as MLM or direct sales companies. Even if Young Living is technically a legal multi-level marketing company it has many pyramid scheme red flags. These qualities make it a bad business opportunity.
Finally, we can see this isn’t a great opportunity because so many people are earning $0. This means, after expenses, most people lose money selling Young Living. Check out the income disclosure analysis for more.
WHAT DO YOU THINK?
Income disclosure statements can help recruits evaluate the Jeunesse business opportunity. This disclosure report is very confusing and leaves out a lot of information. A lot more research is needed to understand what a participant can earn selling Jeunesse. Costs and Expenses The Income Disclosure […]
Income disclosure statements can help you to evaluate the Hempworx business opportunity. An income disclosure analysis is just one piece of a big puzzle. Costs and Expenses The My Daily Choice (aka Hempworx) disclosure statement gives a list of expected expenses and the results of […]
In January of 2018, the FTC released business practice guidance to multi-level marketing companies. As part of this guidance, the FTC described illegal mlm compensation structures. “Pyramid scheme” is another term for this type of illegal MLM.
The “unlawful MLM structure” description comes from court decision from the FTC’s case against Koscot:
“Characterized by the payment by participants of money to the company in return for which they receive (1) the right to sell a product and (2) the right to receive in return for recruiting the other participants into the program rewards which are unrelated to the sale of the product to ultimate users.”IN re Koscot Interplanetary, Inc., 86 F.T.C. 1106, 1181 (1975).
Illegal or Legal?
In order to be lawful, MLMs compensation plans should be based on actual sales. Here are some things to look for to tell if a compensation plan may be unfair, deceptive, and ultimately unlawful:
- Compensation based on mere wholesale purchases
- Compensation based on other payments by participants
- Participants buying products that are not resold
- Incentivizing/encouraging participants to purchase for reasons besides satisfying personal and customer demands (ex: opportunity to advance)
Therefore, consider any of the above serious red flags.
Myth: Pyramid schemes don’t sell products
Just because a company sells products doesn’t mean that they are legal. Some MLM companies that sell products are illegal and have been ruled pyramid schemes. The FTC has sued and won cases against MLMs selling products and found them to be illegal schemes.
Many MLMs encourage joining as a distributor in order to buy products at a discount. It is sometimes legitimate to purchase products at wholesale for personal use. In contrast, when the actual demand for these products was the minority of sales, the FTC has prosecuted and won.
What to look out for
- Commissions on wholesale purchases (not retail sales)
- Customers can’t buy directly from the company (only from participant’s inventory)
- Customers must sign up as participants in the business (they can’t just be customers)
The guidance gives suggestions for how companies have shown they followed the FTC act (see #8 in the FTC Guidance). Ultimately, this means showing evidence of sales of products to retail customers. Examples in the guidance include:
- Customers signing up as customers
- Customers buying directly from the company (participants simply refer or sign up customers)
- Commissions on retail sales rather than wholesale purchases
Why is the FTC involved?
The FTC has a goal to protect consumers. The FTC is supposed to go after MLMs that have illegal compensation structures. These MLMs harm consumers. The FTC guidance explains:
“Where such an unlawful compensation structure exists, a participant is unlikely to be able to earn money or recover his or her costs through selling product to the public. In such circumstances, participants will often attempt to recruit new participants who will buy product, and pressure existing recruits to buy product, with little concern for consumer demand. Where an MLM has a compensation structure in which participants’ purchases are driven by the aspiration to earn compensation based on other participants’ purchases rather than demand by ultimate users, a substantial percentage of participants will lose money.”2018 Business Guidance Concerning Multi-level Marketing
This means the money to pay older participants comes from the newer recruits and not from non-participant product buyers. Most of the participants will lose money, only the oldest (highest in the uplines) will make money.
It is dangerous to get involved with a company that has red flag policies. Remember that just because a company isn’t doing something illegal doesn’t mean the company is a good business opportunity.
Avoid buying from or selling products for companies which engage in bad practices. If it seems like a company is following FTC guidance, next ask questions to find out if it is a good business opportunity.
This is just for informational purposes and should not be considered legal advice. Be sure to check out the source material yourself, it’s from the FTC. Contact us with any feedback or corrections.
Income disclosure statements help explain how much money It Works pays people enrolled with the company as Distributors. These are released by the company, and don’t tell they whole story. However, they can give some important information to help evaluate the business opportunity. In October […]