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Holiday Pyramid Schemes

Holiday Pyramid Schemes

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 […]

Thirty One Gifts Income Disclosure Statement

Thirty One Gifts Income Disclosure Statement

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 […]

Book Review: False Profits

Book Review: False Profits

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 so many people join these groups and recruit others. The book goes into why so many people are attracted to pyramid schemes and the quick rise of MLMs over the past decades.

Tip: Amazon is useful to preview the book and even to buy. However, always check your local library for the absolute best (free!) prices on books. Most libraries even have eBooks available!

The authors dive deep into the New Age movement. It’s important to note that the book was written over 20 years ago. The cultural context has changed dramatically but the relevance can’t be overstated. The book is often prophetic.

One thing we’ll point out is how much more prevalent and adept multi-level marketing has become. The book probably underestimates this. The internet is a lot more powerful and ubiquitous than the analysis expects. The author implies a much closer relationship of new-age thinking and the MLM and pyramid scheme business models than is proving to be the case these days. Today, we are seeing MLM models thrive globally under very different cultural contexts and with different motivations.

Regardless, this is a fascinating analysis and helpful to understand the staggering rise of multi-level marketing in the United States. It’s useful to understand the underpinnings of the messaging and marketing of the largest and most successful MLM companies.

False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes; Robert L. Fitzpatrick and Joyce K. Reynolds; 1997. Amazon Listing (I got my copy from my local library!)

We read a ton of books, blogs, magazines, listen to podcasts, watch documentaries and more to do research for you! If there’s something we should review or recap be sure to reach out and let us know!

MLM or Pyramid Scheme?

MLM or Pyramid Scheme?

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 […]

Is Young Living a pyramid scheme?

Is Young Living a pyramid scheme?

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 […]

2018 Jeunesse Income Disclosure Statement

2018 Jeunesse Income Disclosure Statement

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 statement mentions a few ways to participate in Jeunesse and two ways to make money. In order to earn retail profits you must purchase a starter kit which has a price of $49.95 and a product package. The least expensive product packages in the US are $199.95. This brings the total cost to get started to at least $249.90 plus shipping. There are starter packages that are over $1,000. 

In addition to costs to get started is also an annual renewal fee of $19.95 (which can sometimes be waived). In order to earn commissions, a participant will need to purchase/sell around $160 in a single month and $100 every month.

Product CV ranges from .38-.72 per $1 wholesale price, with the average being .62 and median .67. In order to earn commissions participants are required to purchase or sell 60 in CV each month and 100+CV in a single month. (Source)

Distributors do not need to sell the products they purchase in order to meet requirements. This can lead to inventory loading and bonus buying. A better system would be have requirements be based on retail sales. Having ranks and requirements based on purchases alone is a red flag.

Jeunesse makes a clear statement that “distributors will incur expenses.” The report does not give any specifics about the kinds of expenses participants might run into. Jeunesse also does not give any average expenses or other specific amounts for us to consider. With any business, keep in mind expenses like: advertising and promotional expenses, product samples, training, travel, telephone and Internet costs, business equipment, and miscellaneous expenses. 

Jeunesse products

Where are all the distributors?

The income disclosure report on how much people earn is extremely confusing and pretty misleading. First, the numbers only includes people that “chose to build a team” by sponsoring someone. This corresponds to the approximately 9150 that’s referred to throughout the disclosure. Therefore, it’s not clear how many, if any, members are making money without sponsoring anyone. It’s possible to fill in some of the distributors not earning a commission, and those earning less than $245 (see below). But this isn’t the whole story.

# of Team BuildersCommissions Earned
1830$0
2845< $245
3282$245-$4,350
1035$4,350-$82,000
158> $82,000

Where are the non builders and the retailers?
Where are the rest of the thousands upon thousands of distributors?

But, the above numbers are simply misleading. In 2015, Jeunesse was reporting adding tens of thousands of distributors each month. The growth of the company indicates this is still likely the case. Yet the report only mentions around nine thousand distributors total.

Image result for jeunesse conference
The report doesn’t include thousands and thousands of distributors.

The disclosure doesn’t clearly include distributors who didn’t earn any money from retail sales (or even the ones who did). These numbers also exclude distributors who were inactive for 90 days (even though 2017 was much longer than 90 days). Also, many distributors may have chosen to build a team but didn’t yet sponsor someone in 2017. Those distributors are not included.

Further, this disclosure is broken down by commissions earned rather than rank. This means it is impossible to tell what a distributor needs to do in order to earn these commissions. This is a red flag and bad for evaluating the business.

Buy-back and refunds

Jeunesse mentions a refund policy. However, it’s important to carefully examine the plan’s terms and conditions. For example refund does not include return shipping costs. Products returned after 30 days are subject to a restocking fee and must be “currently marketable.”

Check out the entire buy-back/refund policy in the Jeunesse policies and procedures. They can change and be updated.

Conclusion

The confusing report gives more questions than answers. The information is incomplete and misleading. This makes it impossible to use the Jeunesse Income Disclosure to draw conclusions about the business opportunity. It is full of red flags.

Be sure to ask a lot more questions about the Jeunesse business opportunity before getting involved. Ask for evidence backed data about costs and expenses. Also, look into what participants generally earn from selling Jeunesse products. What do most participants earn (mean, median, minimum, maximum). Try to avoid testimonials and look for evidence of the experience of most distributors.

Jeunesse has had trouble with lawsuits and had to release new/updated Income Disclosures. Based on the income disclosure and the red flags outlined here alone, we suggest avoiding involvement with Jeunesse.

We’re unaffiliated with Jeunesse. Please contact us with any questions or feedback. We’d love to hear from you.
Source: 2018 Jeunesse Income Disclosure statement (Linked from the opportunity menu on the Jeunesse site)

My Daily Choice aka  Hempworx Income Disclosure Analysis

My Daily Choice aka Hempworx Income Disclosure Analysis

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 […]

FTC Guidance: MLM Compensation Structures

FTC Guidance: MLM Compensation Structures

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 […]

It Works! 2016 Income Disclosure Analysis

It Works! 2016 Income Disclosure Analysis

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 2018, It Works! still had not released a 2017 disclosure.

Expenses and Costs

It Works! makes an important note about all of the disclosures about income and expenses. Remember, none of the income disclosures should be thought of as profit, to get an idea of profit or take home pay you would need to subtract all expenses. It Works! mentions that these expenses can be pricey.

Note that these figures do not represent a Distributor’s profit, as they do not consider expenses incurred by a Distributor in operation or promotion of his/her business. The [figures] refer to gross (total income before any expenses are deducted). The expenses a Distributor incurs in the operation of his or her It Works! business vary widely. Expenses for distributors can be several hundred or thousands of dollars annually. You should factor in estimated expenses when projecting potential profits. Such operating expenses could include advertising and promotional expenses, product sales, training, travel, telephone and Internet costs, business equipment and miscellaneous expenses. 

2016 It Works! Income Disclosure Statement (emphasis added)

Who is buying and selling?

The income disclosure says most Distributors received income in 2016. 6.48% of Distributors receive no income at all. The compensation plan lets us know how a Distributor can receive income: through retail sales, sponsoring distributors, and bonuses. For retail sales, “Commissions are paid to the enrolling Distributor on retail orders even if the enrolling Distributor is not commission qualified.” This includes commissions on retail orders for the Distributors own purchases.

Image result for it works wraps
It Works! accessory wrap product

This helps to explain why most distributors (93.52%) are being paid something by It Works!. But, it’s hard to tell if most purchases are just by It Works! distributors (see bonus buying and inventory loading). Previous versions of the compensation plan explain that purchases of this type will be made in the distributors name. This is a red flag, a better system is to attribute sales to end customers.

Also, this income only includes commissions made on these purchases, its not clear if the products sell for more than wholesale. This is a red flag. If markups were a significant part of the income for distributors, It Works! would want to share that opportunity.

What’s does “average” mean?

Distributors make up 78.73% of the Distributors with a monthly average paid is $51. Looking carefully, we see that the range paid is extremely wide with a high of over $10,000 and a low of $1. There is no information like percentiles, and how many distributors this data represents. It is impossible to tell if very many distributors actually receive the ‘average’ amount.

For example, if there are 2 distributors and one is making $10k and one is making $1 the “average” would be about $5k. In order to get to about $51 average with only 1 person making $10k there would need to be about 200 people making $1. This means a lot of people are making very little money.

The wide ranges, make the averages pretty misleading. Instead, It Works! could report on the top and low percentiles, and other more transparent information.

Who’s getting paid?

Most people selling It Works fall in the first rank and the first three cover over 95% of distributors. Emerald, Diamond, Double Diamond, Triple Diamond, Presidential Diamond and higher ranks account for less than 5% of everyone.

2016 Income Disclosure Statement from It Works!

We see that for 78.73% of Distributors have a monthly low of $1 and a high of $10.3k. Executives have a very similar range ($9-$10.5k) and represent around 9% of Distributors. Finally, Ruby also has a similar range ($35-$11.3k) The averages climb a bit between these ranks but its hard to tell what that actually means (see above) without more information.

What about the higher ranks?

Reaching the higher ranks is all about recruiting and having enrolled commission qualified Distributors. You can not reach higher levels without recruiting other members. This is a red flag. This means that significant income comes from recruiting other members into the network and rather than retail sales to customers outside the network.

Climbing the ranks at It Works!

In order to continue receiving commission checks based on the people that Distributors have recruited they must maintain their status as “commission qualified.” This means meeting a personal volume requirement to maintain eligibility for commissions based on rank.

Conclusions

The wide ranges for monthly payments make it impossible to know what payments Distributors generally receive. A fair thing to say is that 95% of distributors received between $1-$11.3k in commissions per month. We can also conclude most received a lot less than $51 per month (in order to bring the averages down). In this case, the averages are simply misleading.

Finally, with hundreds or even thousands of dollars in expenses it’s hard to image this leaves any profit. It’s likely most of these distributors end up losing money selling It Works!.

No affiliation with It Works! Global. Please contact us with corrections or questions.
Source: https://static.myitworks.com/legal/images/ids/2016-IDS-us-en-vf.png

Young Living Income Disclosure Statement

Young Living Income Disclosure Statement

Income disclosure statements also known as earnings disclosure statements help to understand the business opportunity selling Young Living. In 2017 Young Living released an income disclosure statement about the commissions and bonuses earned by Young Living members. Usually, when people think about a good business […]