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Costs of Selling DoTerra

Costs of Selling DoTerra

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) […]

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 what we found.

Thirty-One Gifts 2017 disclosure

This disclosure can be a bit complicated to understand because of the fine print. The fine print lets us know that the table only includes consultants that were active in 2017. Thirty-one defines an active consultant as someone who submits $200 in personal sales volume in a rolling three-month period.

This fine print is pretty misleading because the table is labeled all consultants. The consultants in this table are actually more than active – they are pretty successful, all of them have $200 in personal volume sales in just a 3 month span (this can correspond to more than $200 in retail sales depending on the products sold).

Thirty-one did not report the percentage of total consultants are active. This makes it impossible to get a good idea of how many participants get paid. However, even the successful participants – 18% of those got paid less than $1 over an entire year.

Profits and Expenses

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.

Conclusion

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.

survivorship bias

survivorship bias

also: survivor bias Survivorship bias is a type of bias where we focus on the stories of those who were wildly successful. Those stories makes us believe that success is normal. This is true even when almost all people fail. This bias makes us feel […]

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 […]

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 enrolling others into the scheme, rather than supplying investments or sale of products or services.” -Wikipedia

This isn’t the whole story. Most people see “sale of products or services” and immediately think every MLM who sell a product cannot be a pyramid scheme. The reality is many pyramid schemes sell products.

When sales of a product are mostly to recruits or among the program members then it’s probably a pyramid scheme. This means that the only money coming into the system is from new people joining. It doesn’t matter if that money is from new recruits “buying” products, or paying membership fees, etc. A small amount of sales doesn’t count, this is just selling to hide the scheme.

Example MLM compensation plan recruiting explainer

Red flags to watch out for

  • Big earnings are from recruiting other people. Compensation plans focus on recruitment.
  • Earnings from retail sales to customers outside the network are small or not emphasized. There is little or no data on how much is earned from these kinds of retail sales.
  • People at lower ranks buy inventory that accumulates in their basements. See: inventory loadingbonus buying
  • Lots of exaggerated claims: the products sell themselves, the products are too good to be true, passive income, become a millionaire, no skills needed
products sell themselves, easy money
  • Prices for products are inflated. Claims that the product has no comparable product available in the market.
  • Commissions for recruiting new distributors. Especially when there is no legitimate product or service, or separate up-front membership fee. Similarly, commissions off of new recruits starter kits or membership fees.
  • High membership fees, expensive starter kits, required monthly purchases, frequent and expensive training kits. These are all ways that lower recruits can pay into the higher layers of a pyramid.

Multi-level marketing and U.S. Law

Many participants in MLM companies will say “this is not a pyramid scheme, pyramid schemes are illegal.” This isn’t quite the right way to think about it.

Suppose you were to steal something from a store not get caught. You could say “I walked out of the store without paying and they didn’t say anything. Therefore, it isn’t shoplifting.” Most of us agree, that is not the right way to look at it. Not being caught doesn’t make it legal, it just means you haven’t gotten caught.

illegal activity

If you’re asking if an MLM is a pyramid scheme, the participant should tell you why the program is not a pyramid scheme. They should not tell you that the MLM hasn’t been caught. Talk through the program together and check for red flags.

The United States has federal laws (for the whole country) and state laws. The laws that apply to MLMs are around investments, marketing, consumer protection, and more. There are not really MLM specific laws. Because there are a lot of places where it’s not very clear if what MLMs are doing is illegal or not, it is up to the courts to decide. In these cases, someone, many people, or a government agency will sue an MLM company and the courts will decide whether the company’s actions are legal or not.

Many MLMs have been sued and found to be illegal. Even more companies have been forced to change their policies, compensation plans, and practices.

More research

Here are documents the FTC has released to help us navigate the blurry lines of illegal MLMs and pyramid schemes:
FTC Guidance: “There are multi-level marketing plans – and then there are pyramid schemes.”
FTC Business Guidance to Multi-level marketing companies
FTC: The telltale signs of a pyramid scheme
FTC FACTS for Consumers: The Bottom Line About Multilevel Marketing Plans and Pyramid Schemes

Check out some of our pyramid scheme analysis of a few popular MLMs:
Is Young Living A Pyramid Scheme?
Is It Works! A Pyramid Scheme?
More here: http://stayonthelevel.com/tag/pyramid-scheme/

Finally here’s some more info on pyramid schemes:
Investopedia: What Is A Pyramid Scheme
How Pyramid Schemes Work

We’re not affiliated with any MLM. We aren’t lawyers and this isn’t legal advice, but contacting a lawyer for legal advice can be a great idea. Please contact us with any feedback or questions!

up-line

up-line

The distributors “above” you in the hierarchy of the company. These participants recruited you or your sponsor (or your sponsor’s sponsor, and so on).

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)

buy-back

buy-back

Many multi-level marketing programs have a buy-back rule, provision, or program. In these plans, the company agrees to re-purchase product that a distributor wishes to return. Usually there are a lot of rules and requirements including: the product must be in new condition, time limitations, […]