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 […]
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 […]
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.
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!
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 […]
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, […]
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 a survey. This is useful in looking at what participants look at in terms of profit/loss.
The expenses an Affiliate can be several hundred or 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, business equipment, and miscellaneous expenses. Based on a survey conducted by the company in 2018, the average annual expenses an affiliate incurred were $1,608.My Daily Choice 2018 Income Disclosure
By the company’s own disclosures this leaves a big difference between the average income and the average expenses. Average annual income for all Affiliates was $580.08 and the medium income was $0. Even using the averages, this results in a loss of $1,028.92
What does average mean?
The table in the income disclosure shows the maximum, minimum, and average monthly and annual income. However, for each rank, the difference between minimum and maximum is big. Builders earn from $0.40 to more than $3k monthly, with an average of $10.22. There is no information like percentiles, and how many affiliates this data represents. It is impossible to know how many affiliates receive the ‘average’ amount.
To better understand what these numbers mean, let’s look at one possibility. For example, if there are only 2 distributors and one is making the maximum ($3k) and one is making the minimum ($0.40) the “average” would be about $1.5k. In order to get to the average (about $10) with only 1 person making $3k there would need to be ~310 people earning $0.40. This means a lot of people are earning less than average commissions.
The wide ranges make the averages pretty misleading. However, these ranges also help us understand most people are making a lot less than the average.
Who is making money?
98.5% of affiliates are ranks which make on average less than $100 per month. This means these affiliates have average annual earnings significantly less than the average expenses MyDailyChoice (aka Hempworx) reported in the disclosures ($1608). As a result, these affiliates are spending more than they are making. Finally, most affiliates get a lot less. Buidlers and Directors earn less than $30 per month on average. .
A significant group of affiliates get no income at all and that’s not an average. MyDailyChoice reports that more than 24 thousand affiliates made “no income at all” during the year the report covers.
These disclosures include a lot of information about the number of affiliates but the statistics do not include affiliates not eligible to earn downline commissions. This means the statistics are reported for affiliates who have achieved a business volume requirement. It doesn’t say how many people don’t reach this level of success.
Annual versus monthly averages
We discovered that all of the annual averages are 12x the monthly averages. The annual number should not be the monthly number times twelve. People will change ranks throughout the year, leave, and join the program. You can even see this in the “time to each rank” row. This means either the annual average earnings or the monthly average earnings is calculated incorrectly and is not accurate. As a result, it’s not possible to determine which is inaccurate with the data given.
It’s helpful that MyDailyChoice includes information about survey information about average expenses. More accurate information would be based on actual expenses rather than affiliates estimating and saying their expenses in a survey. However, this information helps us to understand that even with these estimates it is very difficult to sell enough with MyDailyChoice (aka Hempworx) to pay off expenses and earn a profit. On average, very few affiliates are able to earn profits. The disclosures also indicate it takes months or even years to reach the ranks where profit is more likely. Because of this, there may be many unprofitable months or even years for even the most successful affiliates.
Due to the expenses and small percentage of affiliates who make significant earnings, it seems that MyDailyChoice or Hempworx is not a great business opportunity for most people.
OnTheLevel is not affiliated with MyDailyChoice. Please contact us with feedback or corrections any time! We’d love to hear from you.
Sources: https://www.mydailychoice.com/htdocs/MDC_IDS_2018.pdf https://mydailychoice.com/htdocs/CompensationPlan.pdf https://www.mydailychoice.com/corp/opportunity
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 […]