A closed system is when sales are within the company participants or to new recruits, rather than the general public. Participants themselves may make most of the purchases. Distributors at closed system companies may also sell products to cooperating family members. Retail sales to people […]
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 […]
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 opportunity, they are thinking about profit. Profit is money earned minus the expenses. The numbers throughout this disclosure don’t take into account any of the costs associated with selling Young Living. To get a better idea of profit we have to subtract any expenses for the year.
Note that the compensation paid to members summarized in this disclosure does not include expenses incurred by members in the operation or promotion of their business, which can vary widely and might include advertising or promotional expenses, product samples, training, rent, travel, telephone and internet costs, and miscellaneous expenses.2017 Young Living Income Disclosure Statement
This means that if a member is making $0, or a very small amount of money it’s reasonable to assume that they are losing money selling Young Living. This is because their expenses for the above list would exceed their earnings.
Who is making money?
The disclosure statement makes reference to the vast majority (89.5%) of members who are “preferred customers.” These members have not sponsored anyone. It implies these members are just buying oils, but that isn’t the whole story.
The best news for enrolling members is that choosing between becoming a Preferred Customer or a Business Builder doesn’t have to happen at enrollment! By purchasing a Premium Starter Kit (PSK) and enrolling as a wholesale member, you have 11 of our most popular essential oils to help you get started; your personal journey with Young Living will help you organically find your path as a Preferred Customer or a Business Builder.https://www.youngliving.com/en_US/opportunity
This really hides the number of people who are working to build a business (selling and recruiting), but didn’t make money in 2017. Instead, it characterizes them as customers. Anyone who has not sponsored someone falls into this group.
We should not assume that most are customers. In 2016, Young Living did not have this “preferred customer” category and their disclosure looked much different. In the 2016 disclosure, 94% of members made a median of $0, with an average income of $1 (not including expenses). This $0 average included distributors focused on selling products instead of recruiting. This change in categorization aligns with the difference in average earnings.
How about the higher ranks?
The 2017 disclosure statement really only describes those who have successfully enrolled another individual. This accounts for 10.5% of Young Living members. One third of those or 3.5% of all members, get paid a median of $15 per month. The next rank, “star,” or 4.7% of all members and they make a median of $58 per month. Finally, the “senior star” rank has a median monthly income of $198 and makes up a little over 1% of all members.
We looked at medians because the averages indicate that a smaller number of high-commissions are driving the averages up. Medians are a better indicator of what more people are earning for this rank.
Business building ranks also have requirements though including a 50-100 personal volume requirement. This corresponds to $50-$100 or more in purchase requirements. Some of the “income” in this report really is earnings on these purchases (not sales). Check out the Young Living compensation plan for more information on the rankings.
The annualized average income is misleading because a distributor’s rank can change over the year, a distributor can join or become inactive during the year. In all of those cases the annual earnings are lower.
Young Living’s characterization of some business builders as “preferred customers” and excluding them from disclosures is misleading and hide the whole story. This income disclosure statement only gives an idea of income for those distributors who have already enrolled someone and does not include costs and expenses. Young Living gives a list of expenses that are important to consider.
Looking at the 2017 and 2016 disclosures it’s clear most Young Living distributors do not receive income. This is true even without considering the numerous expenses Young Living describes. By and large, distributors and those working hard to sell Young Living are not profitable.
No affiliation with YoungLiving. Please contact us with corrections or questions.
Stories about participants in MLMs getting into debt are pretty common. We took a look and found lots of information. We learned how common debt is for MLM participants, why people turn to borrowing, and that it’s not a good idea. In a survey of […]
Bonus buying is purchasing products that a consultant doesn’t need, for themselves or to resell in the short term (30 days or so), in order to maintain or increase their rank. The consultant might also be buying in order to get a one time cash […]
In January of 2018, the Federal Trade Commission of the United States released guidance on how multi-level marketing companies and participants should talk about business opportunities. The FTC is one of the government agencies which regulates all kinds of businesses, including multi-level marketing companies.
Why should we care?
The FTC works to make sure that things are fair, there is no fraud, and to protect consumers. These guidelines lets us know what the FTC has decided to be bad and why. Companies that violate these guidelines are bad for consumers, business, and in some cases could end up in trouble with the government.
If you are recruiting participants, these guidelines are a great way to think about the best way to share an opportunity. New recruits will be well informed and on their path to success with no regrets. These guidelines from the FTC are not the law but they are help to understand the law and to follow it.
FTC Guidelines on Sharing Business Opportunities
The FTC explains that, to follow the law, you must tell the truth and not be misleading to recruits and participants about the opportunities. A company violates the law if they say or show things that are false or misleading about the business (including about how much you can earn). This includes making claims when there isn’t really proof or evidence for them.
“An MLM’s representations and messaging concerning the business opportunity it offers must be truthful and non-misleading to avoid being deceptive under Section 5 of the FTC Act. An MLM’s representations about its business opportunity, including earnings claims, violate Section 5 of the FTC Act if they are false, misleading, or unsubstantiated and material to consumers.” (FTC Business Guidance Concerning Multi-Level Marketing)
This all seems great. When evaluating an opportunity, you want to make sure that the things you learn about it are true and accurate. Claims that are false or fake shouldn’t be allowed. The FTC makes deceptive practices illegal.
Must be a “reasonable basis” for claims
The first guiding principle (here under #13) says that companies must have objective evidence that supports the claims they share. If you are evaluating a business opportunity you can (and should!) ask for the evidence.
Claims to get rich are deceptive
“Some business opportunities may present themselves as a way for participants to get rich or lead a wealthy lifestyle. They may make such representatives through words or through images such as expensive houses, luxury automobiles, and exotic vacations. If participants generally do not achieve such results these representations would likely be misleading to current or prospective participants.” (FTC Business Guidance Concerning Multi-Level Marketing)
The FTC gives other example claims that are misleading unless they are “generally” achieved. These are just examples and similar claims could also be misleading.
- Making income that is similar to a career or job
- Earning thousands of dollars each month
- Become a stay-at-home parent
- “Fire their boss”
The FTC says that if participants don’t generally get these things then claiming participants could is misleading.
Many companies and leaders will share their own success. The guidance says this is okay only if they include information about how much is earned or lost by most participants.
When talking about business opportunities, talk about real results of most participants. Our research has shown that vacations, big paychecks, quitting a job, and free cars are usually very rare. Check out our income disclosure analysis pages for some examples. Ask for these disclosures. The disclosures we’ve looked at do not include expenses or losses which makes it hard to tell how many people lose money and how much they lost.
Examples should tell the whole story
People sometimes explain an opportunity with a hypothetical: “if you recruit this number of people” then you will get a big commission check. These examples need to include any assumptions for the “typical participant.” That means, for example, if any people you recruit also need to sell a certain amount of product that requirement should also be shared.
If assumptions and additional requirements that make the earnings example true for most people are not included then it’s misleading. This is the 5th principle listed under #13 in the Business Guidance Concerning Multi-Level Marketing.
This, again, is pretty common sense. It is important to get the whole story when hearing about a business opportunity. It would be bad to invest and do a lot of work and then learn there were extra requirements. That would be misleading and unfair.
The company should tell participants not to make false claims
Most MLMs will pay people to recruit new distributors and that gives them a good reason to make false claims. MLM companies should have rules and check up on participants to avoid false claims.
“[An] MLM should (i) direct its participants not to make false, misleading, or unsubstantiated representations and (ii) monitor its participants so they don’t make false, misleading, or unsubstantiated representations.”
Usually, a good place to look for these rules is in the contracts that new recruits sign. Sometimes they will be in “Rules and Regulations” or “Guidelines and Procedures.” You can ask for these documents. Participants often violate on social media, during opportunity meetings, or in one-on-one conversations. Some companies are very strict but others allow a lot.
Inventory loading is when distributors purchase extra inventory in order to participate in a program, meet personal volume requirements, receive commission checks or other bonuses. Front-end loading is meeting monthly purchase requirements or personal volume requirements at the beginning of a month. Similarly, back-end loading is […]
Costs to get started To get started a new consultant needs to purchase a starter kit. These include marketing materials, 35-200 pieces of jewelry, and “business tools.” The lowest priced kit is $99. Inventory costs The Paparazzi model encourages buying inventory for you to sell. […]
No affiliation with dōTERRA. Please contact us with corrections or questions.
Income disclosure statements also known as earnings disclosure statements help explain how much money people make selling DoTerra. They also explain which levels make money.
The statement doesn’t reference any of the costs associated with selling DoTerra. These costs include things like shipping, packaging, marketing, and the advocate’s time. The earnings discussed here seem to be the commissions paid by DoTerra and do not include the costs of doing business. To get a better idea of profit you should be sure to subtract any costs for the year.
Who is making money?
The disclosure statement includes that most advocates (a little over 63% of all advocates) do not make money selling DoTerra.
Entry-level wellness advocates account the bulk (76%) of the company’s advocates. Only 16% of those entry-level advocates make any money at all. The advocates who did make money, on average made on average $376/year. This average doesn’t take into account the people who lost money (remember to subtract those costs!) or broke even.
The next level, builders, account for 23% of all U.S. advocates. Leaders make up around 1%. These levels account for the most profitable ranks and DoTerra describes them as requiring significant part or full time investment. Very few advocates reach these ranks.
|Rank||% Advocates||Estimated Monthly Earnings*||
Average Annual Earnings
|Entry-Level (No Profit)||63.84%||$0||$0|
*Calculated by divided annual across 12 months
Most people (>63%) don’t make any money and are probably losing money when you consider costs. These are the people who join to sell, not just for discount products.
For those that do make money, they are getting a small amount of money. $375 in one year is $31.25 per month. When you consider expenses and how much time and work is required– there is unlikely to be much profit even at the higher ranks.
Notes on the Disclosure Statement
It’s good that doTerra releases an earning disclosure statement. However, it is not easy to understand and is missing a lot of information that other disclosure statements provide. For example it does not include:
- Any information on the number of advocates at each rank
- Ranges or medians for the annual earnings
- Information on how the earnings are calculated and what they mean
- Average costs and expenses, specific time investment
- Time to reach ranks
The way the numbers are presented are pretty confusing (in a way that is a bit misleading). The percentages are percentages of other numbers which makes them hard to compare without doing some math with a spreadsheet. These are great questions to ask when considering dōTERRA.
An opportunity meeting refers to a meeting or party where people give presentations and/or testimonials. These meetings are to convince people to buy the products or to join the company as a distributor.