Monday, 9 February 2015

An Objective Look at MLM Schemes and Forever Living

First up I don't claim to be an expert or know everything about Multi Level Marketing schemes.
I am just writing my opinions, and saying why I think MLMs are bad news and should be avoided.
Feel free to share your thoughts and experiences. Please no links, and no promotion to any MLM.

First up I saw a video talking about how Forever Living worked and how you could make money etc.

Forever Living sells expensive Aloe Vera based products, from health gels you can drink, suntan lotions, creams and so on.

I have decided not to post a link to the video since to do so may inadvertently promote it through google ranks, or even from someone curious going to look at it and getting taken in.

So looking at this from an objective business perspective.

The margins are actually very small compared to regular retail business, and anyone who was genuinely interested and had a passion for these types of products could make much much more money doing this independently and buying the stock directly from manufacturers.

Team Building
Next moving onto the "team building" this is just classic pyramid scheming.
In other words you sign people up, you take a percentage of their sales, you move up the pyramid. The problem is that people at the bottom will ALWAYS lose out, so ethically there is a problem here, Pyramid selling itself is illegal, and these types of MLM scheme just stay on the right side of the law but only just, and they do this by the fact you can climb the pyramid, it doesn't make it any less of a pyramid, it just adjusts the way it works.

Now lets say you start off and sign up 6 people to join your team,

You are top of that mini pyramid.
Now lets say each of those 6 people all signed up 6 people.

Now, if I carry on this level of signing people up, in just 13 levels you would have nearly twice the population of the entire planet! (go do your maths if you don't believe me)

So the whole signing people up, clearly is unsustainable, and money can only be made by people at the top. So this part of the scheme is unethical and morally dubious.

Here is another graphic I found to help you understand.

Remember MLM companies will insist they are not the same as pyramid schemes (which are illegal), yet the numbers expose it!

And this is the problem with nearly all MLMs, the true money is made from the signing up of others, but every time you sign someone up, you are potentially losing potential customers, as the person you signed up, could in theory sell to your customers! So the more you sign up, the more potential you lose, not to mention the question of who do you sell too if you have signed up everyone?.

So that leaves us back to the retail aspect as the only true way to make money.
I have no real problem with the retail aspect, you buy something, you mark it up 30% and you sell it.

The only issues with this is that because it is run like a pyramid, the wholesale price gets bumped up on every step, so the lower you are, the less you make. And to get to the top you have to step on everyone else.

Next up is the various health claims of the various products that forever living sell.
We are taking majorly exaggerated health claims, I believe it was Hungary whereby FL had to pay a huge fine over certain claims.

"Claims made about FLPI products were found to be in violation of several laws in Hungary related to advertising, registration of nutritional products, and the use of cosmetics as medicinal agents. As a result, the company was fined 60 million HUF (approximately $280,000 USD)"

So now you are selling vastly over priced producted, with dubious health claims, but the sad bit is, you are not selling these to gullible strangers, you are selling to well meaning family and friends.

Holland & Barrett sell very similar products for a fraction of the cost of FL. Now of course FL will say that the concentrations in their products are higher so that's why the price is higher, but if the ingredients themselves don't really make a different to the effects of the product, then it doesn't matter if the product contains 10% of something or 90%, its basically the same.

Then there is the ridiculous ranking system, assistant manager, supervisor and so on. Its all nonsense, to make you feel like you have achieved something.

In your own business the only terms that matter are OWNER or MANAGER!
Also did you know that even if you climb the pyramid and gain a higher rank, if your sales/sign ups go down, you keep your rank! Yep that's another thing they don't tell you! And that is why so many people who do get quite high up, just leave the company, why? Because the scheme is unsustainable!

So my advice would be to stay away from pretty much all Multi Level Marketing schemes. There are much easier and much more profitable ways to make a living, and you don't have to stamp on those below you to get to the top, you don't have make a fortune for those above you why you struggle with the low profits.

Even this video, he starts off by saying how he is going to make it easy to understand, but then spends 16 minutes waffling on, making exaggerated claims about how much you can earn, confusing marketing language and so on.

Anyone who has worked in real business knows it comes down to a few simple things.


That's it.
You buy something wholesale price. You mark up the price so that you make a profit, you try to sell it.

Seriously people, anyone who reads this, could go to a wholesale cash and carry, buy say £500 worth of pet food, and sell it for £750, that's an easy 50% profit, sell it from your house, so no costs there, easy paperwork, and after-all people will always need pet food.

Don't get taken in by the likes of Forever Living, Amway, Arbonne etc, they are all the same.

All that will happen is that you will piss off most of your friends and family by constantly harassing them to buy crap off you. You wont really make the riches promised, and you will have wasted a lot of your time and money.

Remember retail is retail, however you look at it, the ONLY difference with MLM schemes, is they had the pyramid scheme element to it, and if you find yourself at the bottom, you end up getting blamed and told that you only failed cause you never worked hard enough, when the truth is the very system is flawed, and unsustainable, and you never failed cause you never worked hard enough, you failed cause you got taken in by a broken scheme.

By Jon Donnis