Residual Income Myth?

 One of the things that got me interested in the Amway business was the talk about lifelong or even generational residual income. Residual income is something that keeps coming in even if you don't do anything. For example, if you put $1000 in the bank, you would earn interest every month. The problem is that $1000 would only get you a few cents each month and it would not be enough for you to retire and enjoy the trappings of wealth. But what is a reality is that you will not achieve this in an Amway business because there is no lifelong residual income.  It there were, wouldn't Amway advertise this as a real benefit of being an IBO?  You only hear it in rah rah meetings but not from the Amway corporation.  Did you ever wonder why that is?

The IBO retention rate of Amway IBO in their first year is about 50%. Many IBOs last less than a year and maybe only about 5% of IBOs last more than a few years. Thus, any hopes of "residual income" is unlikely. You cannot get repeat customers and downline when they are quitting faster than you can recruit them. And certainly, you can conclude that you cannot receive residual income when you cannot retain IBOs. In fact, I don't know of any IBOs who have ever "walked away" from their Amway business to enjoy residual income. Have you even wondered why diamonds and crown ambassadors are still working and none of them have quietly retired? I would guess that they don't retire because they cannot. Once you stop, more than likely your income stops.  Maybe no immediately, but soon enough, attrition will take its toll.  A diamond lifestyle would take a lot of income to maintain. Thus, how can someone walk away and expect to sustain their lifestyle? The answer is obvious to me. You can't walk away and retire. It is probably why even crowns and all the diamonds continue to work busy schedules. I highly doubt they are working because they just "love" their downline and have no other reason to keep going.

It's no secret that diamonds earn income from the sale of standing orders, voicemail, books, and functions. But once you stop appearing at functions, I do not believe you would continue to share in tool profits. Also, Amway has a requirement of "side volume" in order for an IBO to receive certain bonuses. How can you maintain a level of side volume without being active and recruiting IBOs? My upline said your downline will do half of what you do. If you "walk away", so will your downline. The only way for your Amway business to survive is to keep working. Sometimes I wonder if the diamonds even a plan and enough savings and investments have to actually retire someday.

Breaking down a diamond's income is basic math. Even a $250,000 annual income isn't that much when you break down all of the expenses associated with a diamond lifestyle. The diamond lifestyle is an illusion of wealth. One that looks flashy, but I am not convinced that these diamonds are living large behind the scenes. Many professional athletes end up broke within years after their playing careers are over. These athletes earn much more than Amway diamonds. The difference is that diamonds can keep working while pro athletes cannot. But the common denominator in my opinion is living a lifestyle that your income cannot sustain. I hope you see the similarities. To me it is crystal clear.

Walking The Beaches?

 One of the big battle cries I heard as an Amway IBO was how one day, we would all be financially free and walking the beaches of the world.  Being free and not having to own an alarm clock and not reporting to a boss. I mean it sounded like a cool deal.  All you had to do was work the system 2-5 years and follow the proven system of success. At the time, I thought honestly that I was going to do just that. But as time passed, I started to notice things said and taught by the upline leaders that just did not make sense.

For example, why would we constantly be told to get out of debt and live below our means, but it was okay to go deeper in debt to attend a function or to buy more standing orders?  If debt is bad, then debt is bad.  There wasn't much talk about using your business to generate profits to reduce debt. Just more recruiting and sponsoring. I suspect it's because it's just not feasible to generate enough sales to make any serious income from selling generic brand products for top premium prices.

Of course, now I know about how upline's apparent greed was what led to this type of advice. Or we were taught that God was our top priority, followed by our spouse, family, job and then the Amway business. But when anything conflicted with am Amway function or a meeting, the Amway function was ALWAYS to be the priority. "Never miss a meeting, period" was the advice we got from upline. Attend "all" functions. All means all. So much for prioritizing God, family and our jobs before Amway. It was just talk without any action.

Which leads me to ask prospects and IBOs. What progress are you making? When will you be walking the beaches of the world? Why aren't any of your upline leaders retired from Amway, collecting mountains of cash and walking the beaches of the world? Why doesn't Amway advertise residual income as a benefit of the business if it were true? Can you even name one or two people who built an Amway business and actually walked away from their business and collects income? Surely a 50+ year old business with this benefit must have hordes of people realizing this wonderful benefit? Why can't people name a single diamond who built the business, walked away and enjoyed this benefit that's used as a selling point for Amway?

What many people, including IBOs don't know is that you can never go inactive in Amway. Amway, as far as I know, will only pay bonuses on an active business, thus if you ever walk away, someone will have to run your business. You will also need to move a certain amount of volume in order to qualify for some of these bonuses, and you will have to hope that none of your downline ever quits or stop ordering products, or else your bonuses will dwindle down to little or nothing very quickly. For the higher up diamonds, if you stop, not only will your Amway business fall apart, but you will not receive tool money because you aren't participating. Thus, diamonds work until they are physically incapable or until they pass away. That is not freedom.

Join Amway And Annoy Family And Friends?

 I read on another blog written by an Amway IBO, that your real friends would not walk away or cease to be your friends because of yout involvement in Amway. I do not believe your good friends would abandon anyone because of their involvement in Amway. However, they might avoid you for a while if you are always talking about Amway, or bugging them to join Amway. They might also feel that it is the IBO who has deserted the friendship in order to attend the endless number of Amway meetings and conventions.  This is the Christmas and New Year season.  What could be more enjoyable conversation that an Amway IBO prospecting you while at Christmas dinner or at the New Year's toast?

As a former IBO myself, I know that I sacrificed many birthday parties, social events, and backyard barbeques in the name of Amway.  Our upline told us that these minor sacrifices would pay us back a hundredfold in the future. Looking back, not a single IBO crossline or my sponsor, ever got any significant payout from Amway. I believe that some IBO's relationships with friends and family may suffer, but not because of their involvement in Amway per say, but because the IBO is putting the relationships on hold while they pursue their Amway dream. It's almost like a friend who leaves home to attend an out-of-town college. Eventually they come home and your friendship is still there.  

As an Amway IBO, I remember our upline telling us that we needed to separate ourselves from friends at times, to avoid negative. I believe this is still true today, based on what I see coming from current IBOs. IBOs might call it "association", where they think they are "hanging out" with successful people, but the reality is that the masses of IBOs are broke dreamers hanging out with each other.  They aren't truly associating with "rich" people.  It's a lie. The diamonds are the allegedly rich people in the room, and they rarely personally associate with the rank and file IBOs, other than when they are being compensated to give rah rah speeches at functions.

Ironically, our upline taught us that we as IBOs were all friends for life. I recall a high level WWDB leader commenting that an IBO who "quits" is leaving their friendship, therefore the remaining group is not responsible for the failed relationship between current and former IBOs. When an IBO says friends for life, what they really mean for most is that you are friends for life as long as you never quit Amway. This is one of the reasons why Amway has been compared to a cult.  While they may not physically prevent you from leaving, there is subtle and peer pressure to keep going.

Shortly after leaving the Amway business, my father passed away. Not a single person upline or crossline called or visited to pay their respects or to express their sympathy. Friends for life indeed.

P.S.  Merry Christmas and a Happy New Year!

Merry Christmas From Joecool!

 Merry Christmas everyone!   I'll be taking off until Christmas to visit friends overseas so I don't think I'll be focused on Amway related stuff.  I hope everyone has a very Merry Christmas and a Happy New Year!  I'll be back to posting after Christmas.  Until then, here's a holiday blog post:

 I recall being an Amway IBO many years ago.  Amway IBOs wind up being social pariahs at times because during the holiday season because they sometimes have ulterior motives at social events.  Or at least the ones that their Amway schedule allows them to attend.  I found it humorous that Amway diamonds would teach about vertical alignment which means God, Family and your job came first and Amway fell in line after that. But at the same time, you were expected to never miss a meeting or function.   So they teach what makes sense, but in practice they ultimately mean that Amway is always your top priority.  That much clear to me looking in hindsight. 

It must be awkward at times to be at social gatherings with family and friends knowing that some IBO might be eyeing you up as a potential Amway prospect.   Amway IBOs are shameless at times when it comes to looking for potential recruits.  After all, you can’t go diamond without a group of IBOs down line.  I recall doing sone of these zany things myself as an IBO, but luckily, I saw the light and snapped out of my Amway trance pretty quickly.  Some people get hooked for years.  My former sponsor was involved for at least 25 years, although I lost contact with him and common contacts so I don't know what they are up to currently.  I wish them well, but I believe they wasted many of the best years of their lives chasing the Amway dream. 

So, to that I say to Amway IBOs.  Have a merry Christmas and give up prospecting for two weeks.  Enjoy the holidays without having an ulterior motive.  Enjoy your friends and family and don’t worry about Amway for a few weeks.  The world won’t come to an end and more than likely. Your business won’t have been affected by stopping recruiting for a few weeks to enjoy the holidays.   Your upline will say your business gets set back if you're not "core", but really, what would you accomplish by being hard core at family gatherings or social events with friends?  They likely know you're in Amway already so unless you skip social gatherings to stalk people at the malls or coffee shops, what will you really accomplish during Christmas and New Year?

I don’t know what the new year will bring but you’ll survive and life will go on.  By now your upline diamonds are likely promoting a major function called Dream Night or something like it.  While it might be a highly promoted event because you will see sports cars and jet skis, and other luxurious goods.  All to get you “dreaming” so you’ll be motivated to keep building Amway. Of course, to attend dream night you’ll have to fork out $75 or more but at least it should include a dinner.  In the end, you and thousands of other IBOs paying for these functions and other tools is how the diamonds pay for the stuff you might see at dream night.  

Don’t believe me?  Do the math.  

I Own A Business?

 Many people get prospected/sponsored into Amway and think it's a cool idea to be a business owner. "I own a business". And technically, it would be cool for someone to own a business they can call their own. But what Amway distributors fail to see is that they aren't business owners. If they sign up, they are commission only salespeople for Amway. These salespeople take all the risk and expense of moving Amway products, and if you meet a minimum quota, then you get a small commission.

These commissioned salespeople however, are allowed to sponsor down line (additional salespeople) which allows them to increase volume, possibly resulting in higher commissions. To illustrate, someone who moves 100 PV receives a 3% bonus. On 100 PV, a 3% bonus is about equal to $10. But if that same salesperson sponsors 2 people and they all move 100 PV, that would be 300 PV which is now a 6% commission. A 6% commission on 300 PV is about $36 overall. The 2 down line each receive $10 and the person who sponsored them keeps the rest, which is about $16. This is the reason why Amway salespeople are so desperate to sponsor down line, because it gives you an opportunity to increase your overall volume, assuming these down line are active in the business. This in itself wouldn't be a problem if Amway products were easy to sell, but most people find that they don't really like selling products and wind up being their own best customer. That results in most people making nothing or losing money.

So why are the diamonds called business owners? Because the diamonds are business owners, even if the rank-and-file distributors are not. This is because the emeralds and diamonds and some other higher ups are in the business of selling tools and functions. They might sell voicemail and cd subscriptions, books and seminars and other materials designed to allegedly help you succeed in Amway. Given the dismal rate of new diamonds around, I'd say the training is ineffective. I believe there are fewer new diamonds in Amway North America now than when I was in Amway 20 years ago. I've also seen diamonds walk away and quit (as opposed to walking away and collecting residual income). I've also seen diamonds get divorced (Amway saves marriages?) and I've seen diamonds have homes foreclosed (diamonds pay cash for everything?).

The problem for the rank-and-file Amway salesperson is that they believe the diamond holds the key to success so they hang on their every word and will buy all the training thinking they will also go diamond and receive untold wealth and early retirement. But in reality, the diamond is selling snake oil that puts money in their pockets while draining the pockets of their down line. And the diamond needs this money because it is highly unlikely that the "diamond" lifestyle would be affordable on a diamond's income. The average diamond as reported some years back by Amway was about $150,000 a year gross income, not including business expenses. If you do the math, you will easily see that after taxes and expenses, a diamond is not living the high life. It's the tool income that helps to augment the Amway income. Some diamonds make as much money on tools as they do from Amway and some make more from tools than from Amway. This is the secret to success. Sell materials to large groups of people on an ongoing basis.

But don't be fooled into thinking you own a business as a rank-and-file Amway distributor. You are just a commission only salesperson for Amway. If you stop and really think about it, how can you see it any other way? You move products and if you meet a quota, Amway pays you. You must follow Amway's rules and if you violate it or if Amway feels you were in violation, they can discharge your membership, and your income will stop. You cannot innovate or advertise without Amway's permission. Don't fool yourself. Take this information to heart if you are being prospected into Amway.

Money For Nothing?

 In my opinion, Amway is a pyramid. They are not illegal, but still a pyramid. The reason why they remain legal, apparently is because they do not pay anyone for recruiting downline. But most everyone has been or knows someone who was recruited by a zealous Amway IBO. The emphasis of most active IBOs is on recruiting and much of the teaching by upline is on techniques to recruit and/or how to talk to people without tipping their hat to reveal the Amway name. Most IBOs are not very good at this and they stick out like sore thumbs in many cases. It's also comical when uplines teach crazy antics, like how some IBOs use to deny that Amway and Quixtar were even remotely connected.

One of the reasons IBOs use to justify their involvement in the pyramid is that they can earn more than their sponsor. While that is true, it is only because everyone below the emerald or diamond level is basically expendable, or a slave in the pyramid. There are many IBOs who achieve fairly high levels who quit or had upline wreck their businesses. Thus, even platinums are expendable to upline. In fact, an upline might make more money by removing the platinum. For new IBOs or recruits, do you really believe that you are going to ever surpass your current upline diamond or higher? If you believe that, you are sadly mistaken.

And for those who dream of achieving diamond and walking the beaches of the world. How do you think you can ever achieve that? You don't get something for nothing unless someone gets nothing for something. In order for you to receive income for little or no efforts, your downline IBOs must keep purchasing products (which include tools and functions) and replacing IBOs who quit. If your downlines cannot keep up with the attrition rate, your business will collapse in a hurry. Come to think of it, if a diamond can walk away and collect a large income forever, why hasn't anyone done it? I mean we still see crown ambassadors still busy working functions, and I don't know of any who walked away to spend their lives jet setting on the beaches of the world.

The sad reality is that you see new faces at meetings and functions, just as often as you see familiar faces disappear. With that kind of attrition rate, you may have to work even harder at the higher levels just to keep your business status quo. In Egypt, the slaves built the pyramids. Do you have enough slaves? What many Egyptologists find amazing is how the Egyptians were able to motivate the slaves to keep on going, doing backbreaking work all of their lives. The same can be said of a diamond level business (or higher)

Lying To Succeed?

 One of the things my upline leaders used to always talk about was how they wanted everyone to succeed. Looking back, I believe they were lying and simply wanted the faithful downline to keep spending money on tools whether they succeeded or not. Now I am not claiming that every single upline leader does this, but primarily the ones who run "systems", such as WWDB, N21, BWW, LTD and some others.  Why do I say this?  Because it's simply not possible for everyone to succeed,  Diamonds push tools and functions on everyone, without making individual assessments on each business.  The diamonds profit regardless of the results of their downline.

When I stopped and really thought about it, pretty much every piece of advice I received, I had to pay for. Voicemails, standing orders, functions, open meetings. I know these are supposedly optional, but in reality, they are a defacto requirement. Anyone with a "dream" is going to buy the tools because the leaders will tell you that you cannot succeed without tools. Ironically, the same leaders will blame individuals and cite personal responsibility for the failure of downline IBOs, even the ones who did everything they were told.  Where's the personal responsibility of the upline leaders?

The leaders are edified and touted as having great business and financial acumen, thus not following their advice would seem foolish. Yet Amway defenders will try to claim that IBOs should discern the good and the bad and operate independently. It's a redundancy that many people do not see. Sure, a downline should not jump off a cliff because upline said they would pad their fall with a pile of cash, but many IBOs put in an earnest effort in Amway, only to fail because of the handicaps and reputation issues that Amway has. These IBOs are told they were lazy or quit too soon, or did not try hard enough. Yet the very few who manage to break thru are edified along with the system while ignoring the multitudes who do not make it.

The bottom line for IBOs and prospects to know, is that I believe most IBO leaders do not know you or care about you and your success. They are more interested in selling you websites, voicemail, standing orders and functions. They know that people will come and go and they are perfectly happy replacing quitters with new people, as long as the system tools keep flowing. I believe some of the US diamonds are now hurting as Amway is apparently shrinking in the US. I read recently of Amway downsizing some of their operations, seemingly confirming that US sales are down. Also to note, Upline leaders would have to share tool profits with new emeralds and diamonds, which is why I believe they do not want new success.

I believe that Amway, other MLM businesses, Kiyosaki, or real estate gurus all have very limited or rare success with their financial systems. Informercials usually have a disclaimer that success is a "UNIQUE" experience. Amway is no different. But I believe in all of these cases, more money is generated in selling the system than by actually running the system. If not, success stories would be rampant and people would line up to sign up instead of having to be deceived into even hearing the pitch.