Thursday, May 6, 2010

Amway - By The Numbers

One of the things Amway IBOs are taught is to ignore facts, or to ignore numbers. I believe this is because the numbers are not pretty when you take a business like approach to the math behind the Amway business, for most IBOs. It is why upline teaching often "evolves" into things such as Amway saves marriages, or Amway makes you a nicer person, or that Amway is not about money, it is about friendships. That is a load of garbage. Business is about making a profit. If you hear some of these lines from your upline, it should be a red flag. Upline may also feed you other deceptive lines such as an IBO being successful because they showed up at a function, or because they just signed up for standing order. These are all just false lines to encourage an IBO who is not making money.

When you take a good look at the Amway presentation, the majority of IBOs are at the 100 PV level. At that level, they are spending about $300 monthly to reach 100 PV and for their efforts, they receive approximately a $10 check from Amway. Most IBOs will be encouraged to participate in some kind of system, often consisting of voicemail, websites, cds, books, seminars and other meetings. MOST IBOs will not recoup enough cash to cover any of these expenses, let alone all of them. At a glance, the system expenses may appear nominal such as $6 for a cd, $6 for an open meeting, $100 to $125 for a major function, $12 for a book. It is how upline gets you involved, and then after a while, an IBO starts to notice the negative cashflow and then a tough decision needs to be made. Either quit and cut the losses, or press on hoping that the system will eventually deliver on its promises.

What most IBOs don't notice, is that less than one half of one percent ever reach platinum. A fraction of one percent! And in many cases, platinums might break even or even suffer losses! So why would IBOs want to work so hard to reach platinum? They have less than a 1% chance of reaching that level. They have a tiny chance of maintaining that level, and they are still unlikely to earn any significant income at that level. A stody done by an attorney general in Wisconsin (Bruce Craig) revealed that platinum level IBOs averaged a net loss of about $900 annually. While Amway defenders will decry that the study is a bit dated, I will say this: The basics of the Amway business has not changed since that study was done, AND there are actually more system expenses today than there were back then, thus platinums may actually be losing more money annually than before. While not all platinums will lose money, I believe hard core dedicated platinums would stand to lose money.

As an IBO, I hope you are tracking your expenses versus your income. Most IBOs will see a negative cashflow month after month. Even though the Amway business is often promoted as low or no overhead, the system expenses (overhead) eventually begin to add up. Beware and please follow the numbers.


Shaun said...

I do not ignore the facts at all. I am a numbers person to some extent and I don't like throwing my money away without knowing I'm getting something in return. One thing I think you fail to recognize or acknowledge is that a lot of people who join Amway Global or whatever Training System is that they quite possibly get into a bad Line of Sponsorship, maybe a LOS that pushes tools or whatever. It's unfortunate that some LOS's don't run business with integrity and it's this fact that Amway Global and many Training Systems get a bad rap. Amway Global is neutral. It's the people who do the sponsoring that give it the bad name.
You mention that at 100PV people are spending $300 for their efforts. Not sure what you mean by efforts. I know at 100PV we are spending $290 (if you want to be a numbers guy then get your numbers straight, 1PV = $2.90). For that $290 dollars we are buying product from our own store instead of some other store and in turn are keeping the retail profit for ourselves. Now considering we would pay retail at any store out there we put the retail profit back into our business to help fund it, that along with any retail clients we have. You're probably going to tell me how we are buying products we don't need or that they are overpriced, etc...That's not entirely true. I've done my cost comparison at Safeway, Save on Foods, and GNC compared to the stuff we already bought at these stores and found that for the most part the prices were on par, some cheaper, and maybe one or two products more expensive. However the ones that were more expensive were of better value and in my own opinion and felt they were worth the extra expense.
I guess the next question would be what are my monthly costs. With all the tools we buy to run our business it's on average $140 a month to run our business. Now that does go up and down depending on if there is a function or what not, however another thing you fail to realize is that I claimed my functions, books, cd's, gas, etc... anything related to the business and recouped the majority of my business related costs. I fail to see how "MOST IBOs will not recoup enough cash to recover any of these expenses". The ONLY way I could see they don't recoup is if they have bad coaching that does not inform them of filing their taxes correctly or setting themselves up with a budget, or are wildly spending money they don't have.
Like you said it's a good idea, as with any business, to track your expenses versus your income and considering this will be our first full year, we will get a better understanding of our profits. With that being said, (not that we are) most start-up companies or business's operate at a loss for the first few years, so why would this be any different?
For others reading this I'm not saying what we do is right or wrong, this is my own experience and my own examples of how we run business.

Anonymous said...

You don't have to approve this one but seems your on fire about the whole cost thing and what your upline told you to do or not do. your last three blog posts are pretty close to the same. I was going to e-mail you personally if you wanted, to see why things were so different for you while building this. Since your e-mail isn't here you can e-mail me if you want.
I can tell you no word of a lie the way we do build business in Alberta is quite different then say the majority of people in WWDB or Amway Global. Anyway up to you. I'm not trying to get you back in, lol or want to prove my point or what not. Maybe I'm just barking up the wrong tree who knows. Anyway have a great Sunday.

Joecool said...

Hi Shaun. You mention that I may have been in a bad LOS. I believe most LOS are more the same than not. I was in WWDB and my uplines were Harimoto - Wolgamott - Greg Duncan.

They taught all kinds of unethical things. They apparently told many lies as well during my time in the business.

How would a prospect know what a bad upline is?

Joecool said...

Hi Shaun, when I say most IBOs will not recoup their losses, itis true. Just look at the 6-4-2 plan. Most IBOs are at 100 PV. Thus they earn around $10 a month. If they have voicemail, they are already taking losses just for that. And that's not including the cost of standing orders, functions and other expenses. Sure they are optional expenses, but uplines, especially unethical uplines, promote them as defacto requirements.

Shaun said...

You are right it will be hard for someone to know when they are in a bad LOS and that's unfortunate. I guess that's just where we hope to fit in where we are not. Where we will not teach people unethical business practices and build business with integrity.

Not much more I can say then that, i'm not going to fight with you or anyone else out there on the internets. I know what we stand for and I believe we have a high standard. Only time will tell I guess.

Joecool said...

Good luck Shaun. The chances of you and your downline succeeding is overhwelming. I hope you aren't taking a losss almost primarily because of your participation in the tools system.

Joecool said...

Update. Shaun's blog is gone and he is nowhere to be found. I presume he has quit Amway and has suffered financial losses from the tools and functions.

Unknown said...

As an IBO I know for a fact that anyone not registered does not pay fees to attend sessions. And the first thing you learn is that this is a two to five year plan. Not a get rich quick scheme. Yeah your up line wants you to succeed so they will succeed but what makes it different from any other job? If you do poorly you get fired at corporate jobs because you don't perform at the high standard they hold. Up lines hold high standards for their down lines so they can all succeed. That's why it's called a team. You work together to make your mentors reach their goals by reaching yours. And everything is optional. Don't want to go to meetings or conferences, cool. You don't have to. It's your business you do what you want with it you determine your success.