The Loophole?

 This is a reprint article, but still applies:

There's been some interesting debate, although not that recently recently on the James Randi Educational Forum (JREF). Most call Amway a scam and one prolific defender cites the point that IBOs are not Amway. And Amway doesn't sell training materials. While that is legally true, the owner of Amway, back in 1983 acknowledged that the sale of tools was, basically unethical and possibly illegal. However, inaction by the Amway corporation led to the heyday of the tool scam and financial abuse of downline. There's the loophole that covers Amway. IBOs are independent.

However, these same IBO leaders could not run free scamming downline if Amway were to intervene. I believe Amway doesn't take any apparent significant action for fear that these leaders would move their groups to another MLM. The result over the years is a lousy reputation in the US where the name Amway is associated with pyramid, scam and other undesirables. I suppose Amway has survived though, because of a saying by PT Barnum. There's a sucker born every minute. I suppose there are enough pockets of young or unsuspecting people who can still be convinced to join, so it's business as usual.

Which brings to to the next point. Unfortunately, new IBOs are basically suckers. They pay a fee to Amway, in order to become an unpaid Amway salesperson. You absorb your own time and expenses in order to move Amway products, and if you move enough of them, you can get a minimal bonus. You also at your own time and expense, recruit other unpaid salespeople for Amway. Your reward for this is you get credited for a portion of their sales, provided they use or actually sell anything. Most IBOs do little or nothing so your efforts are usually in vain.

But the real trick is to have IBO leaders convince downline that voicemail and cds and live meetings (seminars) can actually help you succeed. There is zero unbiased evidence to suggest that this training or tools do anything but make handsome profits for the people who sell them. Even if many IBOs sign up and do nothing, there are enough serious ones to support the pharoah diamond leaders. And food for thought, do IBOs really need voicemail in an age of email, twitter, facebook and other more efficient means of communication?

So yes, Amway IBOs are not Amway. Amway diamond leaders are not Amway.

But if Amway cannot or will not stop those who taint their name, then they simply must live with the reputation of being a scam or a pyramid. They can be legal to the letter of the law, but most people see it for what it is. Being legal doesn't necessarily mean ethical or moral. It is my opinion that when you sign up for Amway, you are nearly assured of losing money. It's not your fault though, it is the result of a bad system. I encourage everyone to do their due diligence before joining any business, Amway notwithstanding.

My Job Is A Pyramid?

 One of ths things I take issue with is how Amway uplines will create an us versus them mentality in the business. Thus friends and family who care about you suddenly become "negative" and association with them should be limited or cut off completely. In some cases, people are discouraged from excellence in their jobs or professions because it takes the focus off of their Amway business. What I was told was to do my job, but my radar should always be on for new prospects. Some cross line IBOs turned down promotions at work because they did not want to have to work longer hours or take the focus off of their Amway businesses.

In some cases, the speaker at open meetings or functions will put down people's jobs. A commonly used acronym was J-O-B = "Just Over Broke". Some leaders also would say that my job was a pyramid because you will never earn more than the boss. A completely ridiculous comparison because someone's job has no relationship with how people view the Amway business (i.e. an Amway pyramid) and in a job, every employee gets paid and has a net gain at the end of the month. Not true in Amway. If IBOs only use KATE for example, an IBO at 100 PV or less will already be at a loss, and that is not considering any other expenses that IBO may have. And while a job may have a hierarchy, or chain of command, the business owner and CEO or manager earns their salary from customers, not directly from the pockets of their employees.

Some uplines will laugh about people's jobs, stating that they wake up at the "crack of noon". What these same uplines may not tell you is that they wake up at noon because they are up at 3:00 in the morning doing nite owls for their groups and looking for recruits. These same uplines possibly can't do much with their downlines since their downlines mostly tend to have 9-5 jobs. An Amway diamond still has a job, but they work the graveyard shift because the mainstream world works during the day. The part about waking up at the crack of noon is because your upline diamond has to sleep in since he's working the overnight shift.

So if you are of the opinion that nobody should criticize the Amway opportunity or IBO behavior, maybe uplines and IBOs should not criticize family and friends who disagree with or are not interested in the Amway opportunity. And maybe the same uplines and IBOs should not criticize people who choose to work jobs. Don't most IBOs rely on their jobs? More than likely their Amway income is not sufficient to even pay for their Amway business related expenses, let alone anything else. It is most often someone's job that winds up supporting their Amway business, which is truly ironic.

How Diamonds Get Wealthy?

 One of the things that many Amway IBOs do not understand is where the upline diamond profits actually come from. They think they will obtain passive residual income but most do not understand how it works or where the money comes from. What most people see instead, is a photocopy of an upline's check, or they may see upline driving a nice car or something like that. They do not understand how the business works and the fact that there are two businesses at work. The Amway opportunity and the tools (business support materials) business. Frankly, most IBOs would be much better off giving their upline a check for $50 each month and never getting involved in the Amway opportunity to begin with.

Upline diamonds (or higher ups) earn some income from the movement of products. Amway returns about 33+% of their gross in the form of bonuses. Most (active business building) IBOs earn 3% while uplines split up the remaining 30% of the bonus. Not such a great deal when you think about it. Also, most IBOs overspend on Amway products. They are not simply replacing what they normally buy. If they did, then there would be tons of former IBOs continuing to move 100 PV or more. Instead, when an IBO quits, they either buy nothing from Amway anymore, or they may use a few products here and there. The opportunity and the way it is promoted simply creates an artificial demand for Amway products. If the products were so great, why then after 50 years of business, why the Amway sales aren't going through the roof if former Amway IBOs get hooked on the products and keep buying them? The answer is that they typically stop buying once the "dream" of residual income ends.

Then you have the tools business where IBOs don't even get a measly 3% of the profits. Uplines keep all of the tool profits. Also, the tools have a higher profit margin than Amway products. While this may seem acceptable on the surface, keep in mind that the tools are inefficient. There is no unbiased evidence that I know of that suggests that the tools create a natural progression of IBOs from 0 PV to diamond. I cannot name more than a few new diamonds in the US since I left the business in 1997 or 1998. And even if there were some new diamonds, I believe there were even more who quit or left Amway for other reasons. One might wonder why a diamond would quit in the first place if there really was residual passive income involved.

So where does upline profits come from? Simple, it comes directly out of the pockets of downline. If IBOs actually sold products, then some profits would come from sales and customers. Instead, most Amway sales are simply made from upline to downline. And virtually ALL sales in the tools business comes from upline to downline. Thus many IBOs spend $250 to $300 a month on products and get back $10 if they reach 100 PV. Then you factor in the $100 to $250 monthly that IBOs typically spend on tools. Suddenly that cheap or no risk opportunity doesn't sound so cheap. And try working it for several years and IBOs can easily rack up tens of thousands of dollars of expenses or more.

That's where upline profits come from folks. Do the math, most IBOs truly would be better off giving upline a check for $50 a month and doing nothing else.

Is Your Upline Ruthless?

 The really insidious part about some of the Amway LOS leaders, such as the ones I had in WWDB, is that they apparently are cutthroat businessmen with nice suits and nice smiles. They are disguised as your mentors and friends. They get you to trust them, and they will tell you that they have your best interest at heart, or that they would never purposely lead you astray. On the surface, you may think this is true, but look at their actions and you can easily discern that some of these uplines are absolutely ruthless businessmen who would take every cent from you if they could. I was in WWDB and I have good reasons to believe that they are still doing this, based on a WWDB IBO blog and some other bitt of information I am privy to. On this blog, I see all the same teachings today, that I heard as an IBO and some of the same claims such as buying homes in cash. It's scary.

As an IBO, the diamonds would tell you to never miss a function, ever. The only good reason for missing a function was for your own funeral. I recall some crossline IBOs rearranging pre-planned anniversary parties, weddings, and other special family events in the name of being core and attending all functions. Some IBOs actually did quit their jobs to attend functions and they very well may have done so because some uplines taught this. I know of an IBO who did just that. He quit his job to attend a major function and got into all kinds of financial problems when they got back to real life. IBOs were also encouraged and told to go into debt to attend a function. This was okay because it was an "investment into your business". This is scary advice and why I maintain this blog.

Our group was also strongly encouraged to buy 5-7 extra cds (tapes) every week (or more). To be core, you needed to listen to a cd (tape) each day and you cannot listen to the same one each day right? Couples were told to buy their own separate standing orders. Brad Duncan even had a true north tape (cd) that said sponsors were to eat the standing orders for downlines who quit because it was too much trouble to call upline who calls upline who calls upline to cancel a standing order. Oddly enough, they didn't mind upline calling upline calling upline to add a standing order.

In the end, I was lucky enough to have been progressing up the pin ranks so my losses were not that devastating. I ended up losing in my early months of the business but mostly broke even when I was at 4000 PV. Sadly though, my crossline did not fare so well. I know of one couple who declared bankruptcy. I don't know how much their WWDB involvement contributed to bankruptcy, but I am certain it was a major factor and I know of two couples who had homes foreclosed, and I believe that their allegiance to WWDB was a factor in those foreclosures. But I guess hey, two WWDB diamonds had homes foreclosed so maybe they were duplicating?

Do not be fooled. The diamonds may have a nice smile and a nice suit, but they are ruthless businessmen who will take your last dime if you allow them to.

The Merits Of Amway?

 So many IBOs like to point out that Amway has a satisfactory rating from the better business bureau, or that Amway owns title sponsorship of Amway arena where the NBA's Orlando Magic plays. But what so many IBOs fail to remember is that they are not Amway. Amway has over 8 billion dollars in sales but IBOs are not Amway. And IBO stands for "Independent Business Owner". Amway supplies you with products and bonuses based on movement of volume, and Amway also sets the rules by which you can advertise and market your goods. Amway also sets the rules by which disputes are settled.

A big part of being an IBO, is to recruit other IBOs. This is an important focus for many because an individual cannot generate enough volume to reach the higher levels of the business where significant bonuses kick in, along with the recognition and the ability to speak at functions and other types of meetings. When some IBOs reach this level, it is apparently expected that the IBO, who may now be an "emerald or "diamond" will show off the fruits of success, or may show a copy of some bonus check. IBOs like to use these things to entice others to join. The entire process is ridiculous. Can you imagine being enticed to work for a company by seeing the paycheck of the company CEO? If you saw the CEO's home or car, would that entice you to work for a company? Of course not because the CEO's salary has nothing to do with you as an employee, just as a diamond's success is no assurance of a new IBO being able to achieve diamond.

But why do IBOs use these methods to attract others? Is it because their Amway business cannot stand on it's own merit? I believe that to be true. I believe that even the platinum level IBOs mostly lose money. The State of Wisconsin attorney general did a study of all platinum (direct distributor) IBOs in their State and found that they lost $900 a year on average. While the study is a bit dated, I would suggest that nothing has changed. In fact it is very likely that platinums lose even more today because there are more tools and functions that platinums must attend.

It would be very easy for a platinum or a higher level IBO to simply open their books and reveal their schedule C (business tax return) which is common among REAL business owners. But I suspect that most platinums lose money and therefore can't do this, and I also suspect that the higher level pin winners do not make as much income from Amway as they like downline to believe, and do not want to reveal how much they earn from the sales of business support materials (such as voicemail or functions). In a few cases where a diamond's income was revealed, there was less earnings than expected and in some cases, debt where there should have been none.

Can your Amway business stand on it's own merits? Do you use the curiosity approach and leave the Amway name out of your pitch? Are you upfront with prospects when they ask you about what you earn? If not, then your business does not stand on its own merits.

Why Join Amway?

 For people who have already joined Amway and are trying to make a buck, only to see net losses month after month, you have to wonder at times why you joined Amway. As an IBO, I initially joined as it was pitched to me that I could easily earn a couple of hundred dollars a month, which could make a big impact on my life at the time. Of course it made sense that I needed to invest a little bit of money to get started and to learn about how to run a business.

When I got started, there was a lot of hype and excitement in my business. I sponsored people and my business was on its way. I was touted as a mover and shaker and even got to attend some home board plans with my upline diamond. Even though I did as I was advised, had the parameters in the business that were recommended, I noticed that any cash I had earned still resulted in a loss, or if I made some money, the "next major function" ate it up and then some. As you should know, there are four major functions and a bunch of regional ones. But for many, the major functions take place out of your area, requiring travel, sometimes by air.

It was at the function called "family reunion" where I started to figure out what was happening. My upline platinum was having us "hang out" after the function at about 1:30 am. He started talking about how the business has nothing to do with money. That we made friends, became nicer people, better spouses or parents, and that money was the least important aspect of the business. While many nodded in agreement, I was thinking what the heck??? I wouldn't have joined and "invested" that much time and money into a business where I was "moving and shaking" but not making money.

Many IBOs are at a point where it may be hard to quit. You may have invested some time, money, and effort into your business and you may have been programmed to think that quitting is failure or that success is right around the corner and you don't want to quit too soon. But I urge you to look at facts. What is your bottom line net income? It is red numbers? Is it a recurring loss, primarily because of tool and function purchases? If that is true, ask yourself why you joined. Was it to be a nicer person or to earn some money?

What are your prospects of making a net profit soon if you are breaking even or taking losses? Amway leaders themselves have often said that insanity is doing the same thing over and over and expecting different results. Where are you at?

Paying Everything In Cash?

 When I was an Amway IBO, I was always taught that diamonds pay cash for everything. That one day, after following the foolproof WWDB system, that I too, would be strolling on the beaches of the world, with cash rolling into my bank account with no worries in the world. We were told that diamonds pay cash for all purchases, even homes and other large ticket items. As evidence, the diamonds would show slideshows of mansions and sports cars, golf club memberships and other lavish items. All paid for in cash we were told. I have reason to believe that WWDB still teaches this except that it is probably a bunch of lies.

First of all, in looking back, the group really had no way of knowing what was paid for or not. We just assumed that diamond made so much money that everything the diamonds spoke of were true. However, there have been events, some recent, that exposed some of the apparent lies told by these diamonds. There were two (2) diamonds whose home foreclosures became public knowledge and a prominent triple diamond who was involved in bankruptcy proceedings. Now your home cannot be foreclosed if it's paid for in cash right? Technically, nobody would care whether a diamond's home was mortgaged or paid for, but when diamonds parade in front of a crowd bragging about wealth, and then telling the audience that they too will achieve the same success by following the system and upline advice, well that's a bit misleading in my opinion. So many people in the audience are practically crying because they want what the diamonds are flaunting, except that possibly, many of these diamonds don't even have what they are selling.

A average diamond might make about $150,000 (according to Amway) and let's just say another $150,000 from selling support materials. When you factor in taxes and business expenses such as travel to and from functions, what's left over certainly is not going to allow you to purchase million dollar mansions and fancy sports cars. Some higher up pins might make a bit more, but still, purchasing mansions and other luxuries in cash is a stretch. It would be my guess that most diamonds indeed have a mortgage on their homes and may even have car payments. That's not necessarily a crime but it is unethical to lie about your income in order to recruit new downlines.

For IBOs and other newbies, if your uplines are bragging about paying for homes and other things in cash, ask them to show proof of these claims. I can show you pictures of multi million dollar mansions and sports cars, it doesn't mean that I paid for them in cash. But then again, admitting to having a mortgage or having monthly car payments are not quite as attractive or exciting as claiming to pay for these things in cash.