Poll

Mustachian Accountants: Of the income tax returns you've done in the last year, what is the most common annual net income you've found of those involved with Multi-Level Marketing (MLM)/Network Marketing (NW) "businesses"?

They didn't make any money and had substantial losses - greater than $10,000.
2 (20%)
They didn't make any money but had slight losses - less than $10,000.
4 (40%)
Less than $29,000.
3 (30%)
Between $29,000 - $73,000.
1 (10%)
Between $73,000 - $173,000.
0 (0%)
Between $173,000 - $220,000.
0 (0%)
Greater than $220,000.
0 (0%)

Total Members Voted: 10

Author Topic: POLL for Mustachian Accountants; Info for the rest of us...  (Read 3469 times)

Beard N Bones

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Notes regarding the poll:
1. It is a poll to ascertain how profitable MLM companies are to those that are involved with them.
2.  I've used above income ranges, based the on Heilbroner and Thurow book entitled Economics Explained, that correspond (inflation adjusted) with Poverty (Option #1 - 3), Working Class (Option #4), Middle Class (Option #5), Upper Class (Option #6), & Rich (Option #7).
3.  There is a inherent weakness in this poll - most in MLM participants have a secondary income source which makes an annual net profit harder to ascertain (I'd suspect.)
4.  If there are "substantial losses", I'd be curious to know which company that individual was involved with.
5.  This poll is a follow-up on the thread started in the Antimustachian Wall of Shame that can be found here:
http://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/multi-level-marketing-(mlm)network-marketing/
« Last Edit: June 20, 2016, 01:30:22 PM by Beard N Bones »

Cpa Cat

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Re: POLL for Mustachian Accountants; Info for the rest of us...
« Reply #1 on: June 20, 2016, 04:25:52 PM »
Substantial losses include personal use of supplements and travel/conferences/training. Losses would be even higher if I include indirect costs such as meals, cell phone, home office, etc. I am refraining from mentioning the company because it's possible that someone who knew me could guess who the person is.

LeRainDrop

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Re: POLL for Mustachian Accountants; Info for the rest of us...
« Reply #2 on: June 20, 2016, 05:50:25 PM »
Posting to follow and did not vote.  My next door neighbor has a full-time job but also has a "side business" with one of the MLMs.  Her daily posts on facebook to advertise are irritating, and I notice that all the likes and comments are from her MLM colleagues.  She once invited my whole condo floor presumably to a "welcome new neighbors" party, but then she added in a "free demo" on the invitation, so practically no one went.  It's too bad because she's a super nice person, but she is insecure and this MLM thing is only more isolating for her.  I have no knowledge of her finances, but based on how she talks versus time that's obviously spent, I can't imagine she's got much of a profit, if any.

esq

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Re: POLL for Mustachian Accountants; Info for the rest of us...
« Reply #3 on: June 20, 2016, 06:35:03 PM »
I also did not vote, as I'm not a CPA, but speak from my own experience.  I did MLM from 2004 - 2008, selling Cookie Lee Jewelry.  Easy to sell, beautiful, quality product and not overpriced until they got new management in at which point I quit.  I loved the business, netted about $1000 a month mostly from jewelry sales, I'd say about 20% of that was residual. Free cruises every year didn't hurt either. When they started overcharging and the quality went down, I could no longer be an enthusiastic seller.

However - I have friends who sell Mary Kay, Juice Plus, Juenesse, etc.  They don't make squat, because the products are over priced, or the company requires expensive training/marketing materials, has unreasonable monthly sales quotas, and a host of other reasons.  I hear most Mary Kay pink cadillac drivers just buy the ridiculous  amount of makeup themselves every month just so they can look, well, silly. 


Sibley

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Re: POLL for Mustachian Accountants; Info for the rest of us...
« Reply #4 on: June 21, 2016, 02:26:38 PM »
My sample of 1 - friend who only does one MLM for fun. She doesn't make money, but doesn't try. She does a jewelry one, and has fun with some friends. No pressure to buy (I've been to a few parties).

ETA: I help her with taxes every year.

prognastat

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Re: POLL for Mustachian Accountants; Info for the rest of us...
« Reply #5 on: June 21, 2016, 03:44:57 PM »
From what I can tell most people in MLM make either very little to even making a loss thinking they are paying now to make money later, but never do. There is a very small percentage of people that make lots of money.

The latter are people that have a skill set very similar to a conman, they would make just as much if not more money using those skills to con people, this just happens to be a still legal way to make money using such skills. Very often most of these people do not make much of their money by sales themselves, but instead by conning/convincing other people to do it by manipulating them often through displays of wealth and putting on a friendly face. Essentially this group is taking advantage of the first group which lack the skills to manipulate other people in to selling for them or even buying product. These are often people that were already doing pretty well for themselves before starting MLM and sell the dream through displays of wealth supposedly afforded through MLM. They manipulate people in to believing that they be as wealthy by participating and often that you just have to put up some money up front to build your "business" and the money will be streaming in, you aren't making money yet? You need to either put more money in first or more work.

I don't know the exact numbers myself, but I picked up this much through a combination of observing people I knew doing this and also others online. I would honestly be surprised if more than 10% of them make more than minimum wage doing it after all expenses.

Definitely interested in seeing some numbers to either confirm or contradict my anecdotal experiences.
« Last Edit: June 21, 2016, 04:13:52 PM by prognastat »

With This Herring

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Re: POLL for Mustachian Accountants; Info for the rest of us...
« Reply #6 on: June 22, 2016, 09:07:10 PM »
I voted, but it was a return I prepared for a few years as a friend, not for compensation.  I did not see any MLM activity in the returns I prepared via OldJob.

Loss was less than $10K, but that is NOT slight for this friend.  I would guess friend lost a significant fraction of total assets.

For the friend:
First, she got into Mary Kay when just out of college.  This was going to be a side-gig during slow times of her RealJob.  She tells me of the new venture.  I wince.

Year 1 of her return, after a REALLY difficult time getting any kind of statement of sales from MK corporate and an explanation of it, she had a loss of somewhere around a grand?  But, she is just getting started, so surely things will improve.

Year 2, hope is waning.  There is another loss of similar size.  Friend tells me she is giving up selling and will stay in it "just for the discounts."

Year 3, she made a couple more sales.  Still a loss.  *sigh*  But, she tells me, wait, now she and hubby are selling an alternative electricity supplier, Ambit!  Their rates are definitely better than your local supplier!  But, it turns out that she and hubby paid $500 to be able to sell this.  (Was it maybe for a seminar?  I don't know.  There certainly weren't samples of electricity to stock.)  And they were recruited by a close relative.  They get $100 commission for each new seller they sign up and maybe little "residual commissions" from new buyers.

Me: "So, you are selling this energy plan."
Friend: "Yes."
Me: "And you paid $500 to join."
Friend: "Yes."
Me: "And for every person you sign up to be a seller you get $100."
Friend: "Yes!  It's great."
Me: "It's a pyramid scheme."
Friend: "No it isn't!"
Me: "You make money by getting other people to sell.  That's what a pyramid scheme is.  The people at the top need to pull in many times more people underneath them to keep the money coming in."
Friend: "It's not a pyramid scheme!  People really save money on electricity!"

[Note that, after just researching a little online about what has happened with Ambit, it looks like the payment structure is different by state and possibly in other ways as well.  Friend paid $500 and was to get $100 for each seller recruited.  Various Ambit-related websites are offering $399 to start plus $25/month, or a "limited-time offer!" of $75 to start and $XX per month to keep selling.  I could not find this info a couple years ago when this conversation took place.]

That went well.  Yes, people do save money on electricity...until they are misled about rates, and then they file class action lawsuits.

Year 4, friend decided to start preparing her own return (YAY!), so I never saw the electric MLM loss (though she told me they only got back $300 of the $500).

Now friend is selling ridiculously overpriced bags for yet another MLM.  This is just not going to end well.

prognastat

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Re: POLL for Mustachian Accountants; Info for the rest of us...
« Reply #7 on: June 23, 2016, 06:57:35 AM »
I voted, but it was a return I prepared for a few years as a friend, not for compensation.  I did not see any MLM activity in the returns I prepared via OldJob.

Loss was less than $10K, but that is NOT slight for this friend.  I would guess friend lost a significant fraction of total assets.

For the friend:
First, she got into Mary Kay when just out of college.  This was going to be a side-gig during slow times of her RealJob.  She tells me of the new venture.  I wince.

Year 1 of her return, after a REALLY difficult time getting any kind of statement of sales from MK corporate and an explanation of it, she had a loss of somewhere around a grand?  But, she is just getting started, so surely things will improve.

Year 2, hope is waning.  There is another loss of similar size.  Friend tells me she is giving up selling and will stay in it "just for the discounts."

Year 3, she made a couple more sales.  Still a loss.  *sigh*  But, she tells me, wait, now she and hubby are selling an alternative electricity supplier, Ambit!  Their rates are definitely better than your local supplier!  But, it turns out that she and hubby paid $500 to be able to sell this.  (Was it maybe for a seminar?  I don't know.  There certainly weren't samples of electricity to stock.)  And they were recruited by a close relative.  They get $100 commission for each new seller they sign up and maybe little "residual commissions" from new buyers.

Me: "So, you are selling this energy plan."
Friend: "Yes."
Me: "And you paid $500 to join."
Friend: "Yes."
Me: "And for every person you sign up to be a seller you get $100."
Friend: "Yes!  It's great."
Me: "It's a pyramid scheme."
Friend: "No it isn't!"
Me: "You make money by getting other people to sell.  That's what a pyramid scheme is.  The people at the top need to pull in many times more people underneath them to keep the money coming in."
Friend: "It's not a pyramid scheme!  People really save money on electricity!"

[Note that, after just researching a little online about what has happened with Ambit, it looks like the payment structure is different by state and possibly in other ways as well.  Friend paid $500 and was to get $100 for each seller recruited.  Various Ambit-related websites are offering $399 to start plus $25/month, or a "limited-time offer!" of $75 to start and $XX per month to keep selling.  I could not find this info a couple years ago when this conversation took place.]

That went well.  Yes, people do save money on electricity...until they are misled about rates, and then they file class action lawsuits.

Year 4, friend decided to start preparing her own return (YAY!), so I never saw the electric MLM loss (though she told me they only got back $300 of the $500).

Now friend is selling ridiculously overpriced bags for yet another MLM.  This is just not going to end well.

That's just sad to hear, you'd hope someone would learn their lesson at least after being burned twice.

catccc

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Re: POLL for Mustachian Accountants; Info for the rest of us...
« Reply #8 on: June 23, 2016, 10:31:29 AM »
I voted, but maybe I shouldn't have, I was kind of basing my estimates on my personal direct sales experience and what I know from others that have tried them.

I used to sell a line of direct sales bags.  I sold online, via ebay, which turned out to be a no-no.  Before I found out it was a no-no, I pulled in about $7,000 after expenses over a couple years.  Nobody but close friends, with whom I was willing to share my consultant discount, knew I sold it.  I did not fill my fb feed with annoying ads or pressure friends into hosting direct sales parties.  I find it all so annoying.

MLMs are profitable for the very few at the top with big downlines.  Everyone else gets little to nothing.