Money Musings 💭 A pyramid scheme ⚠️
You might have heard the term MLM lately (or have known about them for a long time). MLM stands for multi-level marketing (also called network marketing) and these companies get their name from the structure of the business.
A sales rep runs their own business selling products but can also recruit sales reps and they typically share in a part of their earnings. And then those reps recruit their own reps and the network continues on its way down.
MLMs have been around for decades. In the Double X Economy, Linda Scott talks about the incredible impact Avon has had in Africa, helping women escape poverty by allowing them to essentially run their own businesses and earn income on par to men. Spoiler alert: I interviewed Linda for my book! Eep! 😁
This is an incredibly inspiring story but unfortunately it’s not always the case.
Other MLMs have come into the spotlight (again) for less virtuous reasons. During the pandemic some have made misleading income claims when people are experiencing financial hardship and others have been making unproven health claims about the benefits of their products while people are fearful of COVID.
The Federal Trade Commission (the FTC) issued the below message to multi-level marketers and sent warning messages to the following MLM companies for false earning and/or health claims: doTERRA International, LLC, Pruvit Ventures, Inc., Total Life Changes, LLC, Tranont, Modere, Inc., Arbonne International, LLC, IDLife, LLC, It Works Marketing, Inc., Rodan & Fields, LLC and Zurvita, Inc.
Dear Multi-Level Marketer. Stop it. Stop all promotions that push your products by claiming they prevent or treat COVID-19. Stop all misleading or unsubstantiated promotions that push your business opportunity by claiming people can earn substantial income peddling your products. The claims are unproven and deceptive. Whether you or your distributors are making them, you’re responsible. That means you could be breaking the law.
According to the FTC, “Some MLMs are illegal pyramid schemes. Most people who join legitimate MLMs make little or no money. Some of them lose money.”
How many is “some?” A 2017 report by the Consumer Awareness Institute found that 99% of MLM sellers actually lose money. An AARP study said that 47% lose money and 27% make no money (total of 73%).
Why do I care?
75% of these direct sales reps are women. Women are investing time and money into businesses where 73%-99% of them will lose or make no money.
MLMs focus their efforts on women. Women who want to earn more. Women who need flexibility. Women who see other women living big fabulous lives saying this could be you. Women who want in on the dream.
Now, as I mentioned in the Avon example above, not all MLMs are created equal. Before investing time and money, here are some red flags to look out for:
You make money by recruiting more sales reps rather than selling products
You are required to buy more products (or buy products at regular intervals) even if you have a surplus of inventory
There are required fees and trainings that you have to pay for
If you are already a sales rep you might notice that you can’t keep up with the costs and are struggling to make money
Check out these warning signs that a company is an illegal pyramid scheme (according to the FTC).
MONEY MOVE OF THE WEEK
CHECK IN ON YOUR 2021 GOALS.
We’re at the halfway mark of 2021. What?! It’s a great time to check in on your goals. If you outlined goals for yourself earlier in the year, evaluate your progress. Are you on track to achieve them? What changes need to be made to get there? Are these goals still even important to you?
If you didn’t set goals or you’re looking to set new ones, consider the SMART method. It’s one of the most widely used and effective methods for goal setting, and it also happens to be my favorite.
I’m here to help you achieve your goals, but please don’t be too hard on yourself if you’re not where you hope you’d be at this point in the year. We can always start over and we can always start small!
YOU GOTTA SEE THIS
AVOID SUPPORTING PRISON LABOR.
The U.S. has 20% of the world’s incarcerated population but less than 5% of the world’s citizens. Our mass incarceration crisis (which disproportionately affects Black Americans) is perpetuated because so many companies have a clear financial incentive to keep this gross system in place.
Your investments could be making money from the prison industry. Yup, you read that correctly. In fact, Geo Group GEO and CoreCivic CXW (two publicly traded private prison companies in the US) list “reduced incarceration rates” as material risks in their annual reports. You can check through the funds you are invested in to see if they include publicly traded prison companies.
You might also be supporting businesses that use prison labor in their supply chain. The compensation for inmates is paltry - less than $1 per hour, if they are paid at all.
You’ll have to do a little research on your own to see if you’re purchasing from (or invested in) companies that are profiting from prison labor. Pick a few products you buy frequently and learn more about where they come from.
Once you do, send what you find my way or post your findings in the Fiscal Femme Slack Community. We can pool our research and do better together!