Tuesday, March 18, 2014

Bad Argument: I follow the leader who made lots of money in MLM (now with more Vemma busting)

One of the frequent arguments by followers of a particular MLM is s/he is following "leader X", who has already achieved rank Y and thus is a proven leader.

Actually by following a "leader" means your own chance of making decent money is WORSE, not better. The higher the leader is ranked, the lower your chance of success. This may sound counter-intuitive, but let me explain. And we'll use a real company's numbers as example.

Here is Vemma's 2013 income disclosure statement. PDF LINK  And here's the graphs:

The graph is extremely misleading, because not only did they split the graph in half with very different scales, you should also note that the vertical axis in both graph is exponential, instead of linear. Which disguises the disparity between the bars.

Here's what it would look like if it were combined and using linear scale:

You're welcome to check out the spreadsheet yourself and compare it to the original linked above.


What's interesting from the data and extrapolation shows...

From the data, I was able to extrapolate that...

a) top 1.9% took home 50% of all commission paid out.

b) 77% of all reps (two lowest ranks) took home less than 20% of all commission paid out out. (in other words top 23% reps took home more than 80% of all commission paid out.

c) Total commission paid, extrapolated from the income disclosure, is 521.5 million, subject to some rounding error, but should be about 500 million.

The problem with this number is according to Vemma themselves, they only did 221 million of business in 2013. In fact, according to BK Boreyko himself, Vemma paid out about 100 million in 2013 as commission to affiliates.

So there are currently 4 possibilities:

1) Vemma's income disclosure 2013 is bull****
2) Vemma's business figure 2013 is bull****  (I doubt it)
3) my math is seriously flawed and thus bull**** (I doubt that too)
4) Various combination of the above

I am going to take a look at my own figures again to see if I screwed up somewhere... So Stay tuned. I have a feeling the chart itself, that 4-week period, screwed up the average, i.e. it's not really an average.

But in the meanwhile, back to the original premise... WHY does having an already successful leader make you LESS likely to succeed?

Very simple, actually. As you can see from the income disclosure, the people at the top are quite rare. 23% of people on top, took home more than 80% of commission pay out.

You are NOT among the top. You're in the other 77%. Chances of you moving up the ladder is low to none. It pretty much means you have to add a LOT of people under you, each of whom need to do 60 to 120 "rewards points" (i.e. personal volume) per month. And you're just making your upline money, while you keep spending money.

There is another factor to consider. Vemma claims they only have 105K "active reps", and by "active", they mean they are placing 60 or 120 points worth of orders every 4 weeks.

Yet there's a press release claiming that Vemma is recruiting 30K reps a month as of July 2013, and it's still growing. Let's assume that Vemma managed to average 30K a month for the entire year. That's 360K reps for 2013 alone, not to mention however many joined since 2004 when the company's founded. I'm going to guess that's like 150K at least? That's 510K... let's round it off to 500K.

For Vemma to say they have only 105K "active" affiliates at end of 2013 would imply that 400K people have became inactive (i.e. no longer buying those drinks), probably more, as we have to assume in the previous 10 years there are also these massive "churns", albeit at a lesser scale.

You figure the upline are the ones who are successful. Yet they don't tell you about the "failures", who apparently vastly outnumber the successes by at least 4:1.  They simply soothe you over with platitudes like "You have to work at this business with rewards how hard you work."

But what exactly is your work? or perhaps, how what is your upline's "work"?

His work is to find more people like you, who joined, and it doesn't matter if you stay in or not.

If you joined, he gets a check.
If you stay in, he gets a check every 4 weeks.
If you recruit, he gets more than one check.  (and you get one too)
If you quit, he can always find someone like you.
You will be just like him.

They say you're supposed to be sharing the drink. What you're sharing is the "opportunity"... you are recruiting, not selling.

What else are they not telling you?

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