Tuesday, September 9, 2014

Due Diligence: Does the Business Model Make Sense To You? Are you sure?

As the MLM Skeptic, one comes across all sorts of alleged businesses, and many of them makes sense as a business, but not so much as an affiliate/distributor. Some makes sense as an affiliate, but makes no sense as a business. Obviously, a real business have to make sense to both the business itself and to the affiliates/distributors. 

In a typical retail business, the business model is very simple: buy low, sell high, sell much. There is no separate model for the participants, as participant is the owner of the business. 

In a direct sale business, we have to examine both layers, and they should coincide. Business buy the inventory at low prices, then sends out the direct sales people to sell them at higher prices. The business model for the participants, the direct sales force, are the same: buy low, sell high, sell much. 

However, with newer technologies a variety of schemes have appeared to entice participants to put in money or sign up in order to reap benefits...  Yet its business model makes no sense upon closer examination. 

Remember, for a business to succeed, both its own business model and the business model of its participants must both be sensible AND profitable. 

Today, we shall examine one business whose business model makes no f***ing sense upon closer examination. 

Or to put it another way: If it's so profitable why are they paying you?

GetEasy is registered in Macau but seem to be ran out of Portugal. While they claim to operate everything from Cryptocurrency to GPS locators to Music Venues, they all the signs of running multiple Ponzi schemes. Today we will just look at the alleged business model of the "GetTracker" part of the business. 

GetEasy's compensation plan (i.e. participant business model) is pretty simple: 

1) Buy a participation pack (360, 720, or 1200 Euros)
2) Get paid every month (40, 100, 200 Euros depending on specific pack purchased)
3) But only if you manage to recruit two others who also bought participation packs

This is OBVIOUSLY a pyramid scheme / Ponzi scheme, yet some people seem to be enthralled by the promises of money they started defending the scheme, claiming that the company is SHARING its profits. 

But does the business model they claim GetTracker runs on actually make any sense? 

According to the participants, your money (360, 720, or 1200 Euros) actually buys certain number of GPS trackers for the company, which are then LEASED to actual users who pay a monthly fee, thus deriving the profit. The 1200 Euros package claims to have funded 21 trackers, one of which will be delivered to the participants. The other 20 is what allegedly generates the monthly pay of 200 Euros

Does that make any sense business wise? No. 

a) There is NO PROOF that the company actually have that many customers who wants to rent GPS trackers. 

Company has never provided any proof that the "extra" trackers were leased out to others. The only "proof" are from the extra GPS tracker received by the participants themselves, who then convinced themselves that the other money must have went to extra trackers, which must have went somewhere. They can't even consider the possibility that there are NO extra trackers and they've been lied to. 

b) The money payout is ridiculously high given estimated cost of trackers and monthly service. 

According to the largest plan, 1200 buys 21 trackers, which generates 200 Euros per month, or 10 per tracker per month. 

If that's the case, where is GetEasy making any profit? And if they are charging 20 euros a month for plans that others are charging 10 for, then where are they getting these customers? Esp. when other companies are just SELLING the devices outright? 

c) Why don't they just get a loan and BUY all the GPS trackers they want rather than share half or more of their profits? 

This is question none of the participants care to answer, yet the most important. A company does NOT want to carry debt if it can help it, esp. not such a debt that it had to pay 200% interest over 12 months, when it can go to a bank and get a loan for merely 15% interest (and that's an already outrageous rate). 

This is where participants mutter "you just don't understand" and walk away shaking their head, not realizing that it is THEY who don't understand the company business model... because it made no sense. 

Think about it, what sort of a stupid business would "crowdfund" their money by promising 200% interest over 12 months to its participants when they can get 15% interest (or less) over 12 months from a bank? 

Clearly, there is something very wrong here... Possibly fraud. And the obvious conclusion (Occam's razor) is it's a Ponzi scheme. 

Another example would be BitClub Network, which claims to take your money to buy cloud capacity for Bitcoin mining as part of a mining pool, and pays you for 1000 days. AND there are additional recruiting bonuses based on percentage of amount into the pool. 

The problem is Bitcoin mining is NOT profitable. The difficulty of Bitcoin mining goes up by about 15% every 16 or so days. I ran a scenario where I found that if I put in $2000 to buy the MOST efficient hardware available, I will not even make back what I put into it. I will make back about 900$, then by day 110 I won't even make back enough Bitcoins to pay for electricity to run the rig

The claimed business model is not feasible, and therefore must be a fraudulent disguise. The ONLY way this scheme would work is as a Ponzi scheme. 

In summary, when you examine an opportunity, you have to check it both for ITS OWN business model making sense, and the opportunity makes sense FOR YOU to participate in. 

1 comment:

  1. Hi, there. Probably you are not aware of this portuguese media investigation - all about Dias Ferreira one of the old "partner" caught between this scam. He claim that as soon as he realize the scheme, he left the Geteasy. The industry of batteries for car was only a scene to make a video to the network, to convince member that they have another solution. Basically they are moving for scheme to scheme over and over. Couple of days ago, Pleimo left the "partnership" since Geteasy don't paid them back (deadline Jun/2014). Dias Ferreira tell that the Portuguese leader of the Orthodox Church is implied (at least in one payment). Also Dias Ferreira talks about a dead line 31/12/2014 (Geteasy or Tachoeasy must paid companies back).

    Dias Ferreira gave an interview to program and speaks openly about his relationship with the Scheme and Short Some of those involved. The lawyer was USED paragraph give credibility to this scheme online , with a visit to Vila de Rei About the fake factory ParĂ¡ Electric Car Batteries 800 km - https://www.youtube.com/watch?v=KGqbyhithb0