Happy Friday: Passive Income

It’s Happy Friday again! In this pre-Labor Day post, I will talk about the Myth of Passive Income in the Amway business. Many people join Amquix because they are sold on the idea that this can generate ongoing, residual or passive income that will-able to their sons and daughters.

According to Wikipedia, passive income is a rent received on a regular basis, with little effort required to maintain. There are other definitions of passive income that you can look at too.

In all cases, initial work is involved to set up the passive income stream. After that, the money should just continue to roll on in. Here are examples of passive income:

• I write a one-hit wonder. Tapes and CDs are sold, and it’s played over and over on the radio. I get money each time it’s played and for each CD/MP3 that’s sold.
• I write a software program. I sell through PayPal and watch the money come in.
• I write a book. My publisher sends me checks on a regular basis.
• I put money into a bank. I let the interest rate increase my money.
• I have a role in a movie. I get the occasional residual check.

In all these cases, I do the work once and nothing afterwards¹. My question to ponder in today’s Happy Friday post is:

Is your Amway/Quixtar business producing passive income?

I would argue no for the majority of Amway businesses today. Amway businesses are fundamentally retail businesses. Because constant work is required in retail — advertising and selling products, it does not qualify as a passive income stream.

An IBO might object to this and say, “Wait, I have a large organization. The work that I did is duplicated by my downline! That’s creating passive income for me!”

I would counter by saying, no, all you have done is offload the work to someone else. Consider the following questions:

1. What happens if you stopped working the business? Will your downline just continue to do their thing without your constant encouragement, training, and motivation?
2. What happens if you (and your downline) stopped listening to System tapes, reading System-recommended books, and attending System functions? Would you (and they) continue to purchase products on a regular basis?
3. What happens to your retail customers if you stopped contacting them about re-orders? Are they trained enough to purchase the products on their own? Have you set them up with automatic shipment through Ditto?
4. Why is it that IBOs who quit the business typically do not purchase products after leaving?
5. If you were a Diamond and decided to retire from the business, what amount of side volume do you need to produce in order to qualify for the performance bonus checks?
6. What happens if you run afoul of the corporation and they terminate you? Where does all of your income go?

The Systems are there to keep you purchasing — not only their System tools — but products from the Amquix business. Without the System, IBOs would have to look at their businesses as a real retail business. There’s nothing wrong about having a retail business, but people don’t join Amway to run a retail business. They join because they think they can create passive income. An Amway business can produce a side income and can even replace your primary income, but is it passive income? Is little effort required to maintain the income on an ongoing basis? I argue no, that constant effort is needed to maintain and grow the income. Be definition then, an Amway business does not create passive income.

You can read a thread about the myth of residual income in the Amway business on the QBlog Forums here.

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¹ Granted with software, you might do additional work with bug fixes and updates. With books, you might release a second edition or an errata.

Amway Facts on The Truth About Amway

Update August 29, 2008: ibofightback has edited the web pages below with updated information.

One of the prominent supporters of Amway and Quixtar, ibofightback, has a section on his site where he lists various Amway Facts. I went through that list and found some things that I would like to amend:

• Nutrilite/Nutriway – used and endorsed by the world’s fastest hurdler, Liu Xiang: This should be changed to say “endorsed by former world record holder in the 110m hurdlers, Liu Xiang.” Liu Xiang’s record was bested by Dayron Robles of Cuba on July 8, 2008. Robles’ time of 12.87 beat Liu’s record by 0.01 seconds.
• Nutrilite/Nutriway – used and endorsed by the world’s fastest man, Asafa Powell: Powell’s world record was beaten by Jamaican compatriot Usain Bolt not once, but twice. The new record in the 100m dash is 9.69 seconds, run at the 2008 Beijing Olympics.
• Alticor is the 25th largest private company in the US: According to Forbes magazine’s 2007 poll, Alticor now ranks as the 43rd largest private corporation.

At one point, these facts were true, but time and history wait for no one, and now these facts should be updated to reflect the truth today.

Ex-IBO Stories 2001-2007

I was an IBO from 1997-1999, so am I qualified to speak about the business today? If you don’t want to listen to me or other critics who may have quit years ago, why not read the stories from more recent ex-IBOs?

Scott Larsen has a site visitor feedback archive dating back to 2001. Here are some quick links to the entries from 2007:

• Oct-Dec 2007
• Jul-Sep 2007
• May-Jun 2007
• Jan-Apr 2007

If one were to read through the letters, one will identify a number of recurring themes (System and Tools come to mind) that I cover on this website.

Prospects: Do Your Research

Is Amway/Quixtar a good opportunity or a bad one? Critics will say it’s a bad opportunity and tell you to not to waste your time, while supporters will say it’s a good opportunity worth your time and effort.

Who’s right?

Do the research yourself and come to your own conclusions. At the bottom of this site, there are links to sites both critical and supportive of the Amway Business Opportunity.

Millions of people have joined and millions have left Amway over its 50-year history. Find out for yourself why the critics left and why supporters think Amway is positioned for success today and tomorrow.

It’s better to know beforehand both sides of the story before you sign on the dotted line. At the end of the day, the decision is yours to make.

Tape Recording Income Claims

Note-taking by IBOs was a common occurrence at weekly Rhino sessions, monthly Opens, and Major Functions. Many, including myself, furiously wrote down every key point a speaker would say on stage. Other people used tape recorders to capture a Diamond’s Nuts and Bolts presentation or a Diamond couple’s life story. A handful of times during an Open or Function, I heard that the speaker was cutting a new tape that would soon be on Standing Order (SOT). Sure enough, a few months later, the tape would arrive in the mail for IBOs’ listening pleasure:

• What Do They Know?: Tim and Lisa Leets (U-T053)
• Dreams in the Attic: Craig Holiday (C-T3124)
• Quitting Is Not An Option: ??? Alexander (C-T3096)
• Are You Stepping Up?: Nick Carbonaro (C-T3142)
• Stretch Your Dream: Clarke Broome (C-T3141)

Note: If you opened the plastic wrapping, you could not return it to your upline Diamond for a refund.

Critics have pointed out that they heard a speaker say from stage some ridiculous lifestyle claim only to be challenged by a supporter to come up with the exact tape, CD or MP3 with that sound bite. Unfortunately, most critics toss out their tools the minute they decide to leave the business. They do this because they are so fed up with their experience that they want nothing from the business to be within their sight. Additionally, critics have little desire to pay even $1 for boatloads of tools that might have cost thousands of dollars new.

Memory can be a tricky thing. There are things that I remember like they were yesterday, and there are events that I can barely recall. With all of the sound editing done today to produce a tape, it’s very likely that the proof no longer exists; it was wiped out with the click of the mouse when producing next month’s SOT. Thus, it would be very interesting to be able to compare the audio from the actual Open with what was eventually recorded onto the SOT.

Second Wind SOT

One of my favorite tapes when I was an IBO was Second Wind (C-T6002) by then-Emerald Jeff Applebaum. Near the end of his Emerald Life story, he described how he paid cash for his red Lexus SC400 (or SC300). Now, a luxury car is still nowhere in the price range of a jet or yacht, but it’s still a significant cash-only purchase! A Lexus SC400 brand-new in 1997 cost over $50,000.

I’m not singling out Applebaum as a bad guy here — he says on the tape that he was sick of driving around in a junky old car and wanted to buy the Lexus as a reward for hitting a new pin level. Personally, I would like to believe that he had the money to pay cash for the car. I am just pointing out that these types of purchasing claims were made at the Emerald level. Imagine what types of claims were (and still are) made at the Diamond and above level!

Between 1997 and 1999, IBOs were taught to say that an average Emerald made $75,000 a year and a Diamond would average $150,000 a year. Assume for a moment that Applebaum was not an average Emerald but an exceptional one making near Diamond income of $150,000. That’s still 1/3 of his annual Amway income for a car! Of course, Applebaum was still working at his engineering job in the San Francisco Bay Area and could easily have been making additional income through tools and speaking appearances — assuming INA Leader Jim Floor so ordained¹.

Lexus SC400 (2000 model)

All said, just because I feel Applebaum was able to pay cash for his car does not mean that every Diamond says and does the same. I have no doubt that some critics have heard some pretty ridiculous income claims from System leaders on stage.

People get into the Amway business for many reasons. One reason is money, and a great way to show how much money can be made in the business is to cart out out expensive objects: cars, boats, planes, jewelry and homes. These are tangible things that IBOs can relate to and wish for².

Critics like to point out when Diamonds fall into foreclosure and lose their dream homes. They do it not because they are vindictive sore losers; they do it because they were hurt by the lies of these Diamonds and don’t want other people to experience the same thing that they went through.

I ask former IBOs and current ones the following questions:

1. How realistic are the Diamond lifestyles being portrayed on stage?
2. Time has shown that a number of them are not representative of reality. What happened to them and why?
3. What else might be exaggerated on stage?
4. Why do some Diamonds feel the need to embellish their lifestyles to IBOs?

Update August 25, 13:49: Joecool has posted his thoughts on the cash-only claims from Amway leaders.

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¹ The Christian, ultra right-wing ideologies of INA Leader Jim Floor will be a topic for a future post.

² Those that aren’t motivated by material things might like to hear the stories of how a Diamond relationship is better than ever or that the couple has time to spend with their family. This post is not directed at those people.

Happy Friday: Goal Setting

I’m starting a new category on this site called Happy Friday. As I wrote here, Friday is typically the day when IBOs meet at a local hotel for their weekly group presentation and training session. Happy Friday asks IBOs to look at the status of their business over the past week.

Today’s topic is an expansion on what I wrote in an earlier post that the true indicator on the health of your business is the bottom line. Almost all Amway Motivational Organizations (AMO) talk about setting goals in the business. For instance, I remember having the following goals when I was an IBO:

• Hand out 5 tapes this week
• Get 3 people signed up by the next Major Function
• Be in Platinum certification by the end of the year
• Go Diamond in 3 years

Aside from the first one, I didn’t achieve any of other goals during my two and a half years in the business! Call me a failure in the business and I won’t argue with you. Call me a quitter, and I’ll say, “Darn right, I quit!” Since leaving, I’ve set other goals for myself and I’m happy to say that I’m achieving them one by one.

Goal setting is very critical to your business. You can hope and dream for the day when you’ll go Diamond, but until that day comes, it’s just that… a hope and a dream. Setting daily, weekly, monthly, and annual goals is key if you want to move on in your Amway Global business, your job and your relationships.

INA Diamond Dave Vanni once told me that he wrote on an index card the list of things that he needed to accomplish that day. If he didn’t complete all of his tasks, he wrote them on the next day’s index card. He went Diamond, and as far as I know, he’s still qualifying for bonuses in Amway. I suspect that he’s still writing and reviewing his tasks on a daily basis. You know why?

Cause, it’s a good thing to do!

There are many ways to keep track of your tasks and goals. You can get a stack of index cards like Vanni, input them onto your computer or even enter them on your cellphone. There are also free online web sites like Remember the Milk or Ta Da List that can remind you via SMS or email.

To IBOs in the business today, how are you tracking your progress and goals? Are you vigilant in completing your goals or do you find yourself rolling them over to the next day, month, or year? If you’ve been in the business for several years or are just getting started, are you any closer today to your goals than yesterday? At the end of the day, your ultimate goal in the business is to make sure enough PV/BV flow through your network to help you qualify for the pin level you desire. If that’s not happening, you’ve either got to set some new goals or think about doing something else with your time. Don’t waste it dilly-dallying with the business.

More on Greg Duncan and All In Energy

I just reread the IBOAI post on Greg Duncan and All In Energy, and I have some additional comments on the PR double-speak prevalent in the entry. Bold in the quotes are my emphasis.

Says Mr. Duncan, “The most important question is how this activity affects Quixtar IBOs and their marketing of XS Energy Drinks. The principals of XS Energy Drinks do not want to ever be accused of playing semantics or being misleading. They want to be clear and forthright about their priorities, their focus, and their involvement in the beverage world.

That’s exactly what Duncan (or whoever wrote the post) does in the following passages:

The principals of XS Energy Drinks are more committed to the immediate and long-term opportunities for XS and IBOs than ever before. They are investing more of their resources to that end than at any other time in the six-year partnership of XS and Quixtar.

Fine with me. Makes sense to focus resources to help IBOs sell and consume more XS.

My blood really gets boiling with the following quote.

As many IBOs know, the principals of Alticor manufacture for and invest in brands and other entrepreneurial ventures beyond their direct roles with Quixtar/Amway products. Like the principals of Alticor the principals of XS Energy Drinks pursue similar ventures for the purposes of reducing costs and enhancing the effectiveness of products for IBOs and to empower opportunities for IBOs. The positive proof of the effectiveness of such an approach has clearly shown through with not a single penny of increase in XS pricing in nearly six years. Additionally, the XS team has been unparalleled in their generosity to IBOs and IBO events with support staff, product sampling, literature, gear and gifts at absolutely no cost to the IBOs. Such commitment to the product and IBOs will continue to be our utmost priority.

What a second. The purpose of these other ventures, such as selling All In Energy to poker players, is to reduce the cost of XS and to empower opportunities for IBOs?!? Duncan’s commitment and utmost priority is to the IBO?

OMG.

I’ve seen this type of pandering before on the tapes and CDs and from the stages at Major Functions.

“No one makes a dime in the tools business.” Yeah, right.

Come on, just say it for what it is. Duncan is in the beverage industry and wants to make more money by selling to people other than IBOs. Don’t insult everyone’s intelligence and say that he’s selling to outside people so he can make the XS and Amway business opportunity better for IBOs. Don’t say that everything that they do is for the benefit of the IBO. Because, quite frankly, that’s a bunch of BS. Duncan is in the business to make money for himself.

There’s nothing wrong in my book about making more money. But, go out and say it and don’t make some excuse to try to defend it. The System kingpins have been playing semantics and misleading IBOs for decades, and it obviously hasn’t stopped. System IBOs have to wake up and see their many of their IBO “leaders” for what they are: lying, cowardly kingpins.

Such As?

From the IBOAI’s blog post about Greg Duncan and All In Energy drink:

As many IBOs know, the principals of Alticor manufacture for and invest in brands and other entrepreneurial ventures beyond their direct roles with Quixtar/Amway products.

Such as???

I’m very curious to know what brands they manufacture for? Does Amway manufacture other products for other companies? I own Amway’s Queen Cookware and the Amway/Rubbermaid food containers. My impression of those products has always been the other company made the product and Amway slapped its name on it. What the above quote seems to imply is that Amway is making products for other companies and letting them slap their name on it. That’s either news to me or I’m missing something here.

IBOAI Stakes Greg Duncan in All In Challenge

WWDB Triple Diamond Greg Duncan has had a string of bad beats lately. Just this week, Amquix is claiming that several of his properties in Montana are in pre-foreclosure!¹ Last month, he was more or less accused of violating Quixtar’s Non-Compete Clause with the news that he’s the co-owner of All In Energy, an energy drink similar to the Amway/Quixtar exclusive XS. Duncan, as many people know, is also the part-owner of XS.

The IBOAI has a new blog post today explaining that Duncan is not violating Rule 6.5 of the Quixtar Rules of Conduct. I want to comment specifically on one section from the post:

The fact is, XS Energy Drinks are marketed to Quixtar for sale exclusively by IBOs and All In Energy Drink is marketed to an entirely different market not in competition with Quixtar or IBOs. The manufacture and sale of All In Energy Drink does not violate either the letter or the spirit of the Rules of Conduct.

Yes, we all know that poker players would never think of becoming independent business owners, and that IBOs would never, ever, gamble their money away. Ask Phil Hellmuth to calculate his chances of becoming a Diamond versus winning another WSOP bracelet, and I bet he’ll be sticking with his day job!

All In Energy Drink, owned by Triple Diamond Greg Duncan of WWDB and XS

All kidding aside, let’s take a closer look at the cards held by these two target markets. According to the following survey conducted by the American Gaming Association, poker was a popular activity in 2007, with 13% of adults playing poker during the year. The total US population of people age 21 or older is over 217 million, so that translates to 28 million people. 25 percent of the US adult population visited a casino in 2007 and the average trip per gambler was 6.9 trips. 48 percent of adults also purchased at least one lottery ticket.

And the market for XS? In the United States alone, that’s probably around a million people. Now take out those IBOs who don’t gamble nor play poker. Looks to me that Duncan should go all in himself with marketing All In Energy over XS! After all, his target market is much larger with All In Energy! He better watch out, however, because it appears that consumers might be getting tired of energy drinks altogether.

Cut through all the IBOAI BS, and the simple fact of the matter is that All In Energy and XS are competitors. They might say they are targeting different niches, but at the end of the day, they are still competitors. The IBOAI here is not conducting rumor control, it’s playing damage control.

Since I’m no longer an IBO, I quite frankly don’t care if Duncan is the owner of both XS and All In Energy. I won’t be buying his sugar-free water anytime soon. Were I an IBO, however, I would pay particularly close attention to the products that he promotes on stage. I would wager that a good percentage of them will be things that he has a direct financial interest in separate from the Amway corporation, such as tapes, CDs, functions, XS, KATE, and websites. Duncan might appear to be in the business of helping people build their own Amway Global business, but I think he’s really in the business of selling his products to IBOs. Others might not think so — and that is their right² — but to me, that’s a huge conflict of interest.

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¹ Scott Larsen from Amquix.info has updated his post saying that Duncan’s properties are in pre-foreclosure, not foreclosure. Please read the original article for more details on the differences between the two.

² Read an opposing point of view (and the comments) on ibofightback’s website.

Scrapping the Buy From Yourself and Teach Others to Do the Same Model

When I was in INA, IBOs were taught that the business was simple: Buy From Yourself And Teach Others to Do the Same (BFYATODS). They would proclaim from stage, “This is not like your parent’s Amway! You don’t have to go door-to-door selling soap! With thousands of products from thousands of manufacturers, IBOs just have to redivert their spending habits from Safeway, CostCo or Walmart to a place that pays them back! Just buy from yourself and teach other to do the same to earn a 6-figure income in 2-5 years!”

There’s just one problem. Without a significant amount of retailing¹, the BFYATODS model constrains the size of one’s business to the number of IBOs in the organization. If IBOs aren’t being encouraged or taught to retail products, the only way for products and money to flow is from personal purchases. With product prices generally being higher than the competition, doing this month after month can put a strain on an IBO’s finances. When they quit, IBOs stop buying products, and as a consequence, volume in an organization shrinks. I firmly believe the BFYATODS is the reason why Amway’s worldwide sales has hovered around the $7 billion dollar mark for the past decade. People are leaving as fast as they come in².

Now Chuck Knows

Chuck Lia, the blog administrator on the Speaking of Amway web site published a well-written article on his past concerns about the Amway opportunity and where he sees it and his business going in the future. As an IBO who is building the “business outside of a system context,” Chuck is representative of a newbreed of IBO, one who sees the Amway Global corporation as his primary upline instead of his Amway Motivational Organization (AMO) System.

Chuck points out three areas of concerns that he had about the business at the end of 2007. IBOs please take note this is all coming from a current IBO, and that critics have been raising these problems for years. Don’t blame the messenger when you should be listening to the message!

Lack of balance in the business in relation to the tool systems. … Many tool systems had evolved far beyond their original purpose and now ruled the roost, particularly in terms of income, and often treated the company like a second class citizen. Rest assured, not all tool systems were equally culpable, but all were culpable on some level.

Being a supporter of the business doesn’t mean that you have to agree with everything about the business. So, it’s great to see a current IBO like Chuck come flat out and say that there are serious problems with the tools business.

Chuck rationally outlines his issues with Systems in a way that doesn’t make him seem like a frothing at the mouth, crazed man like Tex. More IBOs should listen to IBOs like Chuck and rdknyvr than other Amway supporters.

Joecool: Show Me The Money

Joecool has a post worth reading on his web site today. Titled, Quixtar and Amway – Show Me The Money!, he comments how IBOs frequently talk about the business improving themselves as people or brightening their outlook on life.

I say if the side benefit of being in the business makes you a nicer person, helps you treat your wife better, or whatever, that’s a good thing. Don’t get me wrong. But when you registered to the business opportunity, was that what you signed up for, or did you sign up for residual income, a shortcut to retirement, or to avoid being dead or broke by age 65?

I’ll second Joecool’s comment. Did IBOs sign up for a self-improvement class or get into Amway/Quixtar to make some extra money on the side or to replace an existing income stream?

While an IBO, I used to tell people that I haven’t made much money, but that I’ve learned some useful inter-personal communication skills. Looking back, I said that to convince myself that there was something in the business worth staying in for. I know now that I could have gotten those same important skills doing something else and made a ton more money by focusing on my career.

Quixtar National Spotlight

I just read that the Quixtar National Spotlight tour was held into my part of the country the past two days. Of course, I only learned about this one day too late. This shines a different light on what I wrote on Friday.

First, from the web site description of the National Spotlight Tour:

IBOAI joins the National Spotlight Tour crossing the U.S. and Pathways to Success crossing Canada. A member of the IBOAI Board will speak and staff will be on hand to answer your questions. It’s especially valuable for new IBOs and prospects!

This free event is a great opportunity for you to introduce your prospects, friends, and family to Quixtar / Amway Global – and IBOAI, your advocacy organization. Stop by and say hello!

Happy Friday: Meetings

Friday was the day when my upline group had its weekly core group meetings. I’ve seen recent schedules for other organizations, and it looks like Friday is still the day for many Amway Motivational Organizations. Right now, IBOs are no doubt dusting off their suits and ties and getting ready to drive down to the local hotel for a one-hour business presentation, followed by an hour of nuts-and-bolts training.

My Friday meetings were over 45-minutes away, and I shudder to think how much gas I would be wasting and spending today if I were still in the business. Travel time is an often overlooked expense for beginning IBOs, who are told that it only takes an extra 8-12 hours a week to earn thousands per month. Does that time-commitment also include driving from place to place? I don’t think so.

Now that I’m out of the Amway business, I’m really happy to have my nights and weekends back for myself. I’m going to kick back, have some home-cooked dinner, and watch the Olympic Opening ceremonies from the comfort of my own home.

Current IBOs, how long has it been since you missed a meeting? How long has it been since you deliberately skipped a meeting for an important date, social function, or just to rest? Your business isn’t going to collapse overnight, so give yourself a Happy Friday and take a break from the typical IBO routine!

Humor: Who Moved My MonaVie… or the next Amway Diamond to pull a Woodward

Disclaimer: This is a work of pure fiction.

While reading about Amway Diamonds who have moved over to MonaVie, I got to wondering who might be going next. For a hint at my guess, can you spot the Amway Diamond among the five MonaVie Diamonds shown in the photo on the right?

Lately, I’ve been watching several testimonial and lifestyle videos of MonaVie Diamonds. Check out these four on Black Diamond Kelly Bangert’s web site:

• Calvin Becerra, Youngest Black Diamond in MonaVie history. Reached it in 8 months.
• Rudy De Leon, Reached Hawaiian Blue Diamond Executive in less than 7 months.
• Jeff Creamer, Reached Hawaiian Blue Diamond Executive in less than 7 months.
• Bryan Mataya, Reached Blue Diamond in less than 6 months.

Somewhere, Orrin Woodward is laughing at these guys, “Who’s your Daddy! I made friggin Black Diamond in what, three months?!?”

Kidding aside, Calvin, Rudy, Jeff, Bryan, and Kelly are young males living in the Southern California and have all quickly reached high levels in MonaVie. Like Diamonds in Amway and Quixtar, they have their own motivational and training system — the Kelly Bangert System — to help their downline succeed. The Forbe’s article on Woodward claims he has 60,000 “mostly middle-class members” in his team. While MonaVie certainly has its slice of this demographic, I’m guessing those in Kelly, Calvin, Rudy, Jeff, and Bryan’s teams cater to younger men and women in the 20-35 age range.

Because of that, my bet is the next Diamond to jump ship to MonaVie will also come from that group. I began sifting through the hundreds of people that are (1) in that age range, (2) crossed stage at least once as Amway Diamonds and (3) are not in jail. While there are certainly a number of well-qualified people to choose from, one name stood out: