Lose money now-ask me how!

I have never had a high opinion of MLMs, but I have tried to have a more "open mind" while promoting GotBackup. I'm starting to get jaded again! If you have had a positive experience, I'd love to hear about it. If I missed something bad about MLMs, or if you have your own horror story, that would be even more fun to hear about!

Here are some things you should know about MLMs in general:

• The promotion of the business is based on earning an income. “Start your own home business!” “Are you tired of the J.O.B.?” “Want to leave your corporate job forever?” FACT: More than 99% of distributors LOSE money. Recently GotBackup announced that more than 10,000 people had joined in the past month. Assuming the general statistics hold true for this company (which is more than likely), that means at least 9,900 of those people will earn nothing. 99 will earn enough to keep working hard in hopes of doing better, and maybe 1 in 10,000 will make a lot of money (by being really good at convincing others that this is a great opportunity).
• The basis of the company is supposedly to sell a product, but the actual promotion is all about making money from commissions. When people quit after finding they cannot actually earn money, they also quit buying the product that is supposedly so valuable! Do you know someone who used to sell Nikken or Amway or MaryKay or any of the many other hyped products? After they stopped selling, are they still buying? They may still be using the product, since they had a garage full they cannot get rid of, but I think it is a safe bet that they are no longer buying (even though just last month they were the biggest promoter of how great the product was!).
  • For GotBackup, I thought, “oh, here is something different!” It’s an actual product–online backup, which is something important. They just want to help people protect their data. However, all the promotions that the company has been doing since I joined are NOT focused on selling backup–they are focused on selling people on the idea of making an income (and to do this you are supposed to sell others on the idea of making an income, who then are supposed to sell others on the idea) . . . nobody is actually just selling the product for the sake of the product!
  • They are selling you on the business opportunity. That’s fine, if you want to be a salesman and have great sales skills. However, the support they give you–the promotional materials, the training, etc are all about recruiting more people into the business, NOT about helping people back up their computers and NOT about helping you sell just the product for its own sake.
  • I have specifically asked about making a landing page for new customers that does not promote reselling, but that seems to be out of the question.
• One plus for GotBackup–I don’t have a garage of product that I had to pre-purchase! I also don’t need to ship anything. However, what seems like a cost savings for me is also a cost savings for the company. They do not need to make or ship physical products, so they can have low margins and still make lots of money.
• As a "distributor" or "reseller" or "associate," you are not an employee or a partner–you are a customer. It is YOU who they are selling to. If you believe in the idea that you can make money on this opportunity, then you will buy the product and use it yourself. Actually, you must buy the product in order to have the privilege of selling it.
  • In the case of GotBackup, buying the software is not enough–you also have to pay a $20 monthly fee to be a reseller. The idea behind that is that they give all the subscription back to the resellers in commissions. That could be true if the distribution tree was several layers deep, but I think most of the time it is the company itself who is at the very top collecting most of the commissions plus the reseller fees.
• Broad-based profitability is mathematically impossible – regardless of time commitment, intention, motivation or levels of talent – in an “endless chain” recruitment model. Even if you are one of the few to make good money at this business, you are doing so at a cost to thousands of others who are losing money.
  • The company may say that most people don’t actually want to earn money, that they simply become distributors so they can earn a discount on the great products. Sorry, that’s a lie.
  • With GotBackup, let’s assume that 10,000 new people join for the next 10 months (total of 100,000 people). If there are 10,000 people today, and 10,000 more join and profits were evenly distributed, then everyone would make about $5 in commissions while paying $20 in reseller fees. In the next month there are twice as many people, but the same number of new people. So now if profits were evenly distributed it is $2.50 per person in commissions (while paying another $20 each in reseller fees). . . In 10 months the company will have made $11 million in reseller fees, while the commissions per person will have dropped to about 55 cents each (with an even distribution)! Now, the reality is that the commissions are not evenly distributed at all. 99% or more will have zero commissions during this time, leaving 1% to collect commissions.
  • Here is where the math gets really sad: Commissions of $5 each on 10,000 customers = $50,000. Not bad if you get all that. But remember, we said 1% of the 10,000 recruits would make some commissions, and 1% of 10,000 is 100 people. So, divide that up and you get $500 commission for the month if you are in the top 1%. But guess what? The next month you are competing with 10,000 new recruits, and their top 1%, and you are unlikely to get any more, unless you are in the top 1% of the 1%. This is why 99.9% really do not make money, 0.1% of people who are the best marketers make some decent money (all while lying to everyone else that anyone can do this), and 0.001%, including the company owners, can sleep in mattresses stuffed with cash.
• To quote directly from the pinktruth.com article,
  • The lack of broad-based and profitable retail selling is the single most telling sign that MLM companies are merely pyramid recruitment scams, not direct selling businesses. They have no “customers” and they have no profitable retail salespeople. A business in which almost none of its sales representatives earns a profit and almost none has a sustainable retail customer base cannot be called “direct selling.”
• As for me, I had plans to try door to door sales or other techniques for selling the backup software, but I am really bothered that there is so much focus on the “earn money from home” scam. I do think the GotBackup software is good, and I may actually still try selling it just for the sake of backup, and if I quite I may continue to be a customer for a time (until I find a backup solution I like better). However, I cannot be a cheerleader for the company when the math tells me that thousands of people they claim to be helping WILL lose money from this “opportunity.”
• Not convinced? By all means, try it yourself! However, give yourself a time frame, or some parameters of when you will know “enough is enough.”
• Want something different? Something without hype and false promises? Then start your own business! Sure, most people fail at that too, but you can try to do better–read from my favorite entrepreneurial experts, Steve Blank and you may avoid the pitfalls that most fall into. Or, of course, learn about building websites and affiliate marketing and doing things the hard and honest way at Wealthy Affiliate!