How you feel about It Works?
Can you make money with It Works?
Do you think It Works a Pyramid scheme?
These are the questions I got asked all the time by people looking to join It Works as a distributor.
Yes, I have read many “It Works pyramid scheme” reviews online, but almost all of them focusing on reviewing It Works products.
Yes, the products might not work, to help you lose weight, but that doesn’t make the company a pyramid scheme.
The only thing that makes It Works a pyramid scheme is the company MLM recruiting practice.
The question is, “Does It Works Multilevel Marketing (mlm) legit under the FTC guideline?”
In this It Works review, we will look at the company recruiting activities to answer, ‘Is It Works a pyramid scheme?’
OK, Let’s jump right in,
Tired Of Scams And Pyramid Schemes?
It Works Review
Here’s the deal, not all mlms are pyramid scheme!
Yes, it’s might be difficult to become a successful It Works distributor,
But this doesn’t make It Works a pyramid scheme.
To be fair, we will answer this question following FTC guidelines,
which consider an mlm a pyramid scheme if the business model has one of the following characteristics:
- Earnings are primarily based on recruiting others, not based real sale of goods to the public, or
- Inventory loading is where the mlm program forces recruits to buy more products than they could ever sell, including inflated price, or
- Lack of retail sales, this simply means the majority of the company products are purchased by distributors, not the general public.
OK, how are we going to apply the FTC guidelines to It Works?
This test is not complicated…
We just need to look at the way It Works recruits new distributors and It Works compensation plan.
So, the first question is,
How To Become It Works Distributor?
The process of becoming an It Works distributor starts by visiting the company website to purchase a Business Builder Kit for $99.
Once you have accepted the It Works distributor agreement and paid for your starter kit, you can start selling It Works products to earn commissions.
However, to earn commissions, you have to meet the monthly sales quota of $80… This is considered “Inventory Loading”… It Works distributors are forced to buy inventories to earn commissions.
Now, do you see how this FTC guideline work?
Can we move on to the next step?
It Works Compensation Plan
It Works distributors have three primary avenues to earn commissions according to It Works compensation plan,
commissions from retail sales, from loyal customers, and from recruits.
But, the problem with It Works compensation plan is that distributors do not earn a commission unless they are “Commission Qualified”
Commission Qualified requires It Works distributors, every month, to purchase $80 of products or the total personal product sales of $400.
To all the It Works fans, please don’t tell me every mlm has the same monthly sales quota… No, It Works $80 sales quota is not the same.
What’s the difference?
Other mlms sales quota doesn’t apply to retail sale commissions, it’s only on downline commissions…
Retail commissions should be paid on every sale, with no restriction or requirement!
BUT, It Works $80 product purchase requirement applies across the board.
It Works distributor cannot receive a commission on any sale unless they buy It Works products… This to me is a forced sale!
It Works compensation plan is similar to Herbalife, which the FTC recently fined Herbalife $200 Million, and the company is required to restructure its compensation plan.
OK, let’s look at It Works compensation plan in dollars and cents.
Here’s what we know:
Retail Commission: 40% – 50% wholesale price
Loyal Customer Commission: 15%
Downline Commission: 10% on the first 2 levels, 5% on level 3 – level 5, and 2% level 6… There are more earnings as you move up ranks… Here’s It Works compensation plan if you like to study further.
We will use $80 for the monthly cost… I know, it costs more than $80 to operate an It Works distributorship…
We are not going to use the retail commission either, because the retail prices for It Works products are not reliable… Just look on eBay It Works Products, you know what I mean…
We will use the loyal customer commissions, 15% for this calculation.
So, if the monthly expense is $80, to break even,
Using the loyal customer of 15% commission, you have to sell $534, ($534 x 15%).
Using downline commission of 10%, your team total monthly sale must be $800 ($800 x 10%)… This means you only need 10 people in your organization…
Based on the two scenarios above, it’s much easier for an It Works distributor to make money by recruiting new distributors, not retail sales.
Because once you recruit a distributor, he/she is forced to purchase at least $80 of products each month, and
You don’t have to recruit all 10 people…
You recruit 5, then these people each only have to recruit 1…
Do you see how the $80 has become the main source of revenue for an It Works distributor?
If the It Works parties/meetings are used as an avenue to promote and sell It Works products… then It Works is a pyramid scheme.
This type of compensation plan has been found to be in violation of the FTC guideline because the majority of product sales are to distributors at the parties/meetings, not to the general public… (If it’s over 70%.)
Using the FTC guideline is easier to determine if an mlm a pyramid scheme or legit.
But, why do we care if It Works a pyramid scheme or not?
Well, because most of us making our investment decision based on the answer to this question… If “yes” we do not invest, “no” we put up the money…
It Works distributors don’t want the public to call It Works a pyramid scheme, because, they cannot make a sale!
Where am I going with this?
OK, let’s ask ourselves this question,
“Does every legit business a good investment?”
We all know the answer to this, “NO”… Hundreds and thousands of investors lose money every day investing in legit businesses.
Now, even if It Works is not a pyramid scheme, it doesn’t tell us anything about the profitability of becoming an It Works distributor.
Yes, nobody likes to be a part of a pyramid scheme, but when investing in a business opportunity, there are better financial questions that we should be concerned with, such as
- Can I make money as an It Works distributor?
- How long does it take to break even operating an It Works mlm business? Or
- Is It Works a profitable business?
I will invest in a business opportunity if I have 80% chance or higher of making a profit… That my standard, yours might be different. But, I hope not 50%!
When I started my online writing business, the chance of success is over 90%, because my initial investment was less than $200 with no “Monthly Quota”!
Would you invest in It Works if an It Works recruiter tells you, there are 50% chances you will lose all your investments?
What would you say?
I know what I’m going to say!
Show me the proof to verify the 50% chance of success…
The way to determine your chance of becoming a successful It Works distributor is by looking at,
It Works Income Disclosure
I got this 2016 It Works income disclosure statement directly from the company website.
What are the numbers that we will be looking at?
We are looking at the average income…
Why the average income?
Well, because it takes time for a new business to generate income… It makes no sense to use the highest income when you’re just starting out.
A new It Works distributor is likely to earn nothing in the first few months, or even years… Until he/she can build a team of more than 10 people…
Earlier, we have determined recruiting 10 people is the breakeven point for It Works distributors.
By using It Works distributors average income, we already assume the new distributor breakeven on day 1, which’s not true!
OK, we should start looking at this It Works income disclosure.
Looking at the first line, “Distributor”, we can see, of the 77.63% active distributors, the average income is $51…
Do you see a problem with this?
An It Works distributor’s monthly product expense is $80, but the average income is only $51… This tells you, most It Works distributors loss money with this business!
This is not even adding in other expenses to operate the business.
We move on to the second line, “Executive”, with the average earning of $219… This tells us to make money as an It Works Distributor, you have to reach the Executive level and above.
Based on this It Works Income Disclosure, your chance of success is only 22.37%… This is less than 50%!
Are you still investing, even if It Works not a pyramid scheme?
No, thank you, not me!
Looks, it’s very difficult to make money as an It Works distributor… Over 50% chance you will fail!
You have to work this business full-time to make executive level, you are not going to make executive doing part-time… NO WAY!
It Works is not passive income, either… If you stop working, you make no money… Why? Because of the “Sale Quota”, you have to be “Commission Qualified!”
I will never trade in my writer lifestyle, the carefree work whenever or wherever, to become an It Works distributor!
This brings me to the last point that I want to discuss…
There are other It Works distributors calling people lazy, not putting enough time into the business to see success…
I am sorry, but I don’t think these people are lazy… Most of them have a full-time job…
Oh! It Works advertises this as a part-time business… Then labeling people lazy, when they work on their business part-time.
What’s wrong with this picture?
The truth is, your chance of achieving financial success as an It Works distributor is low…
I think I make my point…
It doesn’t matter if It Works a pyramid or not! It is not a good investment!
My investment decision is based on the income disclosure provided by It Works…
Unless you can provide me financial data that prove the chance of success as an It Works distributor is above 50%, otherwise, you are a liar!
That’s how I feel about It Works business…
Do you think It Works a pyramid scheme under the FTC guidelines?