The Magic of Quixstar*

* Quixtar® is a registered trademark of the company by the same name and to avoid use of this trademark, I have added the letter 's' to its name in my post but I refer to the same company.

I have been receiving comments from a few of my blog readers to write about this subject. Much ink has been spilled about the multi-level marketing (MLM) business, both for and against it, often with passionate arguments on both sides. Quixstar (erstwhile Amway Corporation) is perhaps the most well known and widely discussed MLM company. Most successful professionals have, at one time or another, been approached by ubiquitous "business owners" (IBOs) or "entrepreneurs" of Quixstar at such diverse settings as the grocery aisle at a local supermarket and the top floor of the Empire State Building overlooking New York City (where I was approached). Even places of worship have not been spared. There must be something wonderful about a business that encourages its practitioners to share their insights about wealth creation to anyone willing to listen. The altruism of such folks deserves some careful consideration. I have been fortunate enough to have found that this business does not suit my temperament (selling products directly is not my cup of tea) even if I could get rich doing it, which is unlikely, as I have discovered.

I am not going to diss the Quixstar business model in this post but what I have problem with is why are so many smart people (including successful professionals from India who seem to the new face of Quixstar) barely making any money in spite of trying so hard. A friend of mine has been a Quixstar business owner for the last 4 years. He, his wife and his 3 year old daughter have been "successfully" doing it and have supposedly reached the 'Direct' level. They have apparently developed 7 'downlines', and some of them are apparently starting to do well. Whenever I ask him about why he is doing it, pat come the canned answers, "residual income", "not working to make my boss rich" and the ever-popular "financial freedom".

I never find him and his family relaxing on any weekend or even on weekday evenings. They are always busy attending "meetings", "seminars" and "workshops". I am told they are motivational workshops, but the only thing these meetings seem to be doing is motivating them to attend more meetings! My friend and his family work crazy hours beyond their full time jobs and drive crazy distances to attend these meetings. They even drag their 3-year old along at times. C'mon, how many motivational meetings do you need to attend to run your business? If the business is based on a sound business model and YOU believe in it and YOU have the power to grow it, why do you need to spend money attending motivational pitches and drive around others as well to these meetings? Would you rather not spend your time and money growing your own business?

Speaking of business, during my research, I was often confused as to what they were selling. Were they selling products (unknown brands but supposedly superior to national brands) to their clients OR do they sell clients on their 'business model'? The more I looked into it, the more it appeared to be latter. Also, if your plan is grow through selling products, why is it that the Quixstar motivational tapes/CDs/DVDs sell a whole lot more than the Quixstar products themselves? What is the business sense that drives you to spend $100 buying motivational tapes to earn $50 in product sales? Isn't the fundamental rule of a business to earn more than you spend? What is the principal product line here - consumer products or motivational tapes or new "clients" to join the business?

The money part started to unravel even more. I asked my "successful" Quixstar friend how much money he makes in this business. He said about $2500 a month. That's not bad, I thought, although not spectacular considering he spends about 4 hours on each week day and 16+ hours on weekends to earn this much. If you consider the time, he earns $17 per hour from this business but considering his wife works and travels with him, the earnings per person is just $8.50 per hour. This is what he is slogging for, I wondered, when he and his wife each earn more than $75,000 per year working in professional jobs.

I should have stopped right there....but silly me, I asked him, "so you reported about $30,000 in additional income in your 1040 last year? You must have paid the marginal tax (33% at their income level) on this, so you netted probably around $20,000 last year". This is where the math unraveled beyond belief. I learned that $2500 is what he makes "gross" per month and that he pays business "expenses" from this figure. Considering the motivational tapes, downline sponsorhips, travel costs and several other expenses, I realized he barely breaks even! This is the business that is going to make him financially free? And he is considered "successful" in it? The more I learned about how the business works, the more it worried me. At some point during my research, my understanding of Quixstar transformed from a "business" to a "cult".

Friends, before you sign on to Quixstar, please ask your "sponsor" IBO the following questions:

• Ask them how long have they been in the Quixstar business
• Ask them to show you their 1040 tax returns over the last 3 years or however long they have been in business - Many will not show you but if anyone does, see their Schedule C and calculate how much they have truly made and paid taxes to IRS. If there is no Schedule C, subtract whatever figure they have under "Wages/Tips/Additional Income" by the amounts reported in their W-2s . The difference is their earnings from the business. If they won't show you their 1040, ask for a copy of detailed business income and expense (P&L) statement over the past year.
• Ask them how many hours (and miles) on average per week they have spent on their business over the past year
• Ask them how many of the people they have signed on have stayed with the business after one year

If your potential sponsor's answers to all the above questions still whets your appetite for this MLM business, then remember to read this excellent e-book titled Merchants of Deception, written by a former 'Emerald' of the Amway/Quixstar business. After reading this book, probe your sponsor and his 'upline' about the practices exposed in this book. If you still want to enter the business, good luck! Walk safely, my friend.