Monday, February 28, 2011

IBOs, How's Your Cashflow?

As an IBO, I mostly had a negative cashflow, primarily because ofthe tool purchases. Tools are generally standing orders, voicemail, functions, and other meetings, and books. While some will argue the value of the tools, it is still apparent that the tools are the main reason why the vast majority of IBOs end up with a net loss at the end of the month.

Because most IBOs are unable to generate enough sales, they end up purchasing most of their own sales. With a lack of sales, an IBO can only profit in turn, by recruiting (sponsoring) downline to leverage volume. Of course, when you finally have enough downline, they are taking the losses in order for you to profit. In this model, Amway's opportunity can be seen as questionable from a legal standpoint. While Amway defenders cite the 1979 FTC ruling, that ruling found that Amway was not a illegal pyramid because of their sales requirement. I believe that groups operating primarily as a "buy from yourself" concept are doing so illegally.

But what is concerning and scary is how IBOs seems to disregard to justify their negative cashflow. You move your 100 PV. If you are typical, that 100 PV is mostly from your own consumption and you end up with a 3% bonus, which is about $10 a month. If you are attending functions, buying books and standing orders and using voicemail, you have a negative cashflow. You will likely be taught to justify this as an investment into your business. What I find ironic is that prospects are often told that the Amway opportunity has little or no overhead. Then when you get started, you are told that a business owner needs to invest in their busines.

Investments into a business would be okay, except that it is a rare thing for any of these IBOs to recapture their investments and turn a profit. For most, they will realize this and quit, or hang on and lose tens of thousands of dollars over a number of years. IBOs and prospects should lok at things objectively and ask themselves honestly, what is my business cashflow like? Am I funneling my job income into this business (moneypit) or are there real prospects of turning a profit? If your motivation hangs on a dream and a prayer, maybe you need to sit down with an accountant and truly analyze your business profit and loss statement. If you don't know what that is, you need to find out right away!


Anonymous said...

why do you have to purchase the tools if it caused you have negative income? i also bought some of the tools but not every month. i don't have to buy things i don't need. nobody can force me to. not even my upline. it is purely my choice. agree that being an IBO my business is not totally mine. but i control what i can control. such as cash flow. i purchase what i want to use or sell.

why do you let others control your choice, your business make me confuse..

Anonymous said...

because that's what cults do.