Disclaimer: This page contains email that I have received from Silver Producers and above where they have discussed various aspects of the "tools" business. I have added nothing to these letters. The only editing I did was remove some names and places to protect the identify of the person sharing this information.
Please note that none of these stories is my story
Obviously, there is no way to verify this information. However, the fact that this information comes from distributors in several different organizations and that they all tend to agree in content with each other, indicates at least to me, that it is the truth.
If you want to read other testimonials concerning system income, I highly encourage you to visit Sidney Schwartz's - Amway Untold Stories site. A link to his site is provided on my links page.
After reading this information, I am sure you will know why you cannot succeed without the "system." This "system" is a gold mine for Directs and above.
We didn't go quietly into the night as they expected and actually created quite a lot of waves. As we started to look into the tools business we realized several things.
1. There is nothing in writing to protect the distributors: the upline giveth and the upline can taketh away. We were told by our diamond that there never will be anything in writing.
2. The upline has basically designed the tool business similar to the Amway business: the amount of volume moved in tools qualifies you for different discounts or bonuses - this info is posted on The Amway Page (a link to this site is also provided on my links page). Thus they have turned the tool business into an MLM. If the tools business were ever investigated as such, I believe that it would immediately be declared illegal. In order to move any product through a direct sales company the end product needs to have a customer so that the last person in the line can make a profit. You can retail dish drops, but you can't retail a tape. So this would not be an appropriate way to move these items.
3. The tools business violates fair trade practice. Each Direct basically has created a market that only they can sell too. We are only allowed to move tapes, books, etc to our own groups. Any cross group sales is forbidden. This allows the diamonds to set their own prices with no competition. In the Storms group an SOT from Internet costs the average distributor $6.00 in the Wilson group the same SOT from Internet costs $5.00. Since someone in the Storms group cannot buy from the Wilson group there is no incentive for the diamonds to keep the prices low. No competition. The same holds true for functions as well.
I believe part of the reason why the tools business is so hush hush is that it is illegal, and these guys know that if it ever comes under scrutiny they would either have to shut it down or redesign the whole thing which would take a big chunk out of their profits.
Disclaimer: You are encouraged to research and validate this data yourself.
EDC Family Reunion at a large Portland, OR convention/sports facility Assumptions: 3000 people attend and eat; 4 hours Friday evening; 7 hours Saturday; 5 hours on Sunday
| Facility | $44,500.00 |
| Meals | $161,850.00 |
| Labor/Equip | $12,044.00 |
| Band (est.) | $20,000.00 |
| Total (est.) | $238,394.00 |
| Revenue | $615,000.00 |
| Profit (est.) | $376,606.00 |
| Ticket Price | $205.00 |
| "At Cost" Price | $79.46 |
Local Regional Function at a local Bay Area auditorium type facility Assumptions: 450 people attend (normal numbers for 1996)
| Facility | $1,150.00 |
| Revenue | $8,100.00 |
| Profit | $6,850.00 |
| Ticket Price | $6.00 |
| "At Cost" Price | $0.93 |
Local Mini Function at a Bay Area high school auditorium Assumptions: 450 people attend; 4 hr Fri; 8 hr Sat
| Facility | $624.00 |
| Revenue | $8,100.00 |
| Profit | $7,476.00 |
| Ticket Price | $6.00 |
| "At Cost" Price | $0.46 |
Local Diamond Open/EDC SLM Function at a Bay Area Marriott Assumptions: 400 people attend on weeknight (not incl. guests)
| Facility | $1,500.00 |
| Revenue | $2,400.00 |
| Profit | $900.00 |
| Ticket Price | $6.00 |
| "At Cost" Price | $3.75 |
Books (WHAT DO YOU MEAN A PROFIT ON BOOKS !!)
Books can be purchased at wholesale by obtaining a resale tax number from the State Franchise Tax Board (DD's can do this easily). Fee for this is $50 per year.
Next step is to contact the publisher and purchase books at wholesale. Example: We called Ballantine (publisher of Napolean Hill). For quantities of 10 or more, they offered a 50% discount plus no shipping charge to us. Turn around time on this order was one week.
Book Price:-------- Book's Face Value + 4% freight
"At Cost" Price:--- 50% (in this example) off face value, no freight
Assumptions: Tapes are $3 each for DDs. We are taught to have 45 SOTs at Direct. Assume a Diamond with 6, 45 SOT legs. Each Direct, then has the following:
Cost / mo. ---- $810.00 (does not include "extra tape per week")
Revenue/mo.---- $1,620.00 (ditto)
Profit / mo.--- $810.00 (ditto)
This is supposed to be the money DDs use to fly out and support their long distance business. Does your direct spend $810/mo. on travel??
Consider an DD in the plan we show making ~$2000/month. Their monthly income would be $2810 and the tapes would represent 28.8% of it.
Opinion
When we show the plan, we are taught to talk up the system (thereby talk
down Amway's portion of the business). We show the product income but
we do not discuss the system income (a system of which we speak so
highly). Perhaps we should.
I do not have a problem with a motivational tape, book, and seminar business as long as it is purported as such from the beginning. We may not need to put it in our plan from the start with new people, but it should be made known and made known early in their business career (perhaps at sign-up).
Waiting until they are Silver/Gold DD and then introducing a new business which is the tape, book, and function business is treacherous and, my opinion, dishonest. This is the opinion of an Silver Producer who may not be making a lot of money by a Diamond's standards, but would be of the same opinion if we were 15 bonus checks wide. We stand on principle and it cannot be a variable depending on your "profitability".
As you know, tapes can be produced for about $0.50 to $0.60 a tape. Distributors pay $6.00 + 4% shipping. There are no written rules on tool breaks and it may vary slightly based on your upline. Typically Silvers don't get a discount, a DD will get a tape for $5.00, an Emerald for $4.50 or less depending on size of group and makeup of downline. Diamonds get more of a discount. They also make money from the books, about 10-15% margin for a DD.
Functions / seminars / opens are quite profitable also. Emerald's typically get $5.00 a head in their group at a function. Also, function rooms are paid for.
It's not rocket science to figure out. When we were dream building about booking a place for our own Family Reunion when we were large enough we found that it costs around $70,000 for the weekend, including security, sound, etc. The place holds around 10,000 all though we'd probably start going there with 5,000. If we charged $65 a ticket (on low side) our revenue would be $325,000, less the cost of facility leaves us $255,000 profit. If we filled the place we'd be looking at $580,000 profit. That would be split among Emeralds and above. A strong Emerald will bring around 500 people to a function.
There are four major functions a year and maybe one or two minor functions also. Add this to money made when you're on the speaking circuit for seminars and rallys and it begins to add up.
Emerald's should make around $150,000. This can be much larger if they've got a big group. I know an emerald who made over $500,000. My upline Diamond, was making over $200,000 as an Emerald.
Diamonds should make close to $500,000. Again, this can be much larger if you've got a big group.
Bill Britt said he doesn't have an EDC that makes less than 1,000,000 a year. Approximately 50-60% of this income would come from the system.
1. Concerning the 4% shipping charged by Amway to all persons (Distributors or customers) below the Direct level. This 4 % is calculated into all orders from the RDC's and on all tools. The catalog items are charged at 7% when a specific amount has not been noted. And an additional $ 1.95 for all catalog orders. But anyone in your downline whom are not Directs will be charged the 4% shipping even though Amway did not charge you the Direct. Just another way of bilking your downline. I works out to be around $600.00 per month on average. Not bad for doing nothing. It's the downline that come to you to pick up, not you shipping anything to them.
2. Concerning the money breakdown on tapes. In the Worldwide, INA, and ILDI organizations the cost of a tape to a distributor is $6.00 each. The Direct pays only $5.00 plus 4% shipping, the next break is at Emerald and they pay $3.75 plus shipping and the Diamonds pay based on the sized of their organizations but on average $2.75 and no shipping. You can see that a Diamond with just 6 Direct legs gets a total profit per tape of $2.45. The average Direct has at least 60 to 100 SOT's(Standing Order Tapes) going through their business each week. With one week being a single tape and the next being a double. That means that the average Diamond makes, based on Directs with only 60 SOT's a whopping $882.00 per month per leg. Multiply by 6 legs and you have $5,292.00 per month in just Direct leg tapes not to mention all the other non-directs in their business that they make $3.49 per tape on. It adds up fast. That's why you push SOT's in a leg otherwise you withhold any help from them till they "get serious".
3. Sales tax is "supposed" to be applied to all products including all tools that are exchanged for currency within any state that has a sales tax. There are very few exceptions. There are many people charging their downline tax and shipping without making the appropriate compensation to the state tax offices. There is virtually no way to track this unless you can get a copy of a persons physical invoice or a copy of their computer records. Most directs and above use a software program to track their businesses. These would show whether or not they charge the tax and/or shipping but would not show if they made a payment to the state. Only the state would be able to supply that information. And most of them don't have the manpower to track a few Amway distributors making their lousy miniscule payments.
4. Books are a form of profit but there is only 2 breaking points. One for Directs and the next isn't until you run your own organization. All Directs and above get a 20% discount on all books and the downlines all pay full price plus 4% shipping. Everyone pays the shipping except the Diamonds and above. So not a lot of emphasis is put on the sales of books throught the system accept as a form of tracking tool flow and for the additional 20% profit. Most organizations do push book sales within their system.
5. Speakers are paid varying amounts based on pin level and the function in question. An Emerald will do 4 Mini-Rally Weekend functions and 4 Opens per year. For a Mini,they will get a minimum of $2500.00 honorarium plus all expenses paid. To include food, lodging, and transportation. Additional monies are alloted for plaques, flowers and fruitbaskets. And for an Open it depends on if the Mini and the Open fall on the same weekend which is usually the case. In that case they are paid no more. But if it is a solo Open then there is expense cost paid and a small bonus not more than $1,000.00.
A Diamond and above on the other hand is paid much more. A Diamond will do 4 Regional Rallies, 4 Opens, and EDC's and above will do the same with and additonal 2 to 4 Second Look Meeting or Attitude Session. The Regionals are paid out of the door. For instance, at the Portland Oregon Regional in which a Diamond or EDC is speaking. The Convention Center or John Q. Hammon Center will be rented for the function. The cost of rental is $3500. to $1800. for the weekend. (Saturday & Sunday) There will be 3000 to 5000 people attend all 3 events that weekend at $18.00 per person. If you take and average of 4000 people paying $18.00 each then you get $72,000 for about 8 hours of instruction. Subtract the $3500. and the 10% that goes to the organization and you are left with $61,300.00 that is the honorarium for the speaker for the weekend. IT PAYS TO GO DIAMOND. There are a few more expenses in the function that are paid like plaques, sound system rental and minor things but the bulk is paid to the speaker and they are to pay for their own expenses out of what they make. Keep in mind that not all locations draw 4000 people. There are locations that only draw a few hundred, but if there is not enought to pay the speaker and his expenses then the system picks up the tab and pays for his time at $5,000.00 for a weekend.
As far as Major Functions are concerned. That really depends on whose function it is and which one it is and who is speaking. For instance, I know of one situation that was presented to me. It went something like this... after you go Diamond then you could receive an invitation to speak at one of Bill Britts FED's and at $10.00 per person that could be a profitable 45 minutes. Bill Britt has over 30,000 to 50,000 people at his FED's. You add that up. But I can tell you that the leadership councils of these organizations are paid a quarterly bonus of not less than $25,000.00 just for being a big pin and offering input into the growth of the system.
6. The average profit for a Direct is an illusive amount. I don't believe there is any way to track the precise amount. If you use the Me - You - 6 - 4 - 2 plan that Amway tauts then the average Direct only makes a net profit of $600.00 and a gross profit of $4500.00 . Big difference, huh? The problem is that Amway only requires a minimum of 25 distributors within a Directship, and at that rate that means that each distributor has to be doing 300 PV per month. That's what is taught in most organizations as a Fast Track Program. Since most of the Directships built this way buy the products themselves and usually fall apart not to requalify. And they are usually only 6 out of 12 month directs as apposed to the Q12 qualified Direct. There are countless Diamondships out there taking advantage of the new snot nosed distributor and making them a 3 month wonder by having them creativly finance their brand new Directship. They get to wear their fancy new gold pin and receive praise on stage from their peers and then they go home to huge bills that keep growing. While their Diamond or Emerald goes on trips and sends back Voicemail messages on how great your doing and all the fun you will have when you have figured out the secret. Well the secret is that you have to learn to creativly screw people to get ahead in Amway.
Note: I've had two people accuse me of being this ruby -- it's not me!
I Joined Amway (INA Organization) in 1990 & earned a Ruby Direct level (with 21 active legs) by 1994. I was forced to leave Amway Business at Ruby Direct Level because I am not a Christian & I objected to "Christian prayers" at the seminars.
My objection went to the Chief Operating officer of Amway ( Tom Eggelston -1994 ) and then I was finally told by my upline Diamond in the following words "You are building a huge business, but your objections and non-aligning views with our views(Christianity) will not get you any where. Don't rock the boat".
I confirmed that I did not believe that a Distributor's Income should not be based on their religious believes and I should have the same opportunity as any one else in the Amway's higher levels. I was told that unless "I subscribed to same philosophy (Christianity) I will not be allowed to make "tapes" at the higher levels." Since tapes is the majority of the income at the higher levels (80+%), my continuos objections to Christian prayers at the Company meetings and my upline's attempts to "CONVERT" and "SAVE" me to Christianity left me no choice but to file a complaint with AMWAY & then Federal Trade Commission. At this time I was told by my upline Diamond "Mr. Stanley" that I was "an enemy ". In May 1995 I decided to leave my thriving Amway business because I did not believe in a company that discriminated against people based on their religion and race. I later withdrew my complaint from FTC because of negative energy I had to pour into the lawsuit .
Based on my knowledge and updating the software that handles the products and tapes for Direct Distributors, I truly believe the following incomes are fairly accurate for my self and my fellow Direct Distributors : Each level is subtracting the monthly expenses anywhere from minimum $200/month to $600/month)
Monthly Incomes: -------- AMWAY INCOME----- --OTHER INCOME---
LEVEL # of People in DL Low End Avg. Income from
buying Monthly Tapes income income Selling tapes etc.
-------------------- --------- -------- ----------
1000 PV 5 $-150 $-100 $0
2500 PV 15 $0 $ 100 $0
4000 PV 25 $250 $ 500 $0
7500 PV 40 $450 $ 800 $0
7500 PV(Direct) 50 $450 $ 800 $500+free shipping
15000 PV(Ruby) 70 $1050 $1200 $2000+free shipping
Emerald 190+ $1000 $2000 $4000 per month
Diamond 500+ $2000 $5000 $10000-50000 per month
Here are my thoughts :
It was a good experience because it exposed me to a see in real life how people think and behave. I have also learned people skills that only you can learn in a multi-level business.
Conclusion:
If you want to create a residual, and have a viable business, multi level
is a great way to do achieve your goals but Amway is the least paying
plan of any multi level I have looked at. Most of the money in Amway plan is
at the Diamond level and that is 80% of the total income is coming from
sales of tapes etc and not from the actual movement of
Amway goods & services.
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