I think Send Out Cards is a scam and that Send Out Cards sucks. The facts seem to agree with my opinion, but you can decide for yourself. Here’s what you need to know about Send Out Cards, and the MLM world in general.
For a few years I was an independent distributor with a Network Marketing Company (also called a Multi-Level Marketing Company, or MLM for short) called Send Out Cards (SOC for short). Like most people I met who got involved with that MLM businesses I really didn’t understand as much about what I was getting suckered into as I thought I did. As I tried to work the business, and learned more about how it really functions, I came to an important realization: MLM businesses suck, and Send Out Cards is very useful as an example of why.
Note that this article was originally published on one of my other blogs, one I am closing down, but the information is valuable so this is being preserved. I moved it here and updated the graphics. Click the button to read more.
I went to training sessions. I spoke with my upline. I met a lot of well-intentioned people offering advice. I listened to the motivational speeches of the top earners. In the end, though, the reality of it began to sink in: the business model sucked, the company sucked, the higher-ups sucked, and the entire function of the business is, for all practical purposes, to suck the money out of bright-eyed, hopeful masses of people and channel it into the pockets of the top dogs. I tried to help myself and others by teaching practical sales skills and the like, and I spoke out against some of the worst practices on the company web forums. They banned me from the forums for that, and eventually kicked me out of the company, did not refund my fees, and kept money I had on account without returning it.
This is no shock to those of you who hate MLM companies already, and think of them as pyramid scams. When you read this article all you will find is validation (with math to back it up) of your existing opinion. If you feel like sending an “attaboy” that’s great, but you’re not my real target audience. I am really writing this for the poor masses of people still being suckered by MLM businesses. I’m going to show how MLMs suck the money out of you, show how to see it clearly in any MLM company, and hope that will save a few people from losing their shirts to this awful, evil industry.
The crux of seeing just how bad an MLM is resides in a document they are required by law to make available. It’s called an income disclosure statement. As I write I have another window open looking at the most recent one available for SendOutCards. It’s their 2012 calendar year document, and can be found at this link as of march 24, 2013.
It’s a PDF. Here’s what it looks like:
Income disclosure statements are required to present the actual income figures for the MLM business in question. That does not mean they cannot be assembled and worded in ways that make the company look good when it’s not, or at least look good to the untrained eye. Sadly, most consumers are not mathematicians, and do not really understand the significance of what they see in that document. That’s why I am going to pick it apart for you.
For starters, keep in mind that it opens with a disclaimer. All that language in black above the red bar basically says: Swim in these shark-infested waters at your own risk, sucker. And they’re not kidding. If you don’t make money at this (and you won’t, rest assured of that) they will blame you for it even though the real fault is with the business model itself. People will tell distributors to work harder, do more, put in more time – anything and everything except to see that the system is not designed for them to succeed. I’ll get back to that point later.
The first thing you will notice about this is that it has a lot of numbers, breaks distributors down into classes like “active” and “inactive” and uses mathematical terms most folks haven’t really evaluated since middle school like “average” and “median”. In fact, the one term (average) that most people will relate to isn’t what most people think. Let’s start by taking a look at what an average actually is.
An average, in this case, is the number you get when you total a set of values and divide that total by the number of entries. It sounds more complicated than you remember, right? And that’s for a good reason: because it is. Averages can be misleading when they contain extremely low values, extremely high values, or both. Let’s simply this with an example.
Think back to your school days. If you have a sheet cake shared by 4 people, and they averaged 25% of the cake each, how much does each person get? This is what most people will assume the portions look like:
The problem with that assumption is that it is far, far from the only way to arrive at that average. Here’s another way, showing what happens when one person gets greedy and wants all the cake:
It’s even worse when applied to larger numbers of people. Imagine we’re talking about people earning money. If you have 100 people, who earned an average of $100, it could mean each person earned that $100. It could also mean that 99 of them earned nothing, and one earned $10,000. The average turns out exactly the same. This, in fact, is close to how things work at SendOutCards, and every other MLM I have investigated.
Now, let’s go back to the income disclosure sheet to prove it. Take a look at the text below the chart. The second line says this:
Sixty Two percent (62%) of U.S. Distributors did not earn any commissions in 2012.
Think about that. That means of everybody in the United States who ever signed up, more than half of them earned nothing last year. Zero. Zip. Goose Egg. All those figures in the chart talking about people who made money? That’s just the remaining 38% Think about that earlier example with the four boxes. Imagine that instead of 4 boxes you have 100 of them. That one statement from the Income Disclosure Sheet means the first 62 of those boxes are filled with zeroes just like this:
That’s what “62% of the distributors made nothing” looks like.
But wait, it gets worse
That’s not the entire story of how bad the situation is, however. To understand the real horror of it you have to keep something else in mind: Distributors are paying, out of their own pocket, just to participate. It’s what we call a “pay to play” model. When I was still a distributor the act of enrolling as a distributor cost about $470, and distributors were “strongly encouraged” to go on the auto-order system for $31 per month, or $372 per year. That would allow them to receive commissions and cover the cost of sending 50 cards per month (which, of, course, distributors were also “strongly encouraged” to do. That did not include postage, however, which would cost another $276 per year at today’s prices.
In other words, the most basic of distributors would typically pay, in the first year:
- About $470 to sign up
- Another $372 to buy cards
- Another $276 in stamps
- Total of about $1,118 in the first year
Keep in mind as you look at that total that, according to the Income Disclosure Sheet 62% of people paying that will never earn a cent. It’s a straight loss of over a grand to just shy of 2/3 of all distributors. And guess what? It gets even worse.
SendOutCards also allows people to send gifts with cards, and “encourages” distributors to do so frequently in order to “demonstrate the product”. The most-suggested item when I was with the company was a box of brownies. They cost almost $10 per box, and increased the postage cost as well. That $1,118 isn’t even close to what someone will lose in year one if they follow SOC’s suggested plan for using the product yourself to promote it to others. Add to it the cost of training materials, pamphlets and the like and that overall loss would typically double to over $2,000 in the first year. Add to that the cost of phone calls, driving to meet people, gasoline, etc. and it runs up even more.
My understanding is that now SOC has added fees necessary to advance in rank as well. When they rolled out new product features, like their Picture Plus 2.0 item, Distributors had to buy it for themselves if they wanted to use it (and understand it enough to sell it). It really is kind of a nightmare. And there’s more.
Wait, that’s not all?
No, of course not. Take another look at the income disclosure sheet. The first two ranks of distributors make up 93%-94% of the entire distributor base (both of the first two columns total in that range, so we can look at them as one group.) The entry level group (Distributors, top row) averages only about $18 a year. They are still in effectively the same boat as the people who made nothing, losing a grand total of about $1,100 the year they sign up. The second group (Senior Distributors, 2nd row) does a little bit better – but it’s still a massive suck-fest. Senior distributors only average about $36 per year. They’re still out almost as much as the entry level folks.
Adding the third tier (Manager, 3rd row) the average is still not enough to recover half the first year basic expenses.
What’s that bit about a “median?” Is that the same as an average?
Good question. No, it’s not. A median is the value that half the sample is higher than, and half is lower than. In other words, going back to that first row, the median of $7.44 means that half the people in that row made LESS THAN $7.44 in a year. That means it’s not a matter of half the people making less than the average and half making more. It means so many people are making so little that half of them don’t even make 41% of the average.
Here’s another set of four items:
In this case the top guy gets 3 times as much cake as the next-highest earner, and 75 times as much as the two guys stuck at the bottom of the ladder. Those four values still have an average of 25, but a median of just 12.
If you notice, that trend continues through all the ranks – the median is always a lot lower than the average (with one exception). That means there are a small number of people who make way, way more than the average, dragging that number way higher than the median.
In fact, if you take a look at the top 4 categories (and let me tell you, it is not easy to reach that 4th one, you have to recruit a TON of people to get there) they account for 98.2% of all the distributors around. I know a guy who reached that rank and had a downline of over 550 people and still could not break the barrier to the next level. Even at that rank the median is almost identical to the first year minimum expenses. That means of the bottom 98.2%, half of the top-rank in that group STILL barely make enough to break even with the first year’s expenses – and it takes them mainly longer to reach that rank than a year, so the expenses all pile up even further.
In the end, this horror show is what it actually looks like. These numbers are what SOC distributors make per year, in thousands of dollars (remember, they are SPENDING over a grand a year just to follow SOC’s “recommended method”:
So, after expenses: You have about 96% of them who, including expenses, make nothing or take a loss. You have about 2% who make about $1,000 a year. After that comes a tiny sliver that makes about $21,000 per year. About 2% above that make about $87,000 per year. All the way at the top are the Eagles, which are LESS THAN 1/100th of 1% of all distributors, making about $538,000 per year.
The really, really evil bit about this
All that money the bottom level people are throwing down the SOC hole isn’t just disappearing. It’s creating commissions checks for everyone above them in the chain – the person who recruited them, the person who recruited that guy, and on and on up the chain. That means all that money being lost by one rank’s expenses is actually considered the profit of the higher ranks.
Those people in the 5th tier who appear to finally make some real money at this? All that money being lost by the 4 ranks beneath them is filtering up into their hands. That’s how it works, and not just at SOC. That’s the entire premise of the MLM business model.
See, the rich folks at the very top don’t have to sell anything at all. Their whole job is to keep other people in the system so their network remains large. If you’re an Eagle (top rank, last row) with over 40,000 people in your downline (the suffering members of the lower ranks) you make most of your money this way:
The Eagle gets a percentage of every dollar that low ranking person beneath him brings in, sometimes as much as 25%-30%. Let’s assume that guy (and there is one just like that named Jordan Adler) get’s just $1 a month from money flowing upwards through his network of over 40,000 people. That would be making $480,000 per year just for sitting back and giving some motivational speeches to keep the attrition rate down.
Here’s where things get disgusting
The sick part is that MLM companies like SOC teach that as a GOOD THING. They call it things like “your passive income stream” because it’s money that rolls in even if you are kicking back on a beach – the very point, in fact, of Jordan Adler’s book Beach Money (which, of course, you can pay to read, but since I already did I will share with you that in my opinion it’s nothing but fluff). What’s not mentioned is that all that beach money comes in large part from the suffering and financial loss of people sucked into this rotten, vile system with stars in their eyes.
Think about it. Adler had, when I was with the company, over 40,000 people down his chain. If 62% of them made nothing, that is 24,800 people who each paid over a thousand dollars with no effect other than funneling money upward towards Adler. At $1,118 each that’s $27,726,400 spent by people who never recovered even a single cent of it.
And it’s not like people at that level don’t know how damaging this is. They have entire prepared speeches telling you that this is not a scam, not a pyramid, that anyone can succeed if they work the system, etc. They know the problem is there and are very well versed in how to deflect any concerns people voice.
And, of course, they proved in my case that when someone cannot be hoodwinked with distractions, distortion, and incorrect information, well, they can just kick him out to silence him.
A note about THE BIG LIE of Network Marketing
Remember that Jordan Adler made his riches by recruiting. He did not make it by selling cards. His entire success story is the result of him recruiting a bunch of people, and teaching them to be recruiters as well. The big lie of network marketing is when anyone in it tells you that it’s not about recruitment. It is absolutely about recruitment. Anyone telling you differently is wrong, and is either misinformed or flat-out lying to you. The ONLY way to make big money in network marketing is to follow these steps:
- Recruit as many people as possible no matter how harmful that may be
- Teach your recruits to do exactly the same thing, passing down that lesson level after level
The high earners will tell you that you do not have to be a salesman to succeed. They are wrong. You have to be able to thrive as one of the most hated kinds of salesmen in the world, selling membership rather than product, and have a shark-like ability to close in for the sales kill without remorse or concern – all while convincing everyone that you have their best interests at heart even while you can watch them go bankrupt.
The numbers get even worse, though
As if that were not bad enough, keep in mind that the first “successful” tier (Executive, 5th row) has an average income of just $22,076.27 per year, gross. If you can find a $10/hour job you can make more than that, without having to buy your way in and stack up endless expenses. Even at that rank (and there are darn few people who ever make it that far) the median is still just $10,597.25 That means half the people at that rank are making about 1/2 to 2/3 of what a full-time, minimum-wage job would earn them.
If you look at the left-hand column you can see that the portion of all distributors who reach the top two ranks, where a real, family-sustaining living can be had, account for less than .03 percent. That’s fewer than 3 out of every 10,000 people who get involved in SOC who actually make it into something really profitable – but that profit comes at the cost of the massive financial loss and suffering of others.
A side-effect worse than bad medication
The final kick in the head about this is that for most people, joining SOC (or any other MLM) carries an additional side effect: You lose friends. Lots of friends. Even all of your friends. Why? Because you’ll start seeing them as prospects, not friends, and everyone hates that. You’ll be “encouraged” to contact your friends and family, and try to recruit them, sell to them, and get them to host “parties” where you try to recruit their friends and sell to their friends.
It makes you a social outcast. You know that one person in your circle who sells Amway, and they never shut the hell up about it? That will become you if you join an MLM. People don’t start out consumed by their MLM. It’s a learned behavior, and one taught by cult-like indoctrination. You’ll get tons of new “friends” from the MLM, though – other victims sucked in by the system, all sharing the same struggle, swapping bad ideas, making “dream boards” and trying to “work the system.”
They’re not really your friends, though. They are your competition, because they are also commissioned sales reps for the same product you sell. You all have a direct, financial conflict of interest with each other. You end up trading your real relationships for these cult-like, zombie-brained connections with people you are trying to beat to the sale.
Take my word for it – you can do permanent harm to your friendships and family relationships, and not all of it can ever be repaired. I’ve been there and I know from personal experience just how high that cost can be.
The Last Word
I have researched a lot of MLMs. Every single one works the way I described in this article. MLM companies are not your big break. They are not your opportunity to make it rich. They are more like buying a lottery ticket that costs thousands of dollars, has a crappy payout even if you win, and that makes all your friends and family hate you. If you’re making a lot of money in an MLM you are hurting people to make it. The moral and ethical thing for you to do is leave. If you are losing money in an MLM you are making someone else rich while you suffer. The smart thing is for you to cut your losses.
If you get involved and lose money, which you will in about 99% of cases, your self-esteem will be undermined. You’ll be told it’s your fault. A system designed to rob you blind will never be blamed. You’ll work hard and accomplish nothing and be told you are the reason for your failure. It’s horrible to experience.
If you want to see what being in an MLM is really like, watch the movie Believe. It’s a spoof of the MLM world that is painful to watch because it is so accurate. The format is “mockumentary” but it is so spot-on that when my family watched it after I left the MLM world it took only the first 12 minutes to have us in tears of sadness at just how bad the real-life experience had been because the movie just nailed it. It’s available on Netflix, on DVD or streaming, as of this writing.
Do yourself a favor – stay as far away from MLMs as you can. MLM businesses suck. Remember that the system is not designed to help everyone in it succeed. If you do not make money in the MLM world it does not make you a failure. It does not mean you did not work hard enough. It does not mean you didn’t sell enough product, host enough parties, talk to enough people, or make enough phone calls. It means everything proceeded according to plan and you were a victim of a system designed to make other people rich.
Give yourself credit for the effort you put in. Give yourself respect for having given a solid effort. It is not your fault that the system is rigged against you. Reach out to your friends and family. Let them know you realize that the MLM world was a bad idea. Tell them you miss them and invite them back into your life. Your real friends and family will help you rebuild those relationships.
Expect that when you leave your former MLM colleagues will treat you poorly. They will try to bring you back into the fold, as all cults do. When that fails they will ostracize you. Resist the urge to give in to their calls to return to the MLM world. Like any cult members they are still drinking the Kool-Aid and want you back because it validates their choice to be in an MLM.
Protect yourself and your finances from this horrible trap. It’s OK to cut your losses and find a better path. I promise you that success in the MLM world is not “just around the corner”. You are a wonderful person, a one-in-a-million person, but the system does not reward that. It rewards cold-hearted, callous people more concerned about profit than they are about the harm they cause others; people who can smile to your face while planting a financial knife in your back. If you’re a good person you won’t act that way, so the system won’t work for you.
Be glad it doesn’t work, in fact. If it did, well, that would say very bad things about your character.
I hope the explanations in this article have been helpful and informative. I hope it will reach a great many people in the MLM world who are losing money hand over fist. I hope it will help some make the decision to save themselves from that despicable industry; even one person saved would be a wonderful achievement.
If you have a story about your escape from the MLM world it would be great to hear it. Please feel free to share it with us in the comments, or reach out to me by e-mail or my contact form.