How to Lose Money and Time

Thankfully, tax season is over and I am back, and I'm going to talk today about something I've been wanting to talk about for a while, and I think is a very important subject. Because the statistics show that 70% of the people in this country are looking for a way to make extra money, and most of them are losing money instead. And that's a shame. 

 There's basically two ways that you can make extra money. You can just work and earn money and then go back and work and earn money. And the other is to create residual income that continues to pay you money long after you've quit the work.  But there are some pitfalls you need to know before you start your journey.

Transcript

Episode 8 - How to Lose Money and Time 
Welcome back to Mastery Business Basics. For those of you who wondered where I've been for the last three months, I am a master tax advisor for the last 24 years I've been doing that, and I had about 420 people to help with their taxes this year, which took most of my time. But thankfully, tax season is over and I am back, and I'm gonna talk today about something I've been wanting to talk about for a while, and I think is a very important subject. Because the statistics show that 70% of the people in this country are looking for a way to make extra money, and most of them are losing money instead. And that's a shame. Let's get started.  

You are listening to the Mastering Business Basics Podcast, where we discuss how to build a solid foundation under your small business to improve your chances of success. And now here is your host, Roger Pearson. 

There's basically two ways that you can make extra money. You can just work and earn money and then go back and work and earn money. And the other is to create residual income that continues to pay you money long after you've quit the work. Okay. And of course that is the ideal thing if you can do that. I mean, when people, uh, create retirement incomes, that's what they want to do. 

They want to create a retirement income that is gonna continue to pay them after they quit work. And there's no reason you can't do that while you're still working. Now the most common examples I suppose, of just extra work nowadays is you see a lot of people doing Uber or delivery service type jobs, and I've gotten a lot of those at the tax desk and it's very, very hard to make any substantial income there because your expenses are so high, by the time you pay for gas and everything else. 

And it takes so much of your time for so little reward, and most people don't do it for more than a few months because it looks good on paper. But in actuality, when you start doing it and you start paying out the, the gas and the maintenance and everything else on your car, you're really not making a whole lot on top of that. 

Of the profits you do make, you're paying 25% in payroll and income taxes, plus some state taxes. 

Of course, another way is if you're a crafty person, you could create things and sell 'em up on Etsy. Now, there's a lot of people that make good money on Etsy, but again, it's continuous, continuous, continuous work, and you stop the work, you stop making the pillows and uh, you stop selling and the income stops. 

Of course, the other way to make income. Is residual income. And that's what everybody would love to do. And there's different ways to do that. I think one of the most common things that people probably would recognize is the insurance salesman. He sells a policy and every time you renew that policy, he gets a commission and it takes a lot of people and a lot of renewables to get steady income. 

But I've had a lot of clients that have over the years created that type of income. And as long as those people keep paying their premiums every year, they keep getting a residual income. And that'd be ideal, but it's hard to get a huge residual income that way. 

Another way is probably, and it came about in the seventies and eighties, and I got hooked into it just as much as anybody else is multi-level marketing. I mean, that's what they promised is that you build an organization and you just keep getting residual income from that organization long after you've put in the initial work. 

And while the concept is sound as far as that, the structure of multi-level marketing was not, I mean, it was not designed to make the person doing all the work, a lot of money. It was designed to make the person that created the multi-level marketing organization a lot of money. And for a lot of it did. Very few are around today because it's not a sound business model. 

But I got hooked in it to it just as much as anybody because it sounded good, but when I was 20 years old, uh, I did not have a good business education. I didn't understand really how business works. So yeah, I listened to these people. It sounded good. The conventions were just rah, rah, rah. 

And unfortunately I spent, uh, off and on 30 years of my life fooling with these things before somebody came along and finally pounded into my head, this is what they're doing to you and this is why they don't work. And this is why most of 'em fail within five years. 

And it, that was the education. I mean, look at these things. Over probably 40 years, I mean, I've tried Amway, you know, that's probably one of the big daddies that's still around today. And, it's a global MLM company from 1959 to the present. It's still going all over the world. 

I tried Juvio , it was a computer, uh, tech support and training type of of business. I tried Shaklee, which is another Biggie in the nutritional business. New Vision International sold dietary supplements. They're no longer around. Quixtar was a online multilevel platform that sold Amway products because when people start buying online, Amway just spun this off and decided, we'll try that. 

They tried that for 10 years and it didn't work very well. So they folded it back into the Amway brand. Then there was Life Force International. They sold health and nutritional products through direct sales and you won't see them anymore. Paradox Ventures was an investment venture capital and real estate venture, and I can't even remember what I was selling during that time. I can't find them around anymore anyway. 

There was Tunza products, which was an online marketplace and payment platform. Um, there was SFI Marketing Group, which is an affiliate marketing and direct sales platform, and they had a pretty good cross section of product catalogs. 

Internet Marketing center was online marketing training and information products. Then there was Health First Technologies which is health related technology and product services and New Net Mail. This came along when the internet started really taking off, and then of course, MLM moved to the internet, you know, and all these companies came up. New Net Mail was an email messaging software and a small hosting service, and they're not around anymore. 

Then there was Zuma. Oh, Zuma was health and wellness products, supplements, beverages. They had super water, you know, and, uh, tropical items like that. And it's still operating actually as Zuma worldwide via direct sales around the world. Not really in this country anymore, but there's a lot of other countries don't have strict laws in consumer protections as we do. 

And then there was TransArt Industries, which went from 78 to the eighties. They sold art prints, artistic furniture, pottery, things like that. I still have a few of their pieces sitting around here. 

It was very nice stuff. It's just, buy 'em once and then you gotta go find new customers all the time because you can only buy so many vases or so many paintings or so many prints to put in your house unless you keep building a bigger house. 

And so I tried all those and there's some I probably can't even remember. I did, this is just the ones I can remember. I did. And it wasn't until about 2002, I finally learned why these don't work. And I finally learned why none of these businesses, uh, ever published what their business builders ever made. 'cause they're all based on one thing, bringing in new business builders. 

I mean, yes, they had products, they had to have products to have some kind of legality to them. Otherwise they'd just be a pyramid scheme, so to speak. So they had to have products they sell, but the way it's structured was not to create residual income, it wasn't, it was to make the people that owned the companies a lot of money and they did. And when they didn't work anymore they walked away from them. And that's a shame. 

So, I want to talk about some of this today because these things are still around today. They're just in different formats and, and, um, and the internet hides a lot of what's going on. But one thing I want to tell you, if they can't publish what their business builders are making, you wanna walk the other way 'cause they're hiding something, then they usually are. 

So, let me just show you some of this stuff. In a typical multilevel marketing organization, they require or encourage business builders to invest in substantial amounts of inventory each month to qualify for bonuses. And I found that out because when I started out in, I was, what, 20, that's 1970. 

And you had to inventory everything. We didn't have the internet back then, so you had to inventory, keep inventory and, then go at your customers and deliver your products to your customers and so forth. And, you know, it's like a regular business almost. 

But the thing about it is that, say you wanted to make 4% commission instead of 2% commission. Well, you had to move so much product through your organization and if you couldn't sell enough to get up to the next level so you could get more percentage of your bonus, um. You basically had to buy the product yourself and put it in your garage , and that's the way multi-level marketing worked. 

They encourage you to stockpile a lot of stuff. There were some of 'em out there. I mean, you had to buy an entire garage full of stuff to get started, and if you couldn't move it, you were out the money. And that happened to hundreds and hundreds, hundreds of people also. Okay. And that's a shame. So anything that requires you to buy stuff yourself, uh, to advance in the business, you probably wanna walk away from, you know. But there are some good businesses out there. 

A good business is not gonna require you to make investments in it unless you're in the franchising business. That's another subject for another day, and this is where customers purchase only what they will use up on a monthly basis, and the customers purchase directly from the factory, so there's no need to purchase inventory, and therefore there's no risk of financial loss. 

You want a business where you can't lose money and MLM, you're gonna lose money. Because the way they're structured, multilevel market marketing often sells products that nobody really uses. This is the other thing. 

Uh, like cases of magical fruit juice, magnuts , green algae, things like that. I remember there was a, another company I was selling honey products. I can't remember the name of it now. But you can only use so much of that too. But there's a lot of, just crazy products, but they sounded so good when the propaganda was put out about 'em. 

What you want to do is find a company that markets products that are already being used in households on a daily basis, but they have to be higher quality, more effective, and safer to use than the grocery stores or the drug store brands. You're gonna sell the type of products that people are already buying in the grocery stores and Walmart and Target and so forth. 

But the products you have need to be higher quality than they could get at the corner store. And buy, or why are they gonna waste their time with yours? So that means they actually have to also be cost effective. The thing about the MLM products is they're overpriced. They have to be overpriced to pay the commissions and things that they were promising to people. Well, they're not overpriced, they're hard to sell, so it's harder to keep the clients. You constantly have to be new clients, new customers, because people realize, you know, it's not a good deal, so they go away and you have to replace them. 

That was the hard part . Multi-level marketings often back up phenomenal product claims with folklore and testimonials rather than science and laboratory studies. And isn't that the truth? But they have some really good marketing material on some of this stuff .What you wanna do is find a company that their product claims are backed up by legitimate science and research. 

And it has scientific studies done against their competitors. They can actually show you the scientific studies, clinical studies, how their products are better than what you're currently buying. This is what you want to look for, and that's hard to find. 

Multilevel marketings often require their distributors to resell products to their customers. Well. Wouldn't it be better to find a company that doesn't require any of its products to be resolved to anyone else? In fact, uh, you probably wanna find one that has a policy prohibits reselling. You just introduce people to the products and they buy directly from the company, and the company pays your commission for it. 

You know, that's residual sales. That's residual income. It's the easy way to do it, so you don't have to keep inventory in your garage and you don't have to make deliveries and you don't have to be a store yourself. 

Multi-level marketings usually charge several times what the product's actually worth, such as $40 for a product you would normally play less than $5 for at the store. And that's not gonna work either. People aren't dumb. I mean, they may say, okay, this sounds fantastic, and try it for a time or two. But after that, they're also gonna say, well, that's dumb that I'm paying that much for, and go back to buying at the store what they were buying, even if it wasn't as good a quality. 

So your products need to be competitively priced with grocery store brands, on a per use basis, even though they're usually substantially higher quality than those other brands. So you have things they have to beat. They have to be, uh a good price against what you're currently buying, and they have to be better quality than what you're current buying or people are not gonna listen to you and they're not gonna stay with you, and they're not gonna create true residual income. 

Now, multilevel marketing distributors usually tout big checks to entice others to get involved. And I saw that a lot and rarely will a multi-level marketing company reveal what its distributor exactly make. And most multi-level marketing companies will also never reveal their actual sales. They won't give you statistics. They won't tell you what they're actually doing and what the stats are because anybody with any business brains would look at it and say, this is not a good deal. I don't wanna be involved with this. 

So it's all hype. But a good company will publish how much all of their marketing members make. And complete with highs, the lows and the averages of each status so that you can take a look at it and prove to yourself, well, this thing actually works. These people actually make money and this is what they have to do to get, so if I do this particular set of functions and meet this, I'm gonna be making this much money. 

Well, that gives you something to work for. You choose what you wanna make, what kind of residual income you wanna make. You get a blueprint, you get exactly that. And the proof is all lying here. The the numbers are all there. You know, nothing's being hidden. That's the type of integrity a company should have. 

Unfortunately, multilevel marketing companies don't have that . A lot of, uh, well, actually, most multi-level marketing companies always tout a ground floor opportunity to potential business builders and implying major advantages if you hurry and get in on the ground floor, and I that probably got sucked into that a few times also, but a good company rather than deteriorating over time, a viable business opportunity actually gets better every single year. 

As products improve through more scientific discoveries every year it gets easier and easier to outdistance the competition. And as sales aids improve and the company's reputation grows, it gets easier to build a substantial business factor faster than those who joined the year before instead of the other way around. 

Multilevel marketing often operate a volume line that a distributor can use to call the company before midnight on the last day of the month to determine how close the distributor's reaching a particular volume, qualification, and the distributor that can then purchase the difference to qualify for civic bonuses or discounts, which incentivizes the distributor make an even greater investment in inventory. 

I've been there and done that stupid me, but a good company has no volume lines. Customers buy only what they need each month. There's absolutely no incentive and no requirement to make large purchases at the end of the month to qualify for some volume level. Remember that a good company, a good direct sales company that you can represent, doesn't require you to make investments. They require your time. They require your work, but they don't require your money. 

Now the thing about MLMs also, I mean, the attrition rate of customers and distributors is extremely high in most multilevel companies. And so when you're looking at a good company, what you want to do is look at their retention rate also. In some companies, I mean, 96% of customers who were ordered one month will order again the next month because the quality and the price of the products are just so good. These companies are far and few between, but they are out there . 

Now many multi-level marketing suggest that distributors quit their full-time jobs and work full-time in their multi-level business. And they also suggest that people fake it till they make it by appearing to be wealthy, by driving fancy cars, purchasing expensive homes, buying motor homes, boats, and motorcycles and by wearing fur coats, diamonds rings, expensive jewelry. 

\Well, this activity has really driven thousands of multilevel distributors into bankruptcy and destroyed lives and even broken homes, all while giving a distorted impression of the company's actual success. You need to be honest when you're working with other people. 

You know, if there's a particular product I don't like. In a business that I'm doing, I'll tell people that, even though they may like it. There's a lot of people that do like it. I, I just wasn't crazy about it. I'll, if people ask me directly, I'll tell 'em that. Um, honesty is always the best policy when doing business with anybody. 

So a good company's gonna advocate that marketers keep their full-time job, become the best employee they can be for their current employer. And use their additional income to add to their full-time income. And then only when you're making several times your current salary should you ever consider leaving. 

A good company should advocate that people stay out of debt, pay off their homes, cars, and live within their means. Okay. And that's like such a good feeling when you do that. I mean, I paid off my house last year and what a good feeling. So I don't have any car payments, I don't have house payments anymore. 

And it's a remarkable feeling. It took me a lot of work to get there and I had to work a lot of extra part-time jobs to pay extra on things. But I did it and I got there and it really feels wonderful. 

Most MLMs do not have product return policies unless the distributor cancels their distributorship. Only then will a typical multi-level marketing company honor the direct selling association's code of ethics, which requires such companies to purchase back 90% of a distributor's resellable products. Didn't know they had that out there. Did you ? 

Well, a good company gives an absolute no questions asked a hundred percent. Set customer satisfaction guarantee. They'll give you your money back even if you have used up all of the product and decided you didn't like it after you used it. Grocery stores or drug stores don't offer such a guarantee, and most MLM companies don't offer such a guarantee either. so I've spent a great part of my life learning all of these things the hard way. 

Now there's, there's only one company I have found that actually has not one negative to it. Absolutely not one negative to it. And I love talking to people about it. I'm not gonna tell you what it is now . Um, if you want to know, you can get a hold of me and ask me. I will let you know. But the remarkable thing about this company is and any company you should look at, is the more money the company makes, the more they give back to the people building the company. They don't pad their own pockets with it, and that's even rarer to find. 

So. I know I'm probably rambling here, but I just wanted to gothrough some of the, adventures I've had with multilevel marketing or network marketing, whatever wanna call it, starting back in 1970, up till about 2002 I think it was. 

And, um. I've wasted so much time, so much effort, and so much money in trying to create this kind of residual income until I finally found a company that does it the right way. And I was very skeptical at first because, I mean, I got burnt , so many times 'cause I didn't understand why I was being burnt, you know? 

I didn't understand. And it took me a long time to learn because I listened to the propaganda and I wanted it so bad, and I didn't realize I was being set up for failure from the very beginning so people could make some money and they didn't care about, really care about the rest of us as long as they made the money. 

And unfortunately, a lot of businesses are that way in this country. And to find a good ones takes a lot of research. But you have to know what's bad before you can find the good. And I'm sorry it took me so many decades to learn that. Anyway, that's what I have to talk about today. We're gonna be talking about some things in the future. 

Also, we're gonna talk about franchising. If you really want to go out of the leg and like to invest a lot of money or borrow a lot of money to invest, either a case may be. Uh, we're gonna have some guests coming up, which I think you're gonna find very, very interesting. Anyway, I did and I will try to keep to a weekly schedule from now on. 

If too many other things don't come in my way, but the tax season's over, so I should be free for at least the rest of this year to do some interesting things. So I thank you for coming along. And if you have any questions, of course, you go out to my website, seagull technologies.com. It has links to everything there. 

It has contact forms. If you just want to shoot me an email and ask me any questions, I would be glad to get back to you. So until next time, goodbye .  

You have been listening to the Mastering Business Basics Podcast with your host, Roger Pearson. For more information about all of the business education options that are available, we invite you to visit seagulltechnologies.com and continue your journey.