Author Topic: Very unusual high risk/hard reward investment  (Read 13037 times)

vtatyanin

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Very unusual high risk/hard reward investment
« on: September 17, 2018, 04:08:10 PM »
Hi All,

a friend of mine has brought me an interesting high risk / high return investment opportunity and I’d love to hear your feedback on it. It sounds too good to be true, but I haven’t figured what’s the catch. I’ve put $18K on it and going to invest more, but would love your critical opinion: is there any obvious reason why it wouldn’t work out?

Here is the idea in short: it’s applying internet marketing techniques on top of large, established MLM company (doTerra) to build the network of people. All done for me by professional internet marketing guy. All I need to do is to create a doTerra account and pass my id to this guy.

In details:
1) There is a large and established MLM company called doTerra. They sell essential oils and cosmetics. In spite of the concerning name of their business model (MLM = Multi Level Marketing, aka network marketing) the company itself is phenomenal: they are making $1B+ (yes, BILLION+) of annual revenue. They employ 1300 employees and 3M of independent associates (“wellness advocates”, people in the network, buying their stuff and selling it further down the line). This is your prototypical MLM operating at stunning scale.
2) There is an independent dude, who is a seasoned internet marketing professional. His wife is a doTerra wellness advocate. This guy learned to apply internet marketing to build a doTerra org structure: enroll massive amount of wellness advocates and doTerra customers into his wife’s org. This whole team structure starts generating hyper profit through doTerra commissions.
3) He is now scaling the approach by fundraising a massive marketing campaign of building a doTerra team(s). He sells “marketing packages”, which includes a commitment to get me to the certain level in doTerra. For my money he will enroll strangers (doTerra wellness advocates) under my org in doTerra and get me certain team size, generating hyper-profit.

All done for me for my money, no networking and/or marketing is required on my side. Here are projected earnings and initial investments:
Silver Level: costs $5K, projected earnings: $2200 a month (after the ramp up period, which is <12 months)
Platinum level: costs $18K, projected earnings: $9400 a month (after the ramp up period, which is <12 months)
The best part is that he provides guarantee that I won’t loose my money (that states if I don't make my investment back within first 12 months he will cover the difference).

I have talked to this dude and he seems reasonable and very bright. Here are some of my own consideration:

* Yes, I consider this venture as high risk / high return and I can afford loosing these money (in spite of money back guarantee).
* His customer acquisition cost is reasonable (order of magnitude ~$200 per customer, where customer = “doTerra wellness advocate enrolled into my team”) which makes the math realistic.
* doTerra compensation schema also makes perfect sense, as it is tied to the number of people in your organisation.
* I realize it sounds “too good to be true”. But I haven’t seen any obvious reason why it wouldn’t work.
* I don’t know the founder personally. But I know few people I trust who also trust him.

Bonsai

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Re: Very unusual high risk/hard reward investment
« Reply #1 on: September 20, 2018, 12:41:13 PM »
I would do more due diligence on the company.  There is a post to Wikipedia that would keep me from investing in the company or becoming a distributor.  Best of luck.

hyperobjeckt

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Re: Very unusual high risk/hard reward investment
« Reply #2 on: October 31, 2018, 05:15:52 PM »
I would want to know a LOT more detail about the model behind those "projected earnings" numbers. I would especially want to see your friend's actual performance vs the model as far as how many sellers he is signing up, acquisition costs, and how much revenue they are each generating for him over time.

Do you know anyone else who you would consider an expert on MLMs? I would ask someone experienced to review the model with you. A lawyer should review the money back guarantee as well.

MLMs seem to come & go all the time. Look at lularoe, their products used to be in high demand but now there is so much excess inventory that sellers will take huge losses just to get rid of the stuff. An "established" MLM sounds like a negative if anything: the longer this company has been around, the more people there are sick of having neighbors try to sign them up as "wellness advocates".

Why is this person asking individuals for money? If all he needs to scale is cash, why not just fund it himself, take out a big loan from a bank, or pitch to investors with deep pockets? My gut reaction is that it sounds like he is asking other people to take on all of his risk up front.

That's just what comes to mind reading your post, I get the same feeling that it seems too good to be true. I'm sure your friend is a bright guy, but almost all MLM related stories I've heard end in disappointment.

polama

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Re: Very unusual high risk/hard reward investment
« Reply #3 on: November 01, 2018, 07:19:06 AM »
The basic plan is you put in $18K, and pretty quickly you're pulling in $100K/yr from your downstream. Your cut is what, maybe 3% generously? So your friend is going to run a $3.3M/year sales organization for you, for a one time $18K fee.

Put another way, it's from 2015/2016 but this link (http://www.finance-guy.net/streetonomic/money-doterra-review) says that 0.15% of doterra members make $100K+. So you're coming into a 3M person organization and jumping to the top 5,000 members in a year.

So the plan is to outperform everyone else by about 3.5 standard deviations. Because of internet marketing. There's a lot of internet marketers out there. There's a lot of people spending a lot of time researching and optimizing there pitch to increase their downstream.

The obvious reason it wouldn't work is that these aren't much better than the odds of a high school football player making the NFL. It could happen. It does happen. But that's some really exceptional execution and talent. Maybe you get to $500 a month or something. But when somebody is casually promising the impossible, I'd keep my hard earned cash away.