In December 2020 filed for Chapter 11 bankruptcy. We can assume that this is partly because they dont have the funds to cover commission payouts. So not only do the company have a very poor pay plan, they spent the commissions so that the reality for many distributors is that they have worked for free. 2020 was a special year for the travel industry, but for a company that makes most of its money from a membership fee the fact that people dont travel should not be enough to cut off all their income… If you still consider this as a business, or want to learn more about how little US MLM companies actually pay out, read on;
With its release of the latest income statement for the US distributors we get some interesting facts about World Ventures, and some questions. How much do they return to their distributors? Are their revenue for real or made up numbers?
In case you dont know World Ventures is a travel club claiming to offer discounted travel to its members. No one has been able to document these savings, which is why the company is banned in Norway, if you charge people a monthly fee you need to deliver real value. But in this article we will dig a little deeper than their business concept, it is questionable but there are more worrying facts, read on to learn more:
There are 57 000 reps in the US. 8 400 of these earned commissions from June 2018 to June 2019. This in itself is terrible, but this is worrying the standard in the network marketing industry – most people never make any money (and still some claim that this is a business for the future…).
We broke down the numbers so you can see what people earned in the US:
- 6 earned an average of 906 000 = 5 436 000
- 5 earned an average of 329 000 = 1 645 000
- 15 earned an average of 155 000 = 2 325 000
- 26 earned an average of 70 000 = 1 820 000
- 70 earned an average of 35 500 = 2 485 000
- 183 earned an average of 16 000 = 2 928 000
- 195 earned an average of 7 000 = 1 365 000
- 477 earned an average of 2 700 = 1 287 900
- 676 earned an average of 849 = 573 900
- 6744 earned an average of 80 = 539 500
This is simplified but gives you a pretty good idea. Dont forget the 48 600 people who made nothing. All they get for their money is overpriced holidays.
The financials – numbers that dont add up
From what we can see, for example from a law suite, the average spending from a rep is $1100. So 200 000 reps (official number of 2018) give a revenue of $220 million in sales. But they company claim their sales are at $377 million. Some claim there are 500 000 representatives, we have to assume that their numbers are based on active reps, which makes 200 000 reps sound just about right.
What is worrying is that the company itself published a press release in June 2018 celebrating $2 billion in sales for the last 3 years. Compared to data available, such as income statements, there is nothing that supports billion in sales. What is correct? No one will ever know as they are a privately owned company. But something is not adding up.
Commission pay out
Using the US commissions details we can easily calculate that if the company returns 50% to its reps the total sales are around $40 million in the US. But we know the average rep spends around $1100. This gives $62 million in sales, and a pay back to the reps at around 33%.
It gets worse, lets use the $377 million reported (not official). This give a US revenue of close to $100 million. Now we have a pay back of 20% to the reps. 1/5 of the company revenue paid back to the representatives!
Is the World Ventures business opportunity the worst opportunity you can consider? 1/3 returns to the reps are really bad. 1/5 is terrible. There is no way we can imagine anyone wanting to work for 20% in commissions. Not even top leaders, even if they make millions, would accept this if they did the math.
One problem, the binary
World Ventures is not alone. They might be the worst company when it comes to pay back, but most companies using the binary pay plan operate at the same level. They often claim 50-60% pay outs, in reality they pay way less. At some extent we know why, the binary can bankrupt a company if you dont get your calculations correct. But all the major companies have a policy in place for this, in the event of commissions becoming bigger than the pool they cut the pay circle value, so this is not the main reason.
There are rumors that many of the big network marketing companies use the binary pay plan to cut commissions. There is no easy way to document that their claim of 50% commissions is not true, that people in reality receive 30% in commissions.
Add to this type of fraud to the fact that the binary is used by 90% of all scam companies and maybe the whole industry should consider to ban the binary and use more transparent pay plans? Starting to pay their distributors what they are in title too…