Thursday, September 24, 2009

My Personal Review of Fortune Hi-Tech Marketing (FHTM)

A dear friend of mine recently mentioned that she was getting involved with a new business. She didn't try to push it on me--she's not that kind of person. But I was looking for something. My husband is going to school full-time and working full-time, so I thought it would be nice if I could make enough extra money that he wouldn't have to work as hard. So I asked for more information.

At first I was excited. It sounded like something I could do, and when I did keyword research to find out whether I could get enough traffic to my website, I found that there are over a million people searching for just three keywords: MLM, MLM opportunity and MLM opportunities. And there are many more keywords I could use than just those. So getting traffic to my website would probably not be a problem.

I knew I would have to focus on recruiting at first. After all, it takes time to build up enough customers to build up a decent amount of residual income. That's to be expected. What I didn't expect was the number of customers it would take to make a decent income.

Last night I decided to run the numbers. I needed to know exactly what I was getting into. In other words, how hard would I have to work to grow this business to the point where I would be making $3000 per month (my goal) from commissions so I could stop recruiting and sit back and enjoy the benefits of residual income. The answer to this question shocked me.

First of all, let's talk about how the FHTM business model works. Each person who joins FTHM is supposed to try to recruit just three people. Sounds easy, right? OK, let's say you succeed in recruiting three people and all of your people and your people's people all the way down the line succeed in recruiting three people. Are you with me so far? Hmmm... well, how about an illustration? If you've ever seen a network marketing presentation, you've probably seen something like this before:

Well, that's not so complicated, is it? Everyone gets three recruits, and by the time you get to level eight--wow, you have built up one heck of an organization so you should be rolling in dough, right? Let's figure it out. We'll just use the commissions for our analysis to start with. After all, we don't want to have to keep working at recruiting to make money. We eventually want to be able to live off the residuals.

Once you get the eighth level filled up, your organization will look like this:

Level 1: 3 people
Level 2: 9 people
Level 3: 27 people
Level 4: 81 people
Level 5: 243 people
Level 6: 729 people
Level 7: 2187 people
Level 8: 6561 people

You make a whopping 1/2% commission on the people in levels 1-7. It doesn't sound like much but it should add up to quite a bit. After all, there are a lot of people in levels 1-7, a total of 3279 people to be exact. So let's assume that each of these people is spending an average of $100 per month on their products. That's not too hard, since Fortune sells cell phone service and satellite TV. Those are high-priced services. That adds up to $327,900 in sales just for levels 1-7. The commission on that is $1639.50. A little disappointing, but it's not pocket change either.

Now let's figure level eight. This is where the money is, because Fortune pays 5% on level eight. With 6561 people averaging $100 in sales per person, that's $656,100 in sales. Five percent of that is $32,805 per month. WOW! That's awesome. I can recruit three people, wait for all of them to recruit three people and eventually I will be making $34,444.50 per month!

Does anyone else see the problems with this plan? OK then, I am going to start poking holes in the plan now. Please don't be too upset with me. I am doing it for your own good.

Problem #1: It's Unrealistic

So everyone who joins under you is going to recruit three people? If you think so, you are living in la-la land. Most of the people who join an MLM will never do anything with it, or they will give up before they get anyone signed up. If you're lucky, most of the people who are under you will sign up one person, some will sign up two and a few will sign up all three. The worst case scenario, of course, is that you will sign up a bunch of lazy slobs and will have do all of their recruiting for them--that's 9840 recruits. Are you up for that? Well, that's OK, because that's not realistic either. But even if your recruits only average 1.5 new people each, you still have to do half the work to fill up your organization. That's 4920 recruits. Even if you recruit one person per day, if you half to do half of the recruiting for your group, it will take you almost 13.5 years to fill up your organization if no one quits on you before you get it done.

Problem #2: What If Someone Quits?

That brings us to problem number two. What if someone quits? Well, if they are near the bottom of your organization, it probably won't matter much. But what if they are near the top? Let's say one of your level one people quits. I'm assuming your downline will all move up a step to take his or her place. Someone please let me know if I've got that wrong. I wasn't able to find answers for every possible scenario.

OK, so one of your level one people quits. Now 1/3 of your level eight just moved up to level seven. Those 2187 people are now earning you a 1/2% commission each month instead of 5%, through no fault of your own. That's $9841.50 in lost commissions just because ONE of your level one people left the organization. Ouch!

Well, that's OK, because by the time you get your organization filled up, your level one people will be making so much money from all the work you did for them that they won't ever want to quit. Speaking of which, just how much money will all those people by making from the recruits you placed under them?

Problem #3: Unhappy Recruits

Let's figure out how much the other people in our organization are making. We'll have to figure how many people are underneath the people in each level, then figure the commission based on that. We are still figuring based on an average of $100 per month in subscriptions per customer/recruit. You can double-check my work if you want, but this is what I came up with:

Level 1: 3 people ------- 2187 in downline -------- $1093.50 in commissions
Level 2: 9 people ------- 729 in downline --------- $364.50 in commissions
Level 3: 27 people ------ 243 in downline --------- $121.50 in commissions
Level 4: 81 people ------ 81 in downline ---------- $40.50 in commissions
Level 5: 243 people ----- 27 in downline ---------- $13.50 in commissions
Level 6: 729 people ----- 9 in downline ----------- $4.50 in commissions
Level 7: 2187 people ---- 3 in downline ----------- $1.50 in commissions
Level 8: 6561 people ---- no downline ------------ $0 in commissions

All right, I know that some of the people in level eight will have their own recruits, but I am just basing this on having my own organization filled up. After all, I've been working my butt off recruiting people for 13 1/2 years and I am worn out. I just want to sit back and retire and live off my $34,444.50 per month commission checks.

So let's see how many of my customers are happy. A good company needs happy customers, right? If they are unhappy, they will quit, and I will have to keep recruiting to replace the ones who leave. I have worked hard to give my people a good start filling up their organizations, so they should be making enough that they will not want to quit, right?

All of the people who are making enough money to live on should be happy. Let's see how many there are. My level one people are making $1093.50 per month in commissions. Can you live on that? I can't. They are making some nice pocket change, but they can't quit their day jobs yet.

Let's try defining "happy customer" a little more loosely, shall we? Most of these people would have had cell phones and satellite TV anyhow, so they should be happy if their commission check covers their $100 per month bill. After all, that's like getting them free. The people in levels 1-3 are making enough to cover their $100 subscriptions. That's 39 people. I have 39 happy customers! Yay, me!

Oh, wait a minute. Did you catch that? Only 39 of my 9840 customers are happy. That leaves 9801 unhappy customers. 99.6% of my customers are unhappy, and I have been working like a madwoman for 13 1/2 years to try to help them.

The Business Model Puts Too Much Emphasis on Recruiting

Yes, it is possible to make a decent income with Fortune if you focus on recruiting. You earn at least $100 for each person you personally recruit, and after you get 12 people under you, you earn at least $100 for every new recruit in your organization through level eight.

Recruiting is not bad. Every MLM company is based on the idea of making money from the sales made by your recruits and their recruits and so on. That's not what I have a problem with. The problem is that, when you take away the recruiting and focus only on the commissions, Fortune's plan is sorely lacking.

A business that puts too much emphasis on recruiting will eventually stagnate. Every MLM opportunity has a limited customer base. Even if the opportunity appeals to every person in the world, there will still come a point where the market is saturated. At that point, nearly everyone who would be interested in the opportunity is already involved with it. Once the opportunity reaches that point, those who are involved in it will find that new recruits are few and far between.

It is at that point when I believe disaster will strike for Fortune. Without the bonuses for new recruits, the majority of the people involved in Fortune (those who don't have their organizations filled out), will find that they aren't making enough money to bother with the annual renewal fee and they will drop out. This will cause a trickle-up effect. Those who are a little higher up will lose income because their organizations have shrunk, which will eventually lead to them dropping out once their earnings have dropped low enough.

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