What’s up with Herbalife?
Is it a pyramid scheme, as Hedge fund Manager William Ackman says?
Or is it a sustainable, growing business, as hard-core capitalist Carl Icahn believes?
And why should you care?
Well, when I was in Australia in February, and at the Association of Network Marketing Professionals’ annual celebration in Dallas in March, I got some unique insights into the company, and the market it operates in…
Herbalife is one of the largest and most aggressive network marketing companies out there. It promises people that they can make millions if they simply turn to their friends and associates — their social network — to sell the products.
Sounds like a pyramid scheme, right?
If you become a buyer and seller through me, and then get your sister and brother to become buyers and sellers through you, and then…
Only, that’s not fully how Herbalife works…
The business continues to grow for two reasons:
- It uses the direct consumer-to-consumer, or peer-to-peer marketing approach… one of the more powerful models for cutting distribution costs, increasing personalized service, and exponentially increasing exposure. Perfectly suited to our new networking age, eBay, Tupperware, and Avon are other examples of the power of this model.
- It empowers people who want to start their own business but avoid the high costs of buying a franchise (a great strategy if you have the large up-front money and full-time commitment), or funding their own local restaurant (which is far more risky than most presume). Network marketing businesses allow individuals to start part-time and grow at their own pace, with low risks and start-up costs, but with the support of an established brand name, marketing, customer support and logistic systems behind them.
Mr. Ackman is not convinced. He maintains that Herbalife is nothing more than an elaborate pyramid scheme. So certain is he that he’s bet millions against the company. And he’s getting his ass — and assets — handed to him.
Mr. Icahn, on the other hand, is smiling all the way to the bank, thus far. And I’m with him on this one…
What’s wrong with a business model that combs through 100 prospects to find the one that hits absolute home runs and makes millions a year selling massive amounts of products?
I’ll tell you: Absolutely nothing.
In this industry, 90% of people end up just being happy wholesale consumers of the product, 9% end up selling modestly to others, and 1% hit the jackpot.
In Australia and Dallas, I met many people who make more than $5 million-plus but have people under them (down lines) numbering 250,000 to one million. Holy crap, Batman!
The reason these people are so successful is precisely because they don’t have the “get rich quick” mentality of turning on their friends who then turn on their friends until they’ve become a millionaire. That would be a pyramid scheme. That is more the mentality of the 90%, but most of them become happy customers.
Instead, they’re people who know how to build a business… how to communicate… how to educate and motivate people around them… and how to build systems.
They’re real business people!
And that’s why you should care about Herbalife’s business model…
Because it hands entrepreneurs the tools they need to overcome some of the hardest obstacles they would normally encounter…
It teaches us that we have control over our earning potential… and given the right opportunities, we can exceed our wildest expectations.
I’ve always been an entrepreneur fan — from the most radical like me to the ones who just start a darn good local business. We don’t have to answer to a petty bureaucratic boss anymore. We control our destiny.
Herbalife, Tupperware, Avon… they all show us that there are countless ways to become an entrepreneur. They highlight the power of network marketing for those wanting to build a real business.
Entrepreneurs have high rates of failure, that’s why they do well when they succeed. This is one of the lowest risk models.
If you’re considering network marketing or buying into a franchise or starting your own business, do it sooner rather than later and be committed to it full-time, if possible. You don’t just need some extra income in the economic winter season… you need a back-up plan!
Don’t think about your career as a job or job description. Find your mission in life and make that into a sustainable business that delivers real-time, personalized services at lower costs.
That is the new economy in this information age: networks of entrepreneurs and small business people that create change from the bottom-up.
Don’t let this economic winter season get you down. Put on your skis and start the exciting, invigorating, icy slopes ahead.
P.S. Have no doubt, the world of business and employment is changing, and to survive and prosper, you need to adapt accordingly. Even if you don’t want to become an entrepreneur, start thinking of yourself as an “intrapreneur” within your present company. And look out for my next book, Job Shock. It’ll give you everything you need to master the new networking world of business. In the meantime, check this out.
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