Question

Topic: Strategy

Developing An Idea - Need Your Input And Help

Posted by Anonymous on 8/17/2007 at 12:25 PM ET 125 Points
Note: This is going to require you having an open mind.
Please read the entire thing so you understand the concept.

Background: It has been a desire of mine for years to try and develop a "pension-plan" for the average American. This desire stems from the fact that over 86% of us will retire without sufficient savings (according to the SS administration). Events happening this week in the stock market brought me to post this idea today and ask for your help and input.

Goal: Create a system which anyone can join that will provide a saftey net for basic expenses people are likely to incur in the future. These are medical, food and the like.

Method: The method I have come up with is to create an organization that people join and pay $195.00 month. Everyone who joins understands that the following is going to happen with the $195: after a $25.00 fee is taken off the top, the remaining $170 gets divided into seven levels and each level is credited into the account of a person that is connected to the person paying through a hierarcy or chain of people (this is a multi-level aspect - you earn by getting others involved). There is no hiding where the money goes... everyone knows ahead of time what is happening and is comfortable with this setup.

THIS IS WHAT MAKES THIS IDEA DIFFERENT FROM ANYTHING ELSE:

1.) The maximum amount of money that any person could receive is 5x what they put into it. This means that at the maximum they would get $975.00/ month. They can increase their monthy payment if they want to get more $$ back... up to 500/mo. They can use the money for any purpose.

2.) One of the biggest criticisms with multi-level systems is that the first few people who join become rich and others just pay in with no return. My concept is to have the first position owned by the company with the proceeds shared among all members either thought investment in something or a direct cash credit.

3.) Another criticism is that eventually you run out of people to support a system like this. The concept I put forward is to develop a system over time that creates enough value so that anyone will want to pay $195 to participate regardless of any money coming back. This could be in the form of business advertising, savings and discounts on products, or perhaps some other services.

4.) Make it an "open-book" system so everybody can have access to the company financials so they are comfortable with what is happening.

One possibility is that some employers might decide to enroll their employees in this as a benefit with the understanding that any income generated goes torward the company contribution of health benefits. This would cap an employers fees at $195/mo per employee which is far less then they pay now.

Those are my thoughts and I need some input on this. I know alot of people don't like the idea of anything multi-level but if you look at the overall situation there is no other way (I can think of) to address this problem.

Your honest feedback please - let me have it. Thanks.

To continue reading this question and the solution, sign up ... it's free!
SUBSCRIBE
Or, SIGN IN

RESPONSES

  • Posted by Chris Blackman on 8/17/2007 at 9:04 PM Member
    I'm very interested in how you think you could do this legally, even ignoring the MLM aspects which seem counter-intuitive for a pension plan.

    Since this isn't an employee fund per se, more a kind of savings scheme or a defined-benefit pension plan, you would probably find the product would fall under SEC regulation rather than ERISA.

    How do you see the pension plan being regulated by the Government, and how would you hope to make it compliant?

    Have you received competent legal advice regarding the setting-up of such a scheme? How does the lawyer suggest you overcome what look like enormous regulatory issues associated with what many might perceive as a Ponzi-style scheme?

    ChrisB
  • Posted on 8/18/2007 at 12:06 PM Accepted
    May I jump in and add a consumer’s perspective on your idea? Please keep an open mind as you read this…I’m only trying to help you look at this objectively.

    First, let me say that I am not a marketing expert. I have, however, been involved in an established MLM company, so I can comfortably say that your business concept, business model, whatever you want to call it, is MLM. This is certainly not a bad thing, but it is a numbers game as Randall alluded to. The company I joined:

    - Was well established with quality product, national advertising, and support of its consultants; at the time had been in business for 20+ years (now 30+)…
    - Sold a quality, value-driven product line (and it wasn’t cosmetics or home products).
    - Had products that were easy to sell either individually or at a home party because of its already established reputation.
    - Still required some consumer education in order for the consumer to see the real value in purchasing the product vs. heading to a discount department store.

    I was one of the top recruiters in our directorship and one of the top 10% in the company as a whole, so I could easily see how the numbers worked (and work in any MLM concept). I encourage you just to run the numbers with these main assumptions. There is more to the structure, but this will give you a strong idea of what you need for success:

    - Of ten people 10 asked to join (which in an MLM, is where you make your real money; your down line), nine said no and 1 said yes.
    - Out of every 10 who joined, 7 did nothing, two did a few parties and that was it, and one became active.

    Do the math. Out of 100 people who I asked to join and of those, the 10 that did join, only ONE stayed active enough for me to really benefit.

    To break this down further, in order to find recruits, I called all leads that I received through show booths, parties, and people I just struck up a conversation with in day-to-day life:

    - Of 10 people I called per day to book a party, 9 said no and one said yes.
    - Of those, about 10% cancelled and probably 50% had only a few people show up at their party (and I did all of the required things to help make their parties a success). All of the people who attended my parties are included in the original 10 I asked to join.
    - At each party, I probably had 2-3 people on average who were at least mildly interested enough to look at the information (“the business opportunity” as it was called), but I still followed up and asked everyone who attended to join.

    Now remember, this was in an established company with an established and successful marketing and advertising strategy, which is something that you have yet to develop. As the others suggested, your idea will take a tremendous amount of capital just to establish consumer awareness, and even more time to build trust. And, as you can see from my personal experience, a heck of a lot of work just to get one successful person involved long-term.

    You are asking people to give you $2000+ dollars per year. Of that, $300 is for administrative expenses, so I’ll never see that again. When I think of this amount, I think of a nice, safe, IRA. No, I can’t touch it until I reach a certain age without incurring a penalty, but I know it’s there…all of it. At least with the company I was with, I received a product kit and catalogs, order forms, etc. equal to my original $400 investment, so if I wasn't successful, I wasn't out much money and I could have sold my products from the kit or given them as gifts.

    This may sound harsh, but as a consumer and regular working person, I wouldn’t even consider buying into your program. At best, it’s such a gamble since your company would be new and untested. At worst, it sounds like a pyramid scheme, even if it is not. Honestly ask yourself, “would I put my own money into this program given the unknowns of this concept?” The average working person probably can’t afford to invest that much money per year in an unknown entity and certainly can’t afford to lose it if the concept fails. And, you never told us what your background experience is…… If you truly want to help people save for their future, whether it be for retirement, kids’ college, medical expenses or a dream home, use your money, time and enthusiasm and do what you need to do to become a financial planner or insurance professional. You’ll make a lot more money and help a lot more people.

    Susan
  • Posted by Jay Hamilton-Roth on 8/20/2007 at 11:19 AM Accepted
    While MLM sets off "alarm bells" for many, I'll simply call the MLM money a sales commission.

    The problem I see is that you're requiring the investor to also become a marketer. Successful MLM companies allow you to simply purchase the product (Amway, Mary Kay, etc.) and enjoy the benefit. The other side of those businesses is an opportunity to make money.

    If you business plan for to teach someone how to save $195/month (for a fee) and also offer an opportunity for becoming an "expert", you'd have a much better business model.
BACK TO TOP

Post a Comment

Related Discussions

Community Info

Top 25 Experts
(Strategy)