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My Objections to Multi-Level Marketing

“Isn’t that a pyramid scheme?”

You can imagine how enraged a coworker was, after I naively asked this question about his wife’s new business.  He gave me a rundown on multi-level marketing which, frankly, left me a little confused about the difference between the two, but gave me the verbiage I needed to not offend other MLMers.

My personal opinion has wavered.  Initially I was wary, and maybe a little frustrated at the explosion of advertising in my Facebook newsfeed by family and friends.  Then it started to seem like a good opportunity to get into entrepreneurship for people who might not have the initiative or capital to strike out on their own.

And now…

Well, let’s just say I’ve read a lot about MLMs.  And I’m running across new and alarming stories like the $1 billion lawsuit against LulaRoe, accusing the company of operating as a… you guessed it, pyramid scheme.

Pyramid Schemes vs Multi-Level Marketing

I went to the BBB (Better Business Bureau) to get a reliable definition.  After reading the two, the only real difference I could discern was that pyramid schemes focus more on recruiting new salespeople than on making sales.  Whereas MLMs supposedly put more emphasis on selling products, and recruiting additional sellers is just a bonus.

In my mind, that’s a very fine line and one that would be difficult to police.  Yet one of these business models is illegal and the other is perfectly legal.  So that concerns me a bit, but let’s get into the other issues with multi-level marketing.

Objection #1: Quick, Easy Money

MLMs might disavow responsibility for this, BUT I have seen so many salespeople recruiting others using this tactic.  They gush about how easy it is, how fun, how much money you can make, and so on.  I’ve seen the more gullible among my friends fall for this.

A shy, quiet friend urged to sell sex toys.  An immigrant with poor language skills encouraged to go door-to-door selling insurance.  Another friend whom I love dearly, but will admit has an organization problem and a houseful of kids and pets who destroy everything – told she’d make a killing on products.  Products that wouldn’t make it longer than a week or two in that house.

Even if these salespeople weren’t specifically recruiting my friends and family to positions they’re uniquely unsuited for, I’m highly skeptical of anyone suggesting you can make money without effort.  It just doesn’t work that way.  The BBB helpfully mentions red flags, and that’s one of them.  “Promises of high earnings, especially with little effort, time or serious commitment.”

If it sounds too good to be true, it probably is.

Objection #2: Buy-In Costs

Not all MLMs require money to get started, but I’ve heard of enough.  That insurance company?  The buy-in fee was $500.  Even without a buy-in fee it can be expensive.  For LulaRoe, consultants must purchase the clothing and, according to Quartz, the $5,000+ starter package is required.

At that point, it’s not even about LulaRoe selling to customers, it’s LulaRoe selling to their own consultants.  What do they care if you manage to sell of all your inventory?  They’ve already made a profit.

I’ve also seen MLMs that sell products online, and you can purchase it through your consultant’s sales page.  This seems much less scammy to me, personally, but I also have to wonder, what’s stopping me and other consumers from just buying from the company directly?

Objection #3: Making Money for Other People’s Work

Multi-level marketing is supposed to be about the sales, not the recruiting, BUT the truth is that many of the vocal MLMers you see on Facebook or Instagram are making their money off the salespeople under them.  I spoke to one woman not that long ago who said she wasn’t really selling anymore, but she had a “passive income” from her consultants.

Sounds great, if you don’t mind making money while other people struggle and potentially don’t make money themselves (A study of 11 different companies showed that 99% of consultants LOSE money).  To me, this attitude seems like one that encourages dishonesty, and the cult-like attitude Quartz describes.  Again, using LulaRoe for an example, many unhealthy practices are suggested to consultants in order to keep their inventory purchases high enough for their “team leaders” to keep their bonuses.  Credit card debt, anyone?

I guess there are 2 parts to my objection on this one.  1) The people who get screwed over so others can profit and 2) The idea that people would rather recruit other people to work than do the work themselves.

I have an employee, yes, and plan to have more as my business grows.  But I will never not be doing the bulk of the work.  That’s important to me and if I didn’t like the work I’d get out and find something else.

Personal Preferences

While those 3 things are my biggest reasons for making my opinion public, I’ve never liked the salesy-ness of MLMs.  At one point I got invited to 3+ sales parties a month on Facebook, before I started point-blank telling people I don’t do them.  And I’ve seen several Facebook friends promoting their products by asking friends and family to help support their business.  It’s a strange mix of passion (real or fake), guilting personal acquaintances, and constant selling.  I’m just not a fan.

I’ve already discussed soft selling as my preferred tactic, and this is part of the reason.  We are inundated with ads and marketing and sales talk EVERY. DAY.  I don’t want to add to it.

I’m here, you know what I do, and if you’re curious about something I do, I’ll tell you.  But I’m not going to push services people may not actually need, give false promises about how they’ll change your life or business, or use any kind of psychological trickery or manipulation tactics.

And I’m not going to work with people who do.  Consider this part of my Ethics Manifesto.

5 Misconceptions About Working for Yourself (at Home)

 

5 Misconceptions About Working for Yourself (at Home) | Jenn Wells Design

“But you set your own hours, so you can make time to do whatever you want.”

If you’re self employed, I’m sure you’ve heard this.  And other, equally annoying, misconceptions.

It can be frustrating, as a small business owner, to explain what you do and how you do it.  You have to explain that working for yourself is still a job, and not every task is enjoyable, even though you’re choosing to do them.

Sometimes you feel like you can never complain.  After all, you chose this…

So let’s address some of those misconceptions and how to explain them to well-meaning friends and family.

1. You Must Have So Much Fun All the Time!

Yes.  And no.  I love graphic design.  I feel a great deal of pride in my business and in the end results of my client projects.  You know what I don’t love?  Taxes.  Contracts.  Invoicing.

Choosing to be a small business owner does mean choosing the work you do.  But there’s an inevitable mountain of administration that comes with it.  And, with a few exceptions, most of us dread administrative tasks.

2. Oh… So You’re Really Just a House Spouse

Confession: I’ve had this thought about other business owners.  Especially those who watch kids AND work from home.  Now I’ve tried it and I have so much admiration for people who successfully manage both of these things.  I CAN do it, I just can’t get enough sleep or not be miserable, so for us the right choice was daycare.  But more power to the people who do it all!

Basically you don’t know what’s going on with someone’s business unless you’re there behind the scenes with them.  And even if you were – why judge?  We’re all just doing our best, after all.

3. You Set Your Own Hours So You Have Time for X

Setting my own hours is amazing because I can work around certain things like family, or my client’s schedules.  It does not magically give me more time.

And while I do know quite a few people at office jobs who goof off all day and still draw a salary, I don’t know anyone who’s self-employed and gets paid for not working.  If anything, having the freedom to work any hours often means that work oozes over into time meant for other things like eating or sleeping.

4. It’s Easy

There’s this image most people form of working from home in your pajamas with a steaming cup of tea right after doing an hour or two of relaxing yoga.  Or a similarly pajama-clad one where you sit at the computer for an hour or two, bang out some easy work, and then head to your video game for the rest of the day.

Unless you’ve got someone supporting you and your work-from-home job is truly a hobby, there is never downtime.  Are you out of client projects?  You probably should have started marketing 2 weeks ago.  I have a list of marketing projects and website updates 2 pages long and somehow it never gets any shorter.

5. You Don’t Have to Make Much Because There’s No Overhead

Expenses CAN be low when you first start out, depending on what you want to do, but there’s always something.  Pretty much everyone needs a website, so there’s hosting fees for that and the annual cost of domain names.  You won’t get clients if no on hears about you, so unless your social media game is on-point, you’ll need to pay for ads, or networking, or some other form of marketing.

At this point, my monthly expenses are up around $750, which is a little scary if I stop to think about it too long, because it means a month without work burns about half my savings.  (I know, I’m working on it!)  A product-based business takes on even more risk.

None of which is to say that working for yourself and running your own business isn’t worth it.  It absolutely is.  For some of us.

I don’t regret a single late night (or all-nighter), or any of those stressful months wondering how long my savings would last, or even the less exciting time I spend on my finances.  For me, it’s all worth it to have freedom and control and to do what I love.

But I think it’s good to clear up those misconceptions, for my fellow entrepreneurs and for those considering taking the leap.  Because someone going in expecting fun, and easy work, and hours of video game time probably isn’t going to last very long.

My Business Ethics Manifesto

People often say they want to make an impact, make their mark, effect change, etc.  But what does that actually mean?

The actions each individual takes may differ but the underlying desire is the same.  To leave the world better than we found it.  People who want to create change in the world see a problem and then take steps to improve it, instead of complaining and continuing on about their day.

I recently read an amazing article over at Yes and Yes about building ethics into your business.  I’ve had some vague ideas about values that were important to me, in and outside of my business, but I’ve never vocalized it or built it into my mission statement.  Remedying that now!

Jenn Wells Design Code of Business Ethics

1. Giving Back

I currently donate $25/month to the Nurse Family Partnership, and another $15 to various causes that are important to me.  I’m going to keep that auto-payment, because it’s easy and I don’t have to think about it.  But I’m also going to contribute 10% of my profits, because I want my successes to contribute to the world and not just my wallet.

2. Atmosphere of Inclusiveness

With a company of one (plus a few contractors) there’s not a lot I can do about this, BUT as a graphic designer I do create visuals that go out into the world.  So it’s my job, along with everyone else in the visual communications field, to create imagery that shows diversity.  To me that means trying to include a mix of races and ages in the stock photos I purchase.  It means broadening the definition of what a business person or a teacher or a parent looks like.

3. Selling with Integrity

I use and believe strongly in soft sales techniques.  One-on-one conversation, building relationships, and providing value through this blog and my social channels.  I don’t use scare tactics, hide prices, try to pressure clients into a sale, or present false choices.  I do present options, represent myself and my capabilities honestly, and focus on the client’s best interests rather than my own.

Real Talk – An Honest Look at Business Finances

Real Talk - An Honest Look at Business Finances

I’m never going to be one of those people/companies that publishes a monthly income report.  Both because I feel like it would be really dull…  (I spent the same $5-$50 dollars per product on all the same products that I spent last month!)  And because I feel like a lot of income reports don’t feel very relevant to other people.

Our businesses are different and our expenses and income will differ wildly.  But beyond that, even if you happen to be another graphic designer, your idea of a profitable month will vary wildly from mine.  If you make tens of thousands of dollars a month, you won’t be able to empathize with my penny pinching for $15/monthly subscription services.  If you’re struggling to get up to $1,000/month, you’ll think my networking group expenses of over $500/year seem excessive.

That being said, I don’t think money should be the taboo topic that it is.  There’s very little to be gained by keeping the subject hush hush and not educating ourselves properly about money.  I also enjoy social experimentation, which means I’m the one at parties who will deliberately bring up an awkward topic to see how people react.

I remember asking a friend how much money she spent on a new (sporty) car.  Another friend jumped in with an appalled, “That’s so rude!”  But sports car friend didn’t mind, answered my question, and I gained a better feel for vehicle costs.  This was good for me because at the time I’d never purchased a new car and had no concept of the relative costs of a flashy new car vs the used, economy version.

To bring this back around to business finances, I often wonder what other people’s financial goals are, what they need to live on, how much they spend, and what kind of return they get on those products.  I also wonder if I’m underselling myself and if I’m trying to restrict myself to an unnecessarily tight budget.

The Story Behind My Price Hike

In 2017 I’ve already raised my prices from $30/hour to $60/hour.  This was not a decision I made lightly.  I agonized over it.  I was reluctant to do it.  Scared.

But two people in similar creative fields had urged me to do it and I trusted and respected their opinions.  So up the prices went!

The first two calls with potential clients ended in haggling and eventually losing those projects.  I started to get nervous.  And then… life and business continued on.  No one since has blinked an eye at my new prices and I’ve been working nonstop for the last couple months.  Several people have told me to continue to raise prices, to which I said, “I’m not ready yet.”

It’s uncomfortable to raise prices.  To demand more for your time and to announce to the world, “I have value!”  I’m glad I did it and business is better than before (for several reasons) but I also want to sit at my current level and get comfortable with it before I continue up that incline.

How Raising Prices Improved My Customer Relations

Seems counter-intuitive, I know.  Landing and retaining MORE clients was the last thing I expected.  But I have a couple of theories on how raising prices benefited my clients.

  1. I can spend more time talking to my clients and on other customer service related non-revenue-generating activities because my new prices cover that time.  No more “wham, bam, thank you ma’am” mentality.
  2. Charging appropriately gives the perception that I have confidence in my own abilities.  Pricing doesn’t always accurately affect quality, but it does (and should) often enough that if your prices are too low, people will wonder why.
  3. I appreciate my clients more.  I’ve always appreciated my clients but in the past, it was easy to feel resentful if someone took up too much time because my pricing simply didn’t cover any extra time for revisions or communication.  I also had more clients who were looking for a deal rather than looking for quality work.  So there was a lack of appreciation all around.

Walmart is amazing and serves a definite need.  But no one wants to be the Walmart of their field.  (For more on that topic see my post on Fiverr and other bargain businesses.)

Profit and Loss

So you’d think I’d be super profitable now that I’ve essentially doubled my prices.  But it’s been a weird year.  2016 was the first year where I cut my full-time job down to 2 days a week to dedicate more time to building my business.  The first half of the year was record-breaking (for me) and I brought in between $1K and $2K each month.  Not bad for a “part-time” gig.

In August business died.  I hadn’t diversified my revenue streams so when the work from my 2 primary clients dried up, I had nothing else to fill that gap.  I also had no idea how to go about marketing or finding new clients and so the second half of the year was more dedicated to learning about business and networking.

Long story short, I’ve learned a TON since that little debacle and this year I have a good mix of new and old clients.  (For me networking and building a referral network has been the most effective but I know a lot of people who do really well through social media.  Either way, you need SOMETHING.)  So when I checked out my P&L, I was expecting to see better numbers than the previous year.

But I’d forgotten that I had a baby a mere 7 months ago.  So my averages were a little low because the first 2-3 months of the year were more focused on the learning curve of working from home with an infant.  According to my accounting software, I was making an average of $600/month and I was spending $400 of it.

I don’t know about you, but I can’t live on $200/month.  Even with a part-time job.  I actually need to recalculate this, but I’ll be honest, I’m waiting for several current large invoices to be sent and/or paid because I want to see the more accurate (and flattering!) numbers.

What I Spend My Money On

According to my P&L, I’m spending 2/3 of my income.  At first glance that seems ridiculous, but after breaking it down with the help of my awesome VA, I know where that money is going.

The biggest expense?  Taxes.  And that’s a huge, huge expense that my previous pricing didn’t factor in at all.  1/3 of my income goes to taxes now that I’m married (vs the 1/5 when it was just my own, more modest salary).

Outside of that, I’ve spent quite a bit on design software (Adobe CC is $50/month) and networking groups (another $50/month).  I’ve purchased things I later regret (join.me premium which was $18/month when I could have used zoom for free) and I learned that monthly payment plans aren’t a bad idea to at least try something out before committing to an annual plan that will “save” you money.

Quick confession here: I’m actually floating a balance on my business credit card at this moment.  I hate having that debt, but I don’t regret my purchase (a laptop) and I use it every day.  I will feel much more comfortable when my current invoices come in and I can pay that card off.  Credit card interest is NOT what I want to spend my money on.

Things I do think are worth the expense:

  • Trello Gold (I use this for tasks, project management, business organization, and on and on)
  • Freshbooks (Time tracking AND invoicing in the same place!  But Wave is a great option, too, if you want free invoicing.)
  • Networking events and coffee dates (anywhere from $50 to the cost of a cup of coffee)
  • Networking groups (BUT with the caveat that you have to find the right ones – I won’t be renewing all my memberships)
  • Buffer (or any social media scheduler!)

Things that haven’t returned my investment:

  • Paid ads (I tried Facebook and Google and probably won’t use them again without hiring someone or taking a few classes on how to use these tools effectively)
  • Zapier (SUCH a cool idea!  But ultimately IFTTT is free and I really just don’t have that many tasks I can truly automate.)
  • Feedly (I don’t know what I expected, honestly)

Design-specific things I spend money on:

  • Adobe
  • Stock photos
  • Fonts
  • Microsoft Office (I pay $7 for one month at a time whenever a client needs a specific thing and I don’t renew until the next Office-based project)

In addition to learning that paying month-to-month, while more expensive in the short run, is actually a smart idea for trying something out, I’ve also developed a definite preference for services that offer a freemium model.  It’s a lot like the concept of content-marketing.  They provide a sampling of their services for free and then if and when you want to take advantage of additional features, you can start to pay for it.  It saves me from regret a month or two later if and when I realize a certain service isn’t actually that helpful.

My Finance Goals

While it’s possible that I’ll find more ways to spend my business income as I make more of it (I have started hiring people to delegate work to and I sometimes daydream about going to business conferences), I don’t anticipate my expenses increasing THAT much.  So my goal is based on my current expenses, taxes, and the lifestyle I’d like to be able to afford.

When I mathed this out, I got about $5,000 as the amount I should be making per month.  This seems like a lot to me!  Wildly ambitious even.  But it does include the income from my part-time job, which drops the amount my business needs to make down to $3,500, which seems more doable.

I’ve been struggling to keep up at my current level of $1,000 or so per month, but a big part of that was trying to “do it all” and be a stay at home mom while also running a business.  That is exhausting and stressful and after some long heart-to-hearts with my husband, we decided it wasn’t sustainable or contributing to anyone’s happiness.

So now that baby is safely ensconced in daycare and I have reliable work hours (that don’t involve staying awake all night!) I’ve got a few plans to make this happen.

  • Networking, always networking
  • Make more effective use of my “funnel” (I set this up and it technically runs about once a month but I don’t promote it at all)
  • Monthly promos (see above)
  • Expand my offerings (I’m planning on partnering with a few different people to hopefully start offering SEO, PPC, and reputation management!)

Are you still with me?  I’m impressed.  Want to talk more about business finances?  Shoot me an email at jenn@jennwellsdesign.com.  I’m always happy to talk shop!

Starting Your Business – Planning the What/How/Why

Starting a Business - What/How/Why

If you’re reading this, you’re probably a small business owner or considering starting a business. Or you’re a blood relative and it’s a slow day. (Hi Mom!)

It can be overwhelming to figure out how to start a business, what you need to do, and a step I’ve found a lot of people skip is the “why.” Where and when is up to you, so I won’t get into ALL of the “5 Ws.”

Do You Really Need a Business Plan?

A lot of contemporary advice starts with a business plan. But I’ve read quite a few articles from other creative entrepreneurs who skipped this step altogether. My advice is somewhere in the middle.

I think you need to know what you’re getting into and have a plan of action. Running around with a head full of half-fledged ideas is a recipe for failure. Beyond that, if you haven’t defined what success looks like for your business, how will you even know if it “succeeds” or not?

So no, I don’t think you need to make a Word doc with sections organized by roman numerals outlining your company structure, budget, and so on. Unless you need a business loan. Then your bank is going to want to see the numbers.

But I DO think you should have certain key elements outlined somewhere. Doesn’t matter if it’s a notebook, a Trello board, or a Google doc. You should have one central place to keep tabs on your business and to fully flesh out your ideas before acting on them.

What to Do BEFORE Even Writing Your Plan

Don’t waste time writing a comprehensive business plan before you know why you want to start a business. This is the time to think about what it is you want to do, whether it’s feasible, who will buy from you, and if you really want to do the work involved or if it sounds better in theory.

Things to ask yourself:

  • What do I want to sell?
  • Who will buy it? (You can read more about target markets here.)
  • Why will they want to buy it from me and not someone else?
  • Do enough people want this product that I can make money doing this?
  • How do the costs of running this business compare to the potential proceeds?
  • How much effort is involved with the work both in and on the business?
  • Do I really want to wear all the hats that come with being a solopreneur?

If you’ve asked yourself all those questions and want to continue, you can continue to the next step of actually planning.

Things to Include in Your “Business Plan”

I have an official business plan. I’ve researched to see what information should be included and revised it countless times. And then… I never actually look at it for day-to-day business management.

So instead of telling you the BS sections that everyone else will tell you “need” to be included in your plan, I’m going to tell you the sections I have actually used and revisited.

Mission Statement

Also called elevator pitch, this is your one or two sentence statement that clarifies what you’re doing, for whom, and why. It’s easy to waste a lot of time here, so don’t worry about pretty phrasing just yet. What’s more important is to figure out what exactly you’re doing so you have something to base the rest of the plan on.

It’s also the most fun piece of this and, if you’re like me, sometimes it’s easier to keep going when you get started with something enjoyable.

Financial

Yep, it’s budget time. This is much less fun but equally if not more important! Things to go over in this section:

  • Business expenses
  • Taxes
  • The baseline income you need to live on
  • The goal lifestyle you hope to achieve with your business
  • The pricing range you can charge between surviving and thriving (you’ll probably start closer to the first number and raise your prices to the second as you gain skills and experience)
  • How this compares to your competitors’ pricing

Marketing

I think this is a good section to include right after budget because now that you know what to charge, you have to think about who will buy from you. Of course, you might need to adjust your budget after considering marketing costs, but that’s ok. Flexibility is a good thing!

Things to include:

  • Target market
  • Where to find them
  • How to connect with them
  • Costs of customer outreach
  • Competitors
  • Plan to differentiate yourself (Why should clients choose you over competitors?)

Licensing and Permits

Technically this could be “business structure” but if you’re a business of one, you don’t need to lay out each board members duties and how to split finances and so on. You DO need to figure out what kind of business you have, and what kind of license and/or permits you’ll need to run that business in your current location.

Things to include:

  • Do you sell products or services?
  • In what state are you operating and are there rules that pertain to your type of business in that state?
  • IF you need a business license (in Delaware, sole proprietors do NOT need a license because their income gets rolled into personal taxes), do you want to register as a sole proprietorship, an LLC, an S-Corp, etc.?
  • Registered agent (you can hire one or register yourself)
  • Will you need an operating agreement? (some banks require this for LLCs, but in my case, it was a little ridiculous since it was an agreement with myself)
  • Will you register your business name?
  • Will you sign up for an EIN? (sole proprietors can usually use their social security numbers, but it varies by state)

Next Steps

If you’ve laid out all these details and you’re ready to go forward, great! There’s still a lot of work ahead of you, but you’ve also got the fun stuff, like naming your business and branding and doing the actual work you’re signing up to do.

Are you like me and prefer to do things the old school way? I’ve got a business plan template you can download for free. Sign up to receive that and future freebies below!