Most distributors will claim that "we don't make money until you make money," or "we're only successful if you're successful." This is correct when you consider each distributor gets a bonus check calculated on the volume of products purchased by his downline. If your downline moves products and makes money, you will make money as well.
However, high-level distributors fail to communicate the amount of money being made from the sale of support tools- tapes (audio/ video), business books, and even the function tickets. In fact, they may hide this fact from their own Direct distributors! From the very first day (when a new person purchases a toolbox), the Emerald and Diamond distributors make money from the sale of tools. The flow of money continues as the new distributor signs up for GGT and SOT audio tape program, as well as every weekly and monthly meeting the new distributor pays to attend. Even though this new distributor's sponsor is not making any money yet (since the new distributor has not sold or purchased any products), the upline has made money. This is further duplicated when the new distributor, in turn, sponsors people of his own. Whether or not any of these people move products is irrelevant- the upline keeps making money off all the tools moved through that group. Could this be the real reason purchasing tools is stressed over selling products? If you resell products at retail prices, you could make a good profit for yourself, but your upline makes very little. If you purchase tools, you make no money, but your upline makes a lot.
The Emerald or Diamond distributors can then be seen to be more and more successful as new people join the group. Forget the fact that products may or may not be moving through the group- the money is being made from the flow of tools. Therefore, when the upline distributors claim that "we aren't successful until you are successful," they are completely lying. They are already successful, at least when you measure the amount of money being made from the sale of tools. There is even evidence that many of the higher level distributors (such as Dexter Yager) have made a vast majority of their "Amway income" by selling motivational tools instead of selling products. Of course it can be argued that Dexter Yager should be making money off the tapes- after all, he owns the company that produces the tapes. But, how do the upline distributors justify the broad price markup from Yager's selling price of $0.50 per tape to the final distributors' buying price of $6.00 (or $7.00) per tape.
It can be further claimed that distributors misrepresent the importance of the support tools. Amway's corporate position is that the support tools are completely optional and no upline may withhold help from someone who does not purchase tools. While this is a good rule in theory, the reality of the situation is much different. Ask any distributor who is building the business, and you will get an answer such as, "Sure the tools are optional, but so is success." In fact, at a motivational rally in Lakeland, FL in November, 1997, an Emerald was quoted as saying, "Sure the tools are 100% optional, but they're 100% necessary." (actual quote) Of course, this statement is 100% contrary to Amway's corporate policy, but who will a distributor listen to- a faceless corporation or the guy standing right in front of him who is making a six-figure income? These statements imply that without the tools, you will not be successful in the Amway business. In fact, many people were successful in the Amway business BEFORE the tools were ever created.
As supporting evidence, the following table outlines the "volume discount" on tools, also known as the tools bonus. Unlike Amway's "discount"/ bonus checks, tools bonuses are calculated using a complex formula that is somewhat similar to the formula complexity of this annuities calculator and are based upon a number of factors: the level of the Direct distributor, the total number of tools sold in the group, the number of legs, the number of people in depth or width and others factors. This number is what is known as Credit Volume (CV). The figures shown in this table may vary with each Diamond's group and the numbers shown here do not imply or represent any possible or future earnings.
To see a table of tools, their retail value, and their CV amounts, click here.
|CV level||Tools Bonus|
For example, if you were a Direct distributor who sold $500 CV worth of tools that month, you would receive a 6% "discount.". This "discount" is actually your payment for selling those tools to your downline distributors. Again, for this example, let's only use the cost of audio tapes. And let's say each tape costs $6.00 but has a CV value of $5 (using the values from the Tools & CV Table). Using these figures, you (as a Direct) would have to move 100 tapes per month to make $500 CV. Assume that each distributor buys 2 tapes per week, 4 times a month, for a total of 8 tapes per distributor per month. For you to receive the 6% discount, you would only need 13 people buying tapes. (Chances are good that a Direct distributor has more than 13 people in his downline who are purchasing tools.) The 6% "discount" is then applied towards the CV total (of $500 CV), so you make $30.00 profit.
Most Direct distributors have 50 to 100 people in their group. If we use 100 distributors in a group, each buying 8 tapes a month, that equals 800 tapes per month. If each tape is worth $5 CV, the Direct would be at the 4000 CV level. He would receive an 18% tools bonus. And 18% of 4000 equals $720. This means that the Direct is making an extra $720 a month ON TOP OF whatever money is his receiving from Amway.
After the distributor reaches the 15,000 CV/ 33% level, he is entitled to additional bonuses. If a distributor has over 15,000 CV in one leg and over 4,000 CV in another personal group, he can receive the 3,2,1 bonus. To explain how this bonus is calculated, I will use the graphic to the right. In the example shown, we will assume that all of these distributors have over 4,000 CV in other legs.
Since Bill has a personally-sponsored distributor (Roger) who is doing 17,350 CV, Bill is entitled to a 3% pass-up bonus. (See red arrows.) This equals 3% of 15,000 CV or $450.00. Since Roger has a personally-sponsored distributor (Steve) who is doing 29,800 CV, Bill is entitled to a 2% pass-up bonus. This equals 2% of 15,000 CV or $300.00. Since Steve has a personally-sponsored distributor (Eric) who is doing 15,600 CV, Bill is entitled to a 1% pass-up bonus. This equals 1% of 15,000 CV or $150.00. Bill's total tools bonus equals 33% of 25,100 CV (or $8,283.00) plus $450.00 plus $300.00 plus $150.00 for a total of $9,183.00 per month (after the downline is paid).
The same formula can be applied to Roger (as shown by the blue arrows), Steve (as shown by the green arrows), and Eric (shown by the purple arrows).
The names shown in this example are purely fictitious. Any resemblance to real or imagined distributors is strictly coincidental.
Here is the tools bonus breakdown for the example shown:
Some people will argue that as you buy more tools, you should be entitled to a greater discount. After all, this is the basis for Amway's entire business: the more people you have in your group, the bigger your "discount" (or bonus check) should be. The only flaw in that argument is the fact that the discount applied to tools is dependent on a number of additional factors besides the number of tapes. And since no distributor knows what he "should be" earning, there is no way to double-check the upline's calculations. So, yes, there is plenty of opportunity for abusing this part of the business.
As more evidence, I recently saw a Diamond's 1099 form and found the following information. Again, the figures shown in this table may vary with each Diamond and the numbers shown here do not imply or represent any possible or future earnings.
|1099 from Amway||1099 from his upline|
This table shows that he received over $115,000 from Amway as a bonus check (which is low for a Diamond). He also received over $1,410,000 (yes, that is over 1.4 million dollars) from his upline for the sale of tools. He does have to pay out about 35% of the tools bonus to his downline, but that means he keeps over $916,000 for himself- about 9 times more than what he received from Amway. It is extremely clear that his income comes from the sale of tools, NOT from the sale of products. Some people may argue that this is just one Diamond's information and does not represent the entire Amway business. As more lawsuits are filed and as more websites are created, this kind of income is shown to be more accurate than distributors would like to believe.
As a side note, the same people who are making money off the tools are the same people pushing their distributors to purchase more tools. The idea is that if the distributors want to be a Direct themselves, they should purchase more tapes, attend more meetings, etc. At the same time the distributors are doing this, the upline makes more money. It makes you wonder if these distributors are really in the illegal tools-moving business rather than in the legal product-moving business?