It’s interesting occasionally to take a step back and compare an Amway or Quixtar business with a comparable result in the “real world”. Though Amway doesn’t like us to say it, a properly structured business can pay you a “passive” income, i.e. one you get without working. With the internet and marketing technologies such as “ditto delivery” this can happen to a certain extent at Platinum and below, but generally in those situations you will need to continue working, at least part-time, to maintain a particular income as customers/IBOs can and will drop out for various reasons. At Emerald and above however, you have found and developed other leaders to the Platinum level and above who will have their own reasons and financial incentives for doing this “maintenance” work. The more of these Platinums and above you have in each leg of your business, the more stable any “passive” income will be. Indeed it may even increase!
Not long after I joined, my upline told me that once you build a business to Emerald and higher, you should expect that when you stop working your business will shrink by at least a third. Now, according to ThisBizNow the average Diamond in North America had a yearly income from Quixtar of approximately US$150,000. So, assuming the business was built properly, if they stopped working they could expect an a yearly income of US$100,000/yr+.
In studying investment vehicles, the Department of Family, Consumer, and Human Development at the University of Utah found the following historical rates of return, after adjusting for inflation –
|Small Company US Stocks||9.5%|
|Large Company US Stocks||7.3%|
The higher the rate of return, the greater the risk. FinancialEngine.com reports that Small Company stocks typically have a rate of return between -14% and 30%, Large Company stocks between -12% and 26%, and Bonds between -4% and 9%. In other words, you may end up with less than you started with!
So, how much would we need invested to get a return of US$100,000/yr? Ignoring risk, you would need –
|Small Company US Stocks||9.5%||$1,052,632|
|Large Company US Stocks||7.3%||$1,369,863|
So, to develop a “passive” income similar to that of a retired Diamond, you would need to save and invest at least a million dollars, after tax, and risk losing it all, or if you wanted it to be relatively safe, you need at least US$5,000,000.
Let’s say it took you 20 years to build a Diamond business, and then you retired. That would be the equivalent of saving $250,000/yr, after tax. Even with compounding at 5%, you’d need to be saving (inflation adjusted) $133,000/yr or $11,000/mth to match building a Diamond business over 20 years.
Do you have an extra $11,000/mth, after tax?
Building a Diamondship in 6 years is the equivalent of saving and investing just over US$49,000/mth for 6 years
What about an Emeraldship? According to ThisBizNow , the average Emerald income is a little over US$72,000/yr. Assuming it drops a third at “retirement”, that would leave an income of just under US$50,000/yr. Let’s take 10 years to build a solid, stable Emeraldship. Plenty of depth so it’s not going anywhere.
Building a Emeraldship in 10 years is the equivalent of saving and investing just over US$14,000/mth for 10 years
So, IBOs, if you’re out there working hard, showing the plan, doing what’s necessary – next time someone asks you how much you are making, tell them “the equivalent of $14,000/mth earned tax-free and invested so I can retire in 10 years!”
As an added bonus, while you’re building the Emerald asset, you get to spend all the money you make along the way!
NOTE: It’s a little appreciated fact that, unlike most stocks and bonds, Amway and Quixtar income is automatically adjusted for inflation. You’re paid a percentage of products purchased. If inflation increases and the prices of those products increase, so does your income!
NOTE 2: An Amway/Quixtar critic has claimed that the above discussion is invalid because of one assumption used – that you should expect the business income shrinks by a third after you “retire”. This assumption was based on discussions with a very experienced IBO with a very large business (multiple downline Crown Ambassadors). If you chose to, you can redo the calculations with different levels of “shrinkage”, the same principle applies. In reality, how stable the income is entirely depends upon how well you’ve built the business and “transferred leadership” to others. I’ve had reports of people income increasing, not decreasing, after “retirement”.