Is Beautycounter an MLM or Legit Business Opportunity?

Until recently, I had never heard of the Beautycounter MLM business. It certainly doesn’t have as much of a presence on social media as companies like Monat or Arbonne, and I haven’t come across many anti-MLM YouTubers talking about it.

It was only when I was doing some keyword research for another post that I stumbled upon Beautycounter, and found that a surprising amount of people are searching for not only the Beautycounter MLM itself, but also Beautycounter controversies, whether Beautycounter is a pyramid scheme and if you can really make money as a Beautycounter Consultant.

This is really great to see!

It means that people are doing their due diligence and researching something before signing up blindly to what could potentially be a scam.

However, it didn’t take long for me to notice a problem.

A big problem.

You see, most of the Google results for questions about Beautycounter, are written by Beautycounter Consultants.

If you read their article and decide to sign up to the company using their link, they stand to benefit financially, meaning that those articles are going to be extremely biased.

‘But you hate MLMs! You’re even more biased!’

It’s true. I make no secret of the fact that I am against the MLM business model as a whole.

With that said, whenever I do a deep dive into an MLM company, I always go in with my eyes wide open and my biases at the door. I want to look at the facts, not just tell you my feelings.

With this in mind then, let’s take a look at the Beautycounter ‘business opportunity,’ and find out whether Beautycounter is a good MLM to join, whether you can really earn money as a Beautycounter consultant, and if Beautycounter is a legitimate direct sales company or whether they are operating as a pyramid scheme in disguise.

So, without further ado, pour yourself a drink and let’s get into it.

Is Beautycounter an MLM, Pyramid Scheme, or Legit Business Opportunity?

What is MLM?

Is Beautycounter an MLM?

Yes, it is, but what does that actually mean?

First things first, I should explain exactly what MLM is and how an MLM company functions compared to a regular business.

MLM stands for multi-level marketing, and MLM companies are also known as network marketing or direct sales companies.

MLMs have been around for years, and popular MLMs include Avon. 

You don’t receive a salary in an MLM. 

Instead, you earn money from selling products to people you know and recruiting others into the business. When you recruit a new person and that person begins earning money, you will earn commission from the sales and recruits generated from THAT person. 

This continues down in multiple levels (hence multi-level).

Imagine a triangle. If the person at the very top of the triangle recruits 10 people, and each of those 10 people recruit another 10 people, and each one of those people recruit another 10 people, you will be making commissions from EVERYBODY in the triangle because they are all in your direct downline (the people underneath you in an MLM are known as your ‘downline’ and you are their ‘upline’). 

All you had to do was recruit 10 people and you make money from 1100.

While you can always make money from selling whichever product your MLM company offers, most people in MLM companies prefer to recruit others because they stand to make a lifelong passive income from that person, whereas if they sell a product they will just receive a one-off commission.

As there is a lot of money trickling up to the top of the triangle, the people at the top are making a lot of money, while the people at the bottom are making the least.

The ultimate aim of somebody in an MLM company like Beautycounter therefore, is to have as many people in their ‘downline’ as possible, enabling them to make large amounts of passive income for little work.

What is Beautycounter?

Beautycounter was founded in 2013 by Gregg Renfrew. It is based in California in the US, and is a cosmetics and skincare company with a focus on ‘clean’ beauty, with no harmful ingredients and no harm caused to the environment.

In fact, Beautycounter has a long list (called the ‘Never List’) of ingredients that they vow never to use in their products due to the alleged harm that they can cause.

It has been a Certified B Corporation since its inception, which means that it meets the ‘highest standards of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose.’

This is a positive sign, and shows that, at least on some level, Renfrew is doing her best to create cosmetics which don’t pollute the planet.

Beautycounter products include moisturisers, serums, cleansers, makeup, body washes and more. They are definitely on the expensive side, with a mascara costing 27 USD and a moisturiser costing 89 USD, but then again, all MLM products tend to be on the expensive side (with the rare exception of Avon, whose cosmetics are actually really affordable). 

However, expensive or not, the reviews seem pretty good (for the most part) when it comes to the quality of the products themselves.

Sidenote: I won’t be diving too deeply into ‘clean beauty’ and the ‘Never List’ here, but let’s just say that Beautycounter isn’t as ‘clean’ as they would have you believe, and the Never List is basically just a list of ingredients that are already banned in the European Union and other countries around the world.

How do you make money as a Beautycounter consultant?

I took a look at the Beautycounter compensation plan to see how Beautycounter Consultants are making money.

Surprisingly, it was a lot easier to understand than pretty much any other MLM compensation plan I’ve seen, although the main ways of making money as a Beautycounter Consultant are the same as any other MLM.

There are 4 main ways that you can make money with Beautycounter:

1. Retail commissions

You earn a 25% commission on every product sale you make. These can be sales to the public, sales to members of your ‘team’ or even ‘sales’ to yourself.

2. Personal sales bonus

If you sell more than 750 USD worth of products in a month, you make 30-35% commission from your sales rather than 25%.

3. Override commissions

These are the commissions generated from your ‘team’ or the people beneath you in the company. Whether your team are buying products for themselves or selling them to other people, you will receive a commission. The bigger your team, the more commissions you stand to make. This commission ranges from 5-9%.

4. Frontline business builder

If somebody in your downline progresses to a higher rank in the company, you will receive a commission ranging from 25-100 USD.

How much money can you make as a Beautycounter Consultant?

To see whether it is likely that you will ever make money as a Beautycounter Consultant, we will take a look at their Income Disclosure Statement (IDS).

This is a document which outlines exactly how many people are registered as Beautycounter Consultants, how many of them are making money, and how much money they are making.

Now, before I get into the actual figures, I do want to commend Beautycounter for having an up to date IDS on their website. Many MLM companies either don’t release their income disclosure statements at all, or they just release one every few years.

I also want to applaud Beautycounter for publishing the average amount that it costs to be a Beautycounter Consultant (usually I have to do a lot of number crunching to figure this out!) as well as publishing income rates for people who have just joined the business.

This latter point is important because it shows that people who have only been working for Beautycounter for 6 months earn less money. 

While I still don’t agree with the MLM business model, I do wish that more MLM businesses were as transparent as Beautycounter in this regard.

I also like that they share median averages, as they are more representative of actual earnings than mean averages, where one outlier can skew the entire result.

As far as I can tell, this is a new addition (analyses of Beautycounter in 2019 showed that they didn’t reveal the median average), meaning that Beautycounter are evolving each year to be more transparent.

This is, of course, a good thing.

However (there’s always a however).

Transparency is all well and good, but what really matters is how much people are actually earning with Beautycounter.

Let’s take a look.

Beautycounter’s income disclosure statement looks at 74,472 US Consultants. 

It found that:

• 25% of Consultants earned nothing
• 35% of Consultants earned over $500
• 22% of Consultants earned over $1,000
• 1% (679) of Consultants earned over $30,000

This means that of 74,472 people, only 679 of them earned more than $30,000 during the 12 month period. 

They also have a separate statement which shows how much new Consultants earned in their first 6 months with Beautycounter.

On this statement, we see that:

• The median total first-6-month income for new Consultants was $103
• 30% of new Consultants earned nothing
• 50% of new Consultants earned over $100
• 23% of new Consultants earned over $500
• 12% of new Consultants earned over $1,000
• 2% of new Consultants earned over $3,700

These numbers are pretty grim, but they are actually better than some MLMs. In fact, 99.6% of people in MLM companies make no money or lose money.

However, we can clearly see that most Beautycounter Consultants are making little to no money, and these figures are before expenses.

How much does it cost to be a Beautycounter Consultant?

In the income disclosure statement, we saw that 22% of Beautycounter Consultants earned over $1000 during 2020.

Now, while $1000 is by no means a full-time salary, it is something, and it is more than people in most MLMs make.

However, this number does not take into account the (on average) $187 that Consultants spent on ‘Starter Kits’ in 2020, nor does it factor in the $50-98 needed for an ‘Enrolment Kit,’ as well as other expenses such as:

• Products for personal use
• Products used for samples/demos/ giveaways and promotions
• Expenses incurred through hosting ‘socials’ including products, food and drink, gas etc.
• Social media promotions
• Cost of attending meet-ups and conferences
• Phone bills, WiFi bills, electricity bills etc.
• Costs of running a blog or other promotional website (including webcams, microphones, lighting etc. if the person has a YouTube channel)

These expenses can rack up into the thousands, so it is highly likely that the 22% of Consultants making $1000 gross profit were not taking in $1000 net profit, and the people that earned less than that were likely losing money.

This is a shame, but it is not unusual with these types of companies.

Is Beautycounter a pyramid scheme?

I am not the FTC. I cannot say, without a shadow of a doubt, whether or not Beautycounter is a pyramid scheme.

I’m also not trying to get sued by Beautycounter.

So, it is important that I make clear that everything which follows is alleged and my own personal opinions about Beautycounter.

Okay?

Okay, so, in order to determine whether or not Beautycounter is a pyramid scheme in disguise, we must first outline what exactly a pyramid scheme actually is.

What is a pyramid scheme?

Pyramid schemes are very similar to MLMs, but the main difference is that MLM reps sell a product as well as recruiting others into the business. 

A pyramid scheme simply takes an initial investment from each member and promises to pay them for enrolling others into the scheme.

You are never buying a product; you are buying into an ‘opportunity’ to get rich.

However, as members of the scheme increase, recruiting quickly becomes impossible and so most members are unable to profit from the scheme or even make their initial investment back. 

The Wikipedia diagram below illustrates just how unsustainable this business model is – after just a few levels of recruitment, the scheme would have recruited everybody on the planet and there would be no-one left to recruit!

Because it is impossible for most people to make any money in a pyramid scheme, pyramid schemes are illegal.

MLM companies are not illegal because there is a possibility to make money from selling products and not just recruiting.

However, although a business may be carefully crafted to appear like a totally legit multi-level marketing company, it could still be exploiting loopholes in order to skirt around the law and function as a pyramid scheme in disguise.

In order to determine whether Beautycounter is functioning as a pyramid scheme, we must try and answer 3 questions:

– Are most people unable to profit?
– Do you have to ‘pay to play?’
– Is there a heavy focus on recruitment?

Are most people unable to profit in Beautycounter?

When we looked at the Beautycounter Income Disclosure Statement, we saw that the vast majority of Consultants were not making anything close to a full-time wage, and when taking into account their expenses, it is likely that most of them are losing money.

This is in direct contrast to the bold income claims that many Beautycounter Consultants make.

In fact, CEO Gregg Renfrew herself said that even in times of COVID-19, Beautycounter is a ‘business opportunity that affords people to replace much needed income in a time where so many people are losing their jobs and being furloughed.’

With 82% of Beautycounter Consultants earning $1000 or less in 2020, Gregg’s claims that Beautycounter is a real ‘business opportunity’ that can ‘replace much needed income’ seem unfounded.

Instead, the Income Disclosure Statement reveals that most people in Beautycounter are unable to profit.

Do you have to ‘pay to play?’

Not only do you have to purchase a $50-98 Enrolment Kit when you sign up to Beautycounter, but you also have the option of buying a Starter Kit full of products. 

Beautycounter themselves state that the average amount spent on Starter Kits during sign-up is $187. 

This does not include the money spent on the Enrolment Kit.

A Beautycounter Consultant will also rack up other expenses, of which I gave some examples earlier.

These include phone/internet bills, gas spent driving to parties and presentations, products to use as samples and personal use etc.

Another incentive for Beautycounter Consultants to spend money buying Beautycounter products themselves is that, in order to remain ‘active’ and receive any commission, you have to hit a sales target ($1200 worth of products in 6 months).

If you’re struggling to make sales but want to continue earning commission, one way to do this is to buy products yourself which count towards your target.

A Beautycounter Consultant named Teri confirms this in her own article about the business.

She says: ‘The $1200 minimum includes your OWN purchases. I see a lot of people get close to that with their own orders, but you are not personally required to buy anything. Does it help? YES. Is it required? NO.’

This shows that even though you don’t have to continue purchasing Beautycounter products, there is definitely an incentive to do.

Plus, in the direct sales industry, if you’re not using the products yourself and showcasing how good they are, people are never going to buy from you.

You have to live the product. 

It’s just how it works.

So, do you have to pay to play with Beautycounter?

Yes. Even if you never buy a Starter Set or products for yourself, you still have to pay to sign up and you will accrue additional expenses as time goes on.

Is there a heavy focus on recruitment in Beautycounter?

At first, when we look at the Beautycounter compensation plan, it seems like most of your money will come from retail sales, but actually, Gregg Renfrew herself describes the Beautycounter business opportunity as its ‘greatest product,’ signalling a clear focus on signing people up to the business rather than selling cosmetics.

It’s not only the CEO of Beautycounter that sees recruitment as a great thing. The Consultant I quoted earlier says that ‘Essentially, as you help grow more leaders, you get paid more,’ clearly stating that the bigger your downline, the bigger your pay cheque.  

It is clear that recruiting is big business in Beautycounter.

Something especially interesting to note is that your Beautycounter downline can only be 3 levels deep. At first, this looks good as it means that you can’t just rely on your huge downline to do all the work while you sit back and watch the money roll in.

However, while one downline can only span 3 levels, there is no limit to the number of downlines you can have.

Because of this 3 level limit, there is more incentive on the individual Consultants to recruit as the only way to make a large amount of passive income is to have multiple downlines that you yourself have personally recruited into the business.

In summary?

Yes, you can make money selling Beautycounter products, but, as with most MLMs, the real money is made by signing other people up to the company and helping them ‘grow.’

Diving Into the Beautycounter MLM – Is Beautycounter a Pyramid Scheme? | Final Thoughts

I hope I’ve shown in this article that Beautycounter is not a good business opportunity, most Beautycounter Consultants will not make money with Beautycounter, and Beautycounter definitely meets the criteria of an MLM operating as a pyramid scheme in disguise (or as I like to say, a pyramid scheme with products).

While Beautycounter may seem like ‘one of the good MLMs,’ the truth is that ALL MLM companies, by default, are exploitative.

They do not replace a full time income, they are not good business opportunities, and you have less than a 1% chance of becoming wealthy (or even making a living wage) if you join one.

If you ask me?

Joining Beautycounter is a waste of time and money.

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