If you’re reading this article then chances are you’ve been approached by an It Works! Distributor who has offered you an incredible ‘business opportunity.’
They’ve probably told you that you can get healthy and make money at the same time by using It Works! products and recommending them to your friends and family and inviting them to join you on your journey to financial freedom.
You’re probably considering it. Who wouldn’t want to own their own business, work from anywhere in the world and never have to worry about money?
However, you also have your doubts. You’ve heard people throwing around phrases like ‘pyramid schemes’ and ’scams’ and you’re concerned.
Is It Works! a pyramid scheme?!
I decided to do a deep dive into the It Works! MLM company and find out whether It Works! is a legitimate MLM company, or whether it is an illegal pyramid scheme in disguise.
This will be a long one, so make yourself a coffee (or pour a glass of wine), and get comfy!
Is It Works! a Pyramid Scheme or a Legit Business Opportunity?
Before we get into whether It Works! is a pyramid scheme or not, it is crucial that we understand a few things.
First – what does MLM even mean and what is an MLM company?
Second – what exactly is a pyramid scheme? Aren’t pyramid schemes illegal?!
Lastly, I will follow the money trail and attempt to answer the following questions about It Works! to establish whether It Works! is a pyramid scheme or not:
Are It Works! products any good?
How much money can you make with It Works! Global? (Are most people unable to profit?)
How much does It Works! cost to join? (Do you have to ‘pay to play?’)
How do you make money with It Works! Global? (Is there a focus on recruitment?)
Does It Works! use legal loopholes that allow it to function as a pyramid scheme?
If the answer is YES to the above questions (aside from the first, in which case it should be no!), then It Works! may well be operating as a pyramid scheme in disguise.
What is an MLM company?
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, Arbonne, Herbalife, Monat and even Tupperware!
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 ‘opportunity’. 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 scheme like It Works! 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 a pyramid scheme?
Pyramid schemes are structured very similarly to MLMs, but the main difference is that MLM companies sell a product as well as paying people to recruit 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 simply 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, this doesn’t mean that some MLM companies are not still operating as pyramid schemes in disguise. 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 assess whether It Works! is a pyramid scheme, we must dive in deep and look at just how this company operates.
Are you with me so far?
Good, so let’s get into it.
What is It Works! Global?
It Works! Global is a multi-level marketing company based in Florida. It sells skin care and nutritional products designed to make your body look and feel better, and it was founded by Mark and Cindy Pentecost in 2001. As of 2017, it was worth hundreds of millions of dollars.
Before creating It Works!, Mark Pentecost was a public school teacher in Michigan. He worked in a few different multi-level marketing companies before realising that if he wanted to make real money, he should start his own (red flag numero uno if you ask me).
The most popular It Works! product is a body wrap named the ‘Ultimate Body Applicator,’ or ‘That Crazy Wrap Thing’ (It Works! actually came up with this term as part of their marketing strategy). It claims to help you tighten, tone, firm and reduce cellulite, all within 45 minutes, and is definitely the product that the company is most well-known for.
It Works! also sells protein powders, hair supplements and various other health and wellness products.
It Works! do not have brick and mortar stores selling their products. Instead, the products are sold online through their ‘Distributors,’ who advertise on social media, using the products themselves and making videos showing off their results and talking about how the products have benefited them.
As with any MLM, the Distributors not only make a commission from selling products, but also by recruiting new people into the scheme, or ‘opportunity.’ Every person they recruit becomes part of their downline, and so the more people they recruit, the more money they make. It Works! is a very typical MLM company in the way that it is structured.
Something that sets It Works! apart from other MLM companies is that It Works! has a charitable wing of its company called the It Works! Gives Back Foundation. This non-profit organisation donates to causes such as cancer research and homeless outreach projects. I will say that although I don’t believe that the MLM business model is ethical generally, I will give them credit for using some of their profits for good, which is more than can be said for others.
Are the It Works! products any good?
In the nature of transparency, I should tell you that I have never used any of the It Works! products, and so I cannot tell you from personal experience whether they work or not.
That said, I do have a few thoughts…
First off, although It Works! preach about the endless health and weight loss benefits of their products, it is important to note that none of the It Works! products have been evaluated or approved by the Food and Drug Administration (FDA), and It Works! themselves have provided no scientific evidence to back up health claims that they make about the products.
In fact, the FDA have issued specific warnings about body wraps in general, saying that there are no long term contouring effects and that the practice can actually be dangerous.
The way that body wraps work is that they make you sweat out water weight, while the alcohol and green tea dehydrate the skin, which can make it appear tauter. This only lasts for a day or two and is not real weight loss, because – newsflash – you can’t lose weight by rubbing something on your belly, even if it is a ‘non-woven cloth wrap infused with a powerful, botanically based cream formula.”
Another red flag about the It Works! products is that the markup price is huge, meaning that any discount that you receive as a distributor or ‘loyal customer’ isn’t really a discount at all.
For example, It Works! sell ‘Hair Skin Nails Beautifying Supplement’ tablets, with the active ingredients being Biotin and Keratin (after reading the label, I can tell you that there is a whole lot of other shite in there as well).
Now, I take PURE Biotin tablets every day to promote my own hair and nail growth. I paid £10 on Amazon for 365 tablets. If you want to buy them from It Works! (and remember that they are not pure Biotin tablets), then you will be paying £48 for 60 tablets.
So for just under 365 tablets then, you’ll be paying £288, compared to my measly £10.
The same goes for the body wraps. The It Works! ‘Crazy Wrap Thing’ will set you back 99 USD, or 78 GBP, but you can buy similar wraps on Amazon for as little as 10 USD (8 GBP).
If you want to be really fancy then you can get the expensive ones for 40 USD or 32 GBP, which is still half the price of the It Works! version. Spoiler alert – the ingredients are all the same.
So, are the It Works! products good? Eh, it depends what you consider to be ‘good.’
I’m not going to sit here and say that the It Works! products are trash, because some of them may have a small effect. For example, if you want to look slimmer for a specific event then the wrap may help with that, but considering it’s more than double the price of everything else on the market, why would you choose this one?
It’s the same with the hair supplements. Many people do find that Biotin promotes hair growth, but why pay £288 when you can pay £10 for the same number of tablets?
It Works! strikes me as the same as any other MLM in this regard – mediocre products with prices so over the odds that you’d be crazy to even think of buying them.
How much money can you make with It Works! Global?
People in MLMs are notorious for bragging about their lavish lifestyles and how liberating it is to be ‘running your own successful business.’
It Works! is no different, with many distributors expressing gratitude to the company for enabling them to live their ‘best lives.’
However, can you really make money with It Works! Global? I had a look at the It Works! income disclosure statement to see for myself, and the numbers paint a pretty grim picture.
In 2019, you can see that of all the active distributors, 83.5% earned an average of 48 USD per month with It Works!
In fact, only 1.76% of active distributors earned 2009 USD a month, meaning that less than 2% of active It Works! distributors earned above minimum wage.
As far as ‘living the life of your dreams’ and ‘being financially free’ goes, only 0.07% of It Works! distributors were at the highest level of the
pyramid company in 2019 so, there’s that.
I don’t know about you, but if I know that over 98% of people are earning less than minimum wage in a company, then it doesn’t exactly make me want to rush to sign up with that company.
Now if you think that’s bad, wait until we dissect this even further.
You see, these numbers do not represent profit for the distributors. It Works! themselves say that ‘The figures above refer to gross income (total income before any expenses are deducted). The expenses a Distributor incurs in the operation of his or her It Works! business vary widely. Expenses for Distributors can be several hundred or thousands of dollars annually.’
Now I have to hand it to It Works! – it’s nice of them to put that last bit in there. Other MLM companies that I have looked at have never admitted that their company will set you back thousands of dollars a year. It may be in the small print but it’s there, and for that, I applaud them.
That said, from my calculations, it seems that only 5.24% of all It Works! distributors made any profit from their It Works! business, while the remaining 94.76% would have lost money.
In fairness, these numbers are better than Arbonne’s, where only 0.4% people working for Arbonne in the UK made above the National Living Wage, meaning that 99.6% of people were either working for less than that, or even losing money.
However, it’s still not great, is it?
SO, are most people unable to make a profit with It Works! Global?
YES. This means that It Works! has met one of the criteria for being a pyramid scheme.
How much does It Works! cost to join?
As I mentioned above, the money earnt by It Works! Distributors is not all profit, and as It Works! said themselves, the amount that Distributors spend to run their businesses can be ‘several hundreds or thousands of dollars annually.’
Here’s how It Works! (hahaha, It Works! Get it?).
First, you must buy the Business Builder Distributor Kit, which costs 99 USD and consists of a pack of the wraps, tiny samples of the gel & some catalogs.
Once you’ve done that, you’ll be a ‘Wrapreneur’ (I’m not kidding – this is what It Works! people actually call themselves). You will be given your own website, which essentially functions as a collection of affiliate links – any product bought from your personal webpage will count towards your commissions.
You have to pay a monthly 20 USD ‘website fee’ for this.
Now, as someone who uses affiliate links and owns my own actual website (as in – I am not renting a page on the website of a huge corporation), this seems like a lot.
It Works! Distributors defend this fee by claiming that ‘you have to pay for any website,’ but I pay 3.95 USD a month to host my entire website, sooo…yeah.
I have also never paid for an affiliate link. I can receive affiliate commission on any product I recommend from GetYourGuide, Amazon, Hostelworld etc., and I don’t pay anything for this privilege because I am making the company money.
There’s also a cheeky 35 USD It Works! renewal fee every year.
So, thus far we have to pay 344 USD per year to have ‘our own business’ with It Works!
But ah! That’s not all!
In order to qualify for any commission, you will need to maintain a monthly autoship of 80 unit volume per month, which is equivalent to around 112 USD.
Your sales can count towards this, but bear in mind that if you’re going to be successful at selling any products, then you should be using them yourself and showing off the results on social media.
The idea of any social marketing job is to use your influence to sell products. You should boast about how amazing the products are, how they have changed your life and how you would be lost without them. You should make videos and take photos of you using the products, and the before/after results of them.
This is the reason why so many brands pay celebrities to endorse products – if we see someone we know and trust recommending something, we are more likely to buy it.
The catch is that influencers and brand ambassadors actually GET PAID to do all of this AND THEY ARE NOT PAYING FOR THE PRODUCT. With It Works!, you have to buy the products yourself.
You also have to sell 400 unit volume of products every month, which amounts to around 560 USD.
If you do not sell 560 USD worth of products in a month, you will receive NO commission on the things that you HAVE sold for that month.
If you add everything up, the cost of running an It Works! business is at least 1500 USD per year, which is more than 83% of Distributors make. This does not factor in how much it costs to run ‘Wrap Parties’ and any other promotional campaigns that a Distributor may host.
I’ll say it again though – these numbers are better than Arbonne and Monat’s numbers, but an 83% chance of losing money is still too much for me.
So, do you have to pay to play? YES. This means that It Works! has met another one of the criteria for being a pyramid scheme.
How do you make money with It Works! Global?
The main thing that sets illegal pyramid schemes apart from MLMs is the product.
In order to avoid being classed as a pyramid scheme, a business must make 70% of its profits through retail sales to the general public rather than on recruiting others into the business.
Now, with It Works! we do see Distributors showing off the products online.
Many It Works! Distributors will post before and after photos of themselves using the Ultimate Body Applicator wrap, along with a lengthy caption about how wonderful they feel after using it.
That said, you don’t have to look too far to see them also promoting the ‘opportunity,’ and it’s easy to see why.
While you can make some money on ‘Retail Commission’ and ‘Loyal Customer Commission’ (product sales), in order to make real money with It Works!, you must focus on making ‘Team Commission,’ which is residual income that trickles up from your downline.
The more teams and downline members you build, the more commissions and bonuses you receive. Also, the more people you recruit, the higher your rank will go in the company, meaning that you get an even bigger slice of everyone’s pie.
I should also point out that in the It Works! compensation plan, there are 16 pages devoted to how you make income from recruiting and only a couple of paragraphs on selling the product.
This means that while you can make some side income from selling It Works! products to your family and friends, it is impossible to get rich if you focus solely on product sales, and it is impossible to move up in rank if you do not recruit people to distribute underneath you (remember, this is multi-level marketing).
So, is there a focus on recruitment within It Works! Global? YES. This means that It Works! has met another criteria for being a pyramid scheme!
Does It Works! use loopholes that allow it to function as a pyramid scheme?
Considering that I had to answer YES to all of the questions that help to determine whether or not a business is functioning as a pyramid scheme, I’m gonna go with YES on this one.
For example, MLMs have to make the majority of their profits based on retail sales to the general public. Something that stands out to me with It Works! is that they give customers huge discounts if they buy their products as a Distributor rather than as a Retail Customer.
In fact, many Distributors will tell you that the reason why so many It Works! Distributors don’t make any money is because most people only sign up for the discount.
Now, if a company’s own staff members are the ones buying the products, then that company would be classed as a pyramid scheme.
However, It Works! gets around this by pointing out that its Distributors do not work FOR It Works! – they are independent contractors.
I don’t know about you but this certainly sounds like a loophole to me…
A second loophole that It Works! exploits is that MLMs have to show that they do not have a ‘recruitment focus.’
While I am no lawyer, it doesn’t take an expert to work out that the It Works! products only really exist for show. Everyone who is making money in It Works! is doing so because they are earning passive income from their downlines, not because they are selling body wraps to people on Facebook.
However, because It Works! do not directly pay Distributors to recruit, they manage to wiggle their way around this. While It Works! Distributors definitely make big money from recruitment, it is in the form of ‘bonuses’ and ‘promotions’ rather than a direct payment. Hmm…
I’m sure that by now you can see what I am trying to say. Just because something cannot technically and legally be defined as a pyramid scheme doesn’t mean that it isn’t operating in exactly the same way as a pyramid scheme does in practice.
I mean, if it walks like an Egyptian then it probably talks like one too, if you’re picking up what I’m putting down.
Is It Works! a pyramid scheme? Final thoughts
It Works! CEO Mark Pentecost once said, about the wonders of multi-level marketing – ‘I think it’s the greatest industry there is because the American Dream is back alive. I was a teacher and a coach and now I’m the CEO of a multimillion dollar company.’
And he isn’t wrong.
The multi-level marketing industry IS the greatest industry in the world, if you are the person to set up your own MLM (or one of the very first people to get in).
You absolutely CAN become a millionaire, or even a billionaire, from multi-level marketing, but the ONLY way to do this is if you are sitting at the top of the – say it with me – pyramid.
To the 99% of people who will lose money in an MLM scheme, multi-level marketing is NOT the greatest industry in the world, nor does it provide a real shot at success.
The facts are that MLMs and pyramid schemes don’t work unless somebody loses, and studies have actually shown that MLMs with products are actually worse than ‘naked’ or ‘conventional’ pyramid schemes.
In a regular pyramid scheme, 90.4% of people involved lose their money, while in product-based pyramid schemes (read: MLMs) that number JUMPS to 99.88%.
99.88% you guys.
While the law may not yet have caught up to MLMs, or ‘product-based pyramid schemes,’ or ‘pyramid schemes in disguise,’ it doesn’t mean that it won’t.
All that It Works! is doing is manipulating legal loopholes in order to function as a pyramid scheme without being caught. I believe that for It Works!, and other similar companies, the FTC will catch up sooner than they think.