Chances are you’re here because you’re considering joining Monat and becoming a Monat Market Partner.
You’ve probably tried their products and figured you may as well take the next step and register as a Market Partner so that you can start selling Monat to your family and friends and enjoy the additional income.
And why wouldn’t you? Who wouldn’t want to have their own business, work from anywhere in the world and never need to worry about money?
However, you’re a bit hesitant.
You’ve heard people saying that Monat could be a pyramid scheme or a scam, and you want to do your own research before you dive in headfirst.
This article is here to help.
We are going to dive into the Monat business opportunity and find out whether you’ll be able to make money selling Monat, and whether Monat could be a pyramid scheme in disguise.
Is Monat a Pyramid Scheme? The Truth About Selling Monat
What is MLM?
Before we get into Monat itself, you ought to know what an MLM company is, because this is the business model that Monat uses.
MLM stands for multi-level marketing, and MLM companies are also referred to as network marketing companies.
MLMs have been around for years, and popular MLMs include Isagenix, Beachbody, Color Street and even 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 by 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 every one of those 10 people recruit another 10 people, and each one of those people recruit another 10 people, you’ll be making commissions from EVERYBODY within the triangle because they’re all in your direct downline (the people underneath you in an MLM are referred to as your ‘downline’ and you’re 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’re just going to receive a one-off commission.
The ultimate aim of somebody in an MLM company like Monat then, is to have as many people in their ‘downline’ as possible, enabling them to form large amounts of passive income for little work.
What is a pyramid scheme?
Pyramid schemes are very similar to MLMs, but the main difference is that MLM reps can make money from selling products as well as recruiting others into the business.
A pyramid scheme takes an initial investment from each member and promises to pay them for enrolling others into the scheme, so participants are buying into an ‘opportunity’ to get rich.
However, as members increase, recruiting quickly becomes impossible and so most members are unable to profit 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 in the world and there would be no-one left to recruit!
Because it’s impossible for most people to make any money in a pyramid scheme, pyramid schemes are illegal.
MLM companies aren’t illegal because there’s a chance to make money from selling products and not just recruiting people.
With that said, many pyramid schemes produce products in order to look like a legitimate MLM company, but the people in those schemes aren’t actually making much money from product sales.
Companies like this are referred to as ‘pyramid schemes with products’ or ‘pyramid schemes in disguise,’ and if the FTC investigates one of these companies and discovers that individuals in them are making most of their money from recruiting, they can be shut down.
What is Monat?
MONAT Global is a multi-level marketing company that sells haircare and skincare products including shampoos, conditioners, serums and more. It was founded in 2014 by Luis Urdaneta. Rayner Urdaneta is the CEO and Stuart A. MacMillan is President of Monat.
Interestingly, MacMillan was the former CEO of the TelexFree 3 billion dollar Ponzi Scheme that was shut down in April 2014, 6 months before MacMillan was appointed President of Monat.
It is unclear why Monat would want somebody like MacMillan leading their company, but hey, it is what it is.
Monat (whose name stands for ‘Modern Nature’) don’t have brick and mortar stores selling their products. Instead, the products are sold online through their ‘Market Partners’ who advertise on social media, using the products themselves and making videos talking about how the products have benefited them.
In addition to selling products, Monat Market Partners make money by signing up other Market Partners. While they don’t get paid directly for recruiting people, they do get ‘bonuses’ for building a team, and they also make commissions from every sale that people in their downline make.
The more people a Monat MP recruits, the more money they make.
Inside the Monat Business Opportunity
How do you make money as a Monat Market Partner?
The main thing that sets MLM companies apart from illegal pyramid schemes is the product.
This dates back to the 1979 case of Amway vs the FTC. After 4 years in court, Amway was found to be operating a legal business rather than a pyramid scheme. This ruling came down to technicalities in some of the wording in Amway’s paperwork, which has come to be known as the 70/30 rule.
The 70/30 rule means that 70% of a company’s profits must be made through product sales instead of recruitment. If the scale is tipped then the company could be classified as a pyramid scheme.
At first glance, we do see somewhat of a focus on selling products with Monat.
Many Monat Market Partners post before and after photos of their hair after using Monat products, and the products are prominently featured on the website, together with lengthy descriptions of the products and their benefits.
However, to find out the truth, I decided to take a look at the Monat compensation plan to see how Monat Market Partners are really making money.
The main ways that you can make money with Monat are as follows:
- Selling Monat to retail customers and VIP customers
- Enrolling people as VIP customers. If you sign 4 people up in a month, you get a $60 bonus
- If you sign people up as a Market Partner, you can benefit from their purchases
- You receive bonuses for rising within the ranks within Monat. The way to rise through the ranks is by recruiting people into the company
- If you sign somebody up as a Market Partner and convince them to buy a product pack, you will receive a bonus
What this tells us is that Monat are really keen to push product sales on Monat Market Partners instead of retail customers, and that there is a lot of cash to be made from growing an enormous team.
Two defining characteristics of product-based pyramid schemes are the focus on endlessly recruiting others into the business, as well as the distributor actually being the main customer.
How much money can you make with Monat?
To see how much money people are making with Monat, I took a glance at their Income Disclosure Statement (IDS) from 2018.
An Income Disclosure Statement is a document which outlines exactly how many people are registered as Monat Market Partners, how many of them are making money, and how much money they’re making.
Before we break down the numbers, it’s important to note that 47% of Monat Market Partners were considered inactive and so were not eligible to receive any commission at all in 2018.
In other words, half of Monat Market Partners earned absolutely nothing.
Of the people that did earn money with Monat, 94.03% of them earned an average of $183 in 2018.
In fact, when we look at the chart, we see that individuals in the first 7 ranks of the company all earned less than $40,000.
This means that 99.89% of Monat reps earn less than you could in a full time job.
In other words, only 1 in every 909 people make a real living from Monat.
It is also interesting to note that these numbers don’t represent profit because they do not take any expenses into consideration.
How much does it cost to be a Monat Market Partner?
The numbers on Monat’s Income Disclosure Statement do not take into account expenses associated with being a Monat Market Partner.
Monat Market Partners have to pay for registration fees, a starter kit, product samples and the actual Monat products themselves.
The sign-up fee for Monat is $49 and this must be renewed annually.
You must also purchase the ‘Starter Kit,’ which is $99 and includes the following:
- 5 ‘Meet Monat’ brochures
- 5 VIP Monat brochures
- 5 Product Magazines with price lists
- 1 SMART Start Workbook
- 1 pack of Skin Routine Tester Strips
- 1 jelly bag
- Skincare product cards
- Assorted samples
If you want to buy Monat products to get you started, then you have the option to purchase different packages which include the Starter Kit and a few discounted products (meaning you don’t need to purchase the Starter Kit on its own).
The cheapest pack is called the ‘Essentials Pack.’ It costs $199 and includes the Starter Kit and 5 hair products.
The most expensive pack is the ‘Optimum Pack’ which costs $799 and includes the Starter Kit and 35 products. This is the best ‘value,’ as the retail price of all of this would be $1873, but spending almost $800 on shampoo is rather a lot!
While it isn’t mandatory to buy a Product Pack, your upline will certainly encourage you to do so as they will make a commission from you, and you will also need to use Monat products at some point as social selling involves using the products and recommending them to your social network.
Although the costs of signing up to Monat are pretty high, it doesn’t stop there.
In Monat, every distributor must generate 200 PV per month so as to ‘remain active’ and earn any commission from their downline. 200 PV literally translates to $200, and you can generate this by buying $200 worth of Monat products, selling products (a small percentage of the product price will count towards your PV), or recruiting others.
Every person you sign up to your downline adds to your PV, and a portion of their sales will also contribute to it.
What tends to happen if Monat MPs don’t hit their $200 sales target is that they will buy products themselves to make it seem like they’re selling more than they really are.
However, even if you never buy a single Monat product as an MP, the absolute minimum that you have to spend in order to join Monat is $148 (the website and Starter Kit). When you take into account that the average earnings of 94% of Monat Market Partners was just $183 in 2018, joining Monat doesn’t seem like a realistic way of earning money.
Is Monat a pyramid scheme?
So far, the FTC has not ruled Monat to be a pyramid scheme, so technically speaking, it is a perfectly legal multi-level marketing company.
In order to see whether Monat is a pyramid scheme in disguise, we must attempt to answer 3 questions.
1. Are most people unable to profit?
When we checked out the Monat Income Disclosure Statement, we saw that 94% of Market Partners were only making $35 annually after the Starter Kit and website fee is taken into account.
This assumes that the Market Partner didn’t buy a single Monat product all year, which is just not realistic. I have yet to see a Monat Market Partner who doesn’t use the products religiously.
What this tells us is that most people in Monat are not making anything close to a full-time wage, and that most of them are probably spending more money than they’re making.
We can also see that although the people at the top of the company are making a significant amount of money, the vast majority of people are not making a profit.
2. Do you have to ‘pay to play?’
Not only does it cost over a hundred dollars to sign up as a Monat rep, but the compensation plan is designed in a way that pushes Market Partners to purchase Monat products themselves.
For example, you get bonuses if your downline buys Monat products, and you also receive bonuses if you persuade a new recruit to buy an expensive product pack.
This makes it clear that the biggest customers of Monat products are actually the Monat distributors themselves, rather than retail customers, which is a huge red flag that Monat is a pyramid scheme in disguise.
So, do you have to pay to play with Monat?
3. Is there a heavy focus on recruitment?
As we have seen so far, the only way to make real money with Monat is by growing a large team underneath you.
Of course, Monat Market Partners don’t get paid directly for recruiting people.
That would be too obvious.
Instead, they get promoted, which then means that they earn higher commissions. They also get paid when the people they’ve recruited make sales and recruit people.
This is a fine line, but an important one because it allows Monat to skirt around the lines of being classified as a pyramid scheme.
So, is there a big focus on recruitment with Monat?
Yes. While you can earn money by selling products, the real money to be made is by growing a large downline and making passive income from it.
Quick Recap FAQ
Monat is a multi-level marketing company that sells hair and skincare products. It has come under fire for having similarities to a pyramid scheme.
According to Monat’s Income Disclosure Statement, over 94% of people in the company made less than $183 in 2018 and less than 1% made a living wage.
To sign up as a Monat Market Partner, you’ll need to pay a $49 website fee and buy a $99 Starter Kit. You will also be encouraged to purchase a Product Pack, where prices start at $199.
Monat has not been officially classified as a pyramid scheme by the FTC but it does share many similarities to an illegal pyramid scheme.
Is Monat a Pyramid Scheme? Final Thoughts
Most MLMs closely resemble pyramid schemes and Monat is no different.
Not only is there an enormous emphasis on recruitment, but thanks to the very nature of the compensation plan, the biggest customers of Monat products are Monat reps themselves!
With the costs required to work as a Monat Market Partner and the heavy focus on endless recruitment, Monat’s business plan is simply not sustainable, and most people are losing money in Monat as a result.
With 94% of people making less than $200 in an entire year and only 1 in every 909 people earning good money with Monat, the idea that Monat is a legitimate business opportunity is ridiculous.
While Monat has not been ruled to be a pyramid scheme yet, I believe that it is only a matter of time before the FTC catches up with them and closes the company down, or forces it to restructure its business model.
If it wasn’t already clear, Not Your Boss Babe does not recommend becoming a Monat Market Partner!
An alternative to joining Monat
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That’s about it for now, but if you have any questions or comments, don’t forget to leave them in the comments section below.