Solavei Shutting Down MVNO and All Operations
Solavei, a T-Mobile MVNO that launched in 2012 has announced that it is shutting down effective December 4, 2015.
Solavei shutting down is no surprise to those of us that were associated with this company over the past three years. This serves of another reminder of the perils of putting your “Eggs in the MLM Basket”. I wanted to post the news to alert Solavei reps as to what to do next, but use this platform as a way to recognize warning signs in the MLM industry as a whole.
I was there the day of the launch in Seattle in the fall of 2012, and I was super excited about Solavei. Ryan Wuerch was a great speaker, he seemed liked he had a great plan in place for Solavei, and their business model made a lot of sense compared to other network marketing companies I’d seen before. Solavei genuinely injected hope into the lives of thousands of people throughout the US. It was free to join, you got paid to refer a commodity service at a fair price, and more services were on their way to create a Social Commerce Network. Sounds awesome…right?
Why Do MLM Companies Fail?
I’ve realized a few truths over the past few years about MLM companies. (Unfortunately) I was blinded by the allure of the MLM industry, in that you develop a “team” of representatives with a similar goal of making extra money outside their normal occupation, and leverage that growth over time to make extraordinary income (hypothetically). The biggest problem is that very few MLM companies will ever survive to the extent that a person can depend on the MLM company to provide a consistent, sustainable income over time. In theory, MLM companies offer a low start-up cost compared to traditional businesses, and a turn key business plan in place. The reality is many are doomed to fail because their products would never compete in a “real world” environment, greed kicks in, poor management decisions are made, or the product lifespan withers away. The erosion of the prepaid cellular market attributed to Solavei’s demise to be certain, but there were other clues trouble was on the horizon long ago.
Why Did Solavei Shut Down?
Solavei shutting down was inevitable. They declared bankruptcy, squandered millions of investors dollars away, Ryan Wuerch made promises to add services he simply never kept, they changed the compensation plan 5-6 times in a year, their Rate Plans were higher than T-Mobile (Their Underlying Carrier)…There are a calamity of reasons why Solavei shut down. Their downfall is similar to Vemma being shut down by the FTC in August. It seems Vemma may be able to reopen, albeit under much tighter controls regarding product distribution, and the compensation received from simply recruiting representatives. The recent shutdowns of Solavei and Vemma, two of the more visible MLM companies in the US with several hundred thousand participants, should serve as a wake up call to the millions of people looking for a legitimate way to earn extra income from home.
If Success in MLM is A Moving Target, Solavei Was the Poster Child.
I personally built my Solavei business to over $5K residual per month in 18-24 months, even after the 3rd or 4th negative compensation plan change. (Imagine handing down 3-4 paycuts to all sales reps, company wide, in 6 months. Would it affect company morale/sales?) After the 27th comp plan change (pun intended) from Solavei, it was reduced to less than $500 within just a couple months of being notified of the changes. Solavei, Ryan, Regulators, T-Mobile (who knows) gutted the company, and it was doomed after that.
Now that Solavei shut down, that side income is completely gone for me, and thousands more throughout the country.
Luckily, I saw the writing on the wall last year when their financial numbers came out, and I started a small business marketing agency so I won’t be devastated from Solavei closing it’s doors like I was before. I’m an advocate for helping small business owners grow their business, and helping individuals learn how to market online to earn extra income versus devoting their time and money to an MLM company.
Knowing what I know now, I strongly believe that most MLM companies do more harm than they do good. The die hards will disagree with my opinion, and that’s fine, but I have the truth and facts to support my argument.
MLM Failure Rate – MLM Red Flags to Avoid
You can look anywhere online, and discover that 97% of people that join an MLM company never earn their initial investment back. While we’re there, let me list a few red flags to look for if you’re considering starting a network marketing business. If these components exist, I would strongly discourage you from considering joining that MLM company.
- A Substantial Start Up Cost or Initial Investment – This practice by MLM companies is sooo tired, and the FTC is tired of it too. I’m referring to a $500-1000 start-up cost to purchase a bunch of product you won’t consume. If the products sold aren’t more than 50% actual customers (not start-up kits or rep purchases), it’s a huge red flag. Vemma was shut down because of this, along with several other companies following this practice. I’m not at all saying that purchasing software that helps your business or personal life, tools you might need to be successful, or some practical purchase for starting a home based business is unethical. I’m merely stating that buying $1000 of skin care products, or supplements etc, to qualify for more commissions, is not something the FTC is going to allow in the future. Solavei charged $298 for their brand partner kit, (a $40-50 value tops) and that was the beginning of the end for me. Fluffy, overpriced distributor kits and recruiting representatives as the primary focus of the company is clearly crossing into pyramid scheme territory. If an MLM company feels like a pay to play business model, it most likely will fail in the long run. Today, MLM Companies have to focus on moving real product to real people, or they have zero chance of succeeding.
- A Monthly Autoship – Again, this is a practice used by MLM companies to encourage a monthly purchase of product in order to receive bonuses or commissions. There is a fine line here for me, and I’m ok with $10-50 a month of a legitimate purchase of a product that you can use or need to run your business. I spend several hundred dollars a month on software tools to run mine. Product based companies, however, shouldn’t have a “garage qualified” mentality when it comes to purchasing products you don’t need.
- Passing the “Walmart or Retail” Test – When you take a close look at most MLM companies, usually you’ll find a product that is similar to something you can buy at Walmart, GNC or from other skin care companies for example. Look even closer at the ingredients of “lotions and potions”, and you’ll often find the active ingredients are less in the MLM product, and much more expensive. This is always to support the MLM compensation plan. If you don’t believe the juice, protein shake, skin care (fill in the blank) would sell for that price in a retail environment, you’re probably onto something. It usually wouldn’t, and therefore unsustainable over time.
- Opportunist/Get Rich Quick Culture – Usually you’ll find a handful of great speakers/leaders in any given MLM company. If the
message is mostly about the opportunity (read money), it’s not a sustainable business environment. Here’s the big problem no MLM leader ever talks about. If a start-up costs $500-1000, and 97% of the people that join don’t get their investment back, where does that money go most of the time? To the top .5-1%! If you look at almost any MLM’s income disclosure statement, you’ll find that there are 1-2% that make over 10-20K per year. How do the odds look now for financial freedom? Can you stomach that many of your friends and family that support you will lose their money along the way too if they support your opportunity? I value my friendships way too much to lose one over stalking them to join my great opportunity.
- Home Parties or Extensive Travel – This is a personal opinion on travel and home parties, but my goal is to spend more time with my family not less. The die hards will say (on stage mind you) they are doing this for their children. I too got lost on the thought of building a life for them through the MLM industry that I couldn’t achieve otherwise. But was it about them or me? As young children, kids want their Mom and Dad to be close to them, to feel safe, and establish the fundamentals of family values. There’s nothing wrong with working hard to support your family, mind you. I actually like Pampered Chef, Tupperware, and many party opportunities for women or men if there is a legitimate product priced appropriately that consumers will readily buy. What I’m referring to are people that commit their lives to traveling to build their “teams” of distributors, and leave their children completely in their wake. This is a sad reality for many involved in the MLM industry, and a cult-like environment surrounding several of the companies.
- Finally, Could You Make a Decent Amount Just Selling the Product WITHOUT Recruiting Anyone? I’m not talking about 100K a month, or even $5K. Most people drawn to network marketing are looking for $500-1000 per month extra income, the typical gap for their comfort level. Please hear me on this critical component of any legitimate business. I’ve personally experienced having to depend on hundreds of people to perform for our family to build a decent income. It stinks!! I’ve often referred to it as pushing a basketball through a garden hose, or pushing a train uphill. If your income potential is determined primarily on the efforts of others, there’s no way I would look further at a business like that. I’m an extremely hard worker, and value my time. Unfortunately, most people attracted to MLM companies are looking for the “easy button”, and quick cash. This can create a vacuum of your time spent on people that simply won’t perform. The squeaky wheel gets the grease as they say, so you can control that to a degree. However, if I can’t market a product online or offline and produce a decent profit to the “masses” or general public, it’s not a business I would entertain pursuing.
Does MLM Offer Hope or Hype? The Truth About Most MLM Companies
Many MLM industry leaders position themselves as messengers of “Hope”. The stark reality is that there is, in fact, more Hype than hope when it comes to the success rate of the average distributor. The new prospect goes to an event, attends a home party, or sees an online presentation. They get sucked into the hype, the potential, the What-ifs, or they’re fascinated with a new career change. So much so they lose focus on what pays their bills today. Jim Rohn’s quote “Focus Full-time on your career, and part-time on your fortune” has a lot of merit. You have to have a solid Plan A, and starting a Plan B can detract from the goal of improving your income or lifestyle.
My personal experience was that my income dropped so dramatically that it caused multiple problems throughout our entire family, and I’m still trying to recover financially from my period of temporary insanity. 🙂
Several years ago I was completely enamored with the idea of becoming successful in the network marketing industry. I won awards, spoke at company wide events for my “achievements”, all while earning $2-3K per month, and working my tail off day and night. That’s not success for me, and six children to support. Luckily I had a nice telecom business to support my family. The lesson here is I focused on an MLM opportunity that made $2500 monthly, but made less income as it consumed so much time it severely affected my primary income stream.
Conclusion – My Thoughts on Solavei Shutting Down & Home Based Businesses
If my article seems like I’m bashing all MLM companies that wasn’t my intent. I know first hand how challenging it is to raise a family, and make enough income to provide the lifestyle you feel like they/you deserve. I’ll never fault anyone for trying to improve their situation. I wanted to give you my opinions on the industry as a whole, help you avoid the pitfalls of MLM that I experienced over the past few years, and encourage you to seek alternative paths of making more money from home. There are several good home based opportunities out there that don’t charge a lot to join, offer software or products that are in line with retail pricing, that don’t have $100-200 monthly autoships with little merit, so by all means investigate the potential of any business with a positive mindset.
The primary mission for my blog is to be a consumer advocate, help small business owners grow their sales, and encourage the masses to start their own blog or brand online. If there is a legitimate MLM company you like, there is no better way to build a strong foundation than learning the fundamentals of online marketing. If you’ve got a business idea, or want to learn local marketing, website design, SEO strategies, Video marketing, or affiliate marketing online, I’m extremely passionate about teaching others what I learned in my journey into the online marketing space.
I’d love to help you build a solid, legitimate business online with sustainable income you and your family can depend on.
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I’ll be releasing a free online marketing course within the next week called Local Business Gold, in unison with Wealthy Affiliate University. My course will be incredible for online marketing training, and it’s completely free. Wealthy Affiliate University helps support an affiliate marketers efforts by connecting with an established online community of fellow marketers.
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What Can We Takeaway from Solavei Shutting Down?
I’m saddened for the over 400K people that joined Solavei, gave so much of their time and money to expand their dreams, only to be disappointed by more false promises from another failed MLM company. It’s at times like this I recall Charles Swindoll’s quote of “Life is 10% What Happens to You, and 90% How You React to It”. Solavei shutting down might temporarily hurt my income or for thousands of other people that were involved. In retrospect, the lessons we can take from the Solavei experience have tremendous value.
Fool me once, shame on you. Fool me twice, shame on me…
Don’t get pressured to join an MLM company or start a home based business if it doesn’t feel right, or if it sounds too good to be true. It probably isn’t. Learn some valuable skills, and focus on YOUR brand online!
I wish you all the best!