Based in Santa Monica California, Beautycounter was founded in 2013. They have a range of skin care and cosmetics products, which they say are free of dangerous chemicals.
Rather than using traditional methods to promote their products, Beautycounter has over 33,000 independent consultants who sell the products through their mulit-level marketing system.
Here at The Finance Guy, we believe that you can’t make money with MLM, but in this full review of Beautycounter, we’ll give them a chance to prove their opportunity isn’t just another MLM.
What is the Beautycounter Opportunity
To help us understand the opportunity, we found this video made by a Beautycounter consultant who is at the director level:
The video starts off telling us how excited she is, before informing us that Beautycounter is a ‘B-Corporation’. This means that they have made some effort to be socially and environmentally responsible. This is definitely a positive as it’s nice to know that they are doing their best to create cosmetics which don’t pollute the planet.
We then learn that after several years using beauty products, the representative learned that they contain dangerous chemicals. Luckily for us, Beautycounter only uses safe ingredients!
We then learn that the products aren’t just for women, there’s also a line for babies and for children. And of course there’s Beautycounter products for men. You can have the whole family on these products with their all safe ingredients.
According to this Beautycounter director, the products are 85% organic. She then tells us that all we need to do to join, is buy a $98 starter kit. It even comes with some cream and a lipstick….There’s also some brochures and a booklet. It’s everything you need to start sharing this business.
She then rambles on about how you can earn 20% commission selling Beautycounter, but you can earn even more if you grow your business. The video finishes with her excitedly telling us about how she has a great upline and I guess that means we should join her team.
While the video did give us a few details about Beautycounter, we still wanted to know more, so we looked at the official page of the Beautycounter opportunity. As expected the page has some photos of happy looking consultants. There are some quotes about how it changed their lives.
Beautycounter tells us that this opportunity is ‘where lipstick meets legacy’. They claim to provide a ‘platform which empowers you to create your own career’. If you become a consultant you’ll get your own Beautycounter website so sell from.
You can choose to sell online, in person (1 on 1) or in group ‘pop-up’ parties. We see that there is some online training, and Beautycounter tell us they provide ‘all the tools you need to run a successful business’. We are then reminded that all it takes to get you up and running, is the $98 starter pack.
While it’s nice to know that there are some excited consultants, and that there are some standard online tools, we still had more questions. We still don’t understand how this opportunity is going to make us rich.
How do you Make Money With Beautycounter
To find out how consultants earn commission, we had a look at the Beautycounter compensation plan. At just a single page, Beautycounter officially has the most concise compensation plan we’ve seen to date. Having said that, we can still get an idea of how it works. Like all MLMs, there are lots of ways to make money:
Just like the video said, you can earn a 25% commission on any sales you make. We assume this includes sales made through your website. This is is useful because it means that if customers buy online themselves you automatically get a commission. This allows you to focus on promoting your website and generating sales. You don’t need to worry about handling products and delivering them to clients.
Personal Sales Bonus
If you generate enough Personal Volume sales, you can earn bonus commissions. The compensation plan explains that this is based volume of sales made to your customers. Therefore this bonus should be considered as additional retail profit. The amount you can earn and the PV required is shown below:
These are the commissions you can earn from your downline. If you sponsor others to become Beautycounter consultants, then any product they order will count as your Business Volume (BV). The amount of commission you can earn depends on your rank in the system. They override commissions and qualifications at for each rank are shown below:
If you sign on as a new consultant, you can earn a 5% override on any orders placed by other consultants you have personally sponsored. Once you start climbing the ranks, you can earn more commission from more levels in your downline. It’s important to note that the commission is paid on Commissionable Value (CV), which is 75% of PV. So when they say 5%, you are actually ending up with 3.75%. This makes the compensation plan a little confusing. We are not sure why they have done this, but it looks like an attempt to make the Beautycounter compensation look better than it really is.
Even after the adjustment from PV to CV, you can still earn quite a bit of commission once you reach the Director ranks in Beautycounter. While this all looks very generous, to us it is a red flag. All these commissions are included in the price charged by Beautycounter to consultants. This means that is you are a new consultant, then 22.75% of what you pay to Beautycouner, goes to your upline as commission.
Director Generation Overrides
If you do manage to reach the rank of ‘Director’ with Beautycounter, then you will qualify to earn this additional commission, as shown below:
If someone in your downline becomes a director, then you no longer will get standard overrides from them. Instead they become a ‘generation’, and you earn a flat override from their entire downline volume. If someone in their downline becomes a director, this becomes your 2nd generation and so on. As we can see, director generation overrides are paid on up to 4 generations.
Once again the amount paid is based on CV, so when they say 3%, it’s actually 2.25% of PV. Even so these commissions can still add up to an extra 9% in trailing commissions. This means that for new consultants 31.75% of what you pay to Beautycounter, goes to your upline as commission.
These generous commissions means that even at their ‘discounted’ prices, the products need to be expensive. After all, they have to pay for the compensation plan, as well as normal costs of production, then there is still the profit margin for Beautycounter.
While we can see that it’s possible (for those at the higher ranks) to make money, we still wanted to know more, so we kept researching
Are Beautycounter Consultants Making Money
To find out how much consultants are earning, we looked at the 2017 Beautycounter Income Disclosure Statement. The first thing we notice is that Beautycounter had a total of 33,408 ‘registered consultants’, and 29,000 active consultants. This tells us that in 2017, there was a total of 62,408 Beautycounter consultants.
They explain that the difference between the two is that ‘active consultants’ earned at least one commission in 2017. They are also telling us that registered consultants did not earn a commission. In other words 53.53% of Beautycounter consultants earned no commission in 2017
Beautycounter then proudly tell us that in 2017, they paid $80 Million in commissions to consultants. However when we consider that there were a total of 63,408 consultants, it’s not a great result, it averages to less than $1,300 per each. In other words, on average, Beautycounter consultants earned less than $110 per month.
Beautycounter has given us information about how much consultants at each rank earned in 2017. We included the 'registered consultants’ and created the table below:
As we can see, the vast majority of consultants earned very little commission with Beautycounter. Only those who reached the rank of ‘Senior Director’, or higher earned a full time income. 99.12% of Beautycounter consultants earned less than a full time income from this opportunity.
Let’s not forget that there is a difference between income and profit. The earnings shown do not include the expenses consultants incur running their Beautycounter business. If we were to include expenses it’s quite likely that we’d find that most Beautycounter consultants are losing money.
Why is it Difficult to Make Money with Beautycounter
We believe that the problem is not unique to Beautycounter. The problem is with MLM as a business model. In his book, Multi-level Marketing Unmasked, Jon Taylor found that 99.7% of people who join direct selling companies end up losing money. Despite what you hear in the sales pitches, it is highly unlikely that you will make money from any network marketing company.
MLM is a way for companies to sell products without employing a sales force and without having to spend money on traditional advertising and promotions. Instead they build a network of loyal believers who are willing to pay unusually high prices for the added hopes and dreams of financial freedom.
The compensation plan may look appealing, but it makes the products more expensive. Even at their wholesale prices, there is a 31.25% price loading to pay the commissions to the MLM.
The only way to make money with Beautycounter, is if you make a lot of sales. Any salesperson will tell you that the best way to make sales, is with a good quality product.
While we didn’t try any of the products ourselves we did find an independent review of Beautycounter products. While the products were found to be good, the review noted that, Beautycounter products are not as good as competitor products. In our opinion, this would make it difficult to generate consistent retail sales. After all if your customers find that other chemical free products are better, they are likely to switch.
Is Beautycounter an Illegal Pyramid Scam
Even though MLMs closely resemble pyramid schemes, they are not illegal. The reason dates back to the 1979 case of Amway vs the FTC. After 4 years in court Amway was found to be offering a business opportunity, rather than a pyramid scam. The technicalities came down to wording in their paperwork. One example requires consultants to make retail sales.
The Amway ruling effectively opened the doors for all other MLMs to operate within the law. However we should remember that being legal doesn’t make it ethical. If you knew that less than 1% of people had a chance of generating a real income, would you feel comfortable recruiting new consultants?
Another issue, is that even though these rules may be in the paperwork, they are difficult to enforce. For example, several people in MLMs have said that they have cupboards full of product. This is because of the minimum monthly purchases they need to make to remain active in the system. Even though stockpiling is against the rules, there is no way for the company to monitor it.
Should You Join Beautycounter
The only reason you should join any MLM, is if you are already a customer, and you believe in the products. If you are happy paying full retail price for the products without any commissions, then you might be able to sell to others.
If you are looking for an opportunity to earn extra money, then we suggest you look at all your options before deciding to join Beautycounter. If you have the incredible sales skills it takes to make money with Beautycounter, it’s quite likely that you could use those skill to make even more money in a regular sales job.
As always, we’d love to hear what you think in the comments section below, especially if you an share your experiences with Beautycounter
Are you wondering if you can make money in an MLM? Check our our list of mlm reviews before you join. If you find one that’s not on the list, let us know and we’ll do our best to write a review