Is Monat a Pyramid Scheme or Scam?
Is Monat a Pyramid Scheme or Scam? Is Monat a legitimate way to make money? Let’s analyze this business model.
Monat is a multi-leveling marketing (MLM) company. Legitimate MLMs do not meet the definition of a pyramid scheme. However, the majority of participants that sell products in an MLM do not make a living wage.
To skip right to the PDF of the Income Disclosure – Click Here.
Introduction
What is Monat and What do they sell?
Monat is a Multi Level Marketing (MLM) Company that opened in 2014.
- Hair – the hair product line of products consists of shampoos, conditioners, repair treatments, oils, and much more
- Skin – the skincare line has products for dry/sensitive skin or normal/combination skin and offers a variety of products. It appears to be four categories of products: cleanse, prepare, target, and replenish.
- Wellness – products include protein powder, collagen, and other supplements.
- Pet – the pet products are shampoo and a deodorizing spray.
Monat’s Better Business Bureau (BBB) Profile
Monat is not accredited by the BBB. They have over 550 complaints – which you can read about directly on the BBB. When reading through, there are some common themes:
- Reports of hair loss and damage
- Customers don’t realize that they are buying items on a subscription basis or a recurring membership fee
- Complaints about the consultants being pushy or people feeling “forced” into purchasing goods
Are Monat’s Products FDA Approved?
Monat’s products are not FDA-approved. This is because the FDA does not need to approve Cosmetics before they get onto the market. This is directly from the FDA website:
Under the law, cosmetic products and ingredients do not need FDA premarket approval, with the exception of color additives. However, FDA can pursue enforcement action against products on the market that are not in compliance with the law, or against firms or individuals who violate the law.
Monat’s Income Disclosure Review, Compensation Plan, and Required Buy-Ins
Overview
Numbers tell a story, and as an accountant, I feel it is the most important story when reviewing an established business. So, let’s talk facts about the financial commitment to start with Monat, their compensation plan, and income disclosure. This is all information coming directly from the Monat website.
Monat’s Start-Up Expenses
In order to join Monat, you first need to be associated with a Monat Partner (in the true MLM pyramid fashion). After that, you’re directed to purchase a product pack. As of today (October 2021) there are 9 options, starting at $99 for the “starter kit” up to $799 for the Optimum Product Pack. There is also an annual $49.99 fee.
Compensation Plan – How Stylists are Paid by Monat
First off, the compensation plan is complicated, as it is with most MLMs. You can break the categories of ranks in the pyramid-style compensation plan into the following:
- Partners (96% of Monat Independent Contractors, .12% of average annual income)
- Market Partner, Managing Market Partner
- Builders (3% of Monat Independent Contractors, 1.13% of average annual income)
- Associate Market Builder, Market Builder, Managing Market Builder
- Mentors (.8% of Monat Independent Contractors, 7.73% of average annual income)
- Associate Market Mentor, Market Mentor, Managing Market Mentor
- Executives (.06% of Monat Independent Contractors, 91% of the average annual income)
- Associate Executive Director, Executive Director, Senior Executive Director
It is important to focus on how to move up the ranks. The focus is not on how much you sell (that is only a small component), it is on how much you recruit. Therefore in order to rank up, it’s not just based on sales. It’s on how active downlines an individual has.
As we will see below, to make a living wage in Monat, on average, you need to be at the Managing Market mentor level. To reach this, you need to have 4 qualified legs (meaning you’ve recruited enough people to have at least 4 successful legs). These have to include at least 1 Managing Market Builder and 2 Associate Market Mentors.
Based on the above, based upon Monat’s own Compensation Plans and Disclosure Statements you cannot make a living wage by selling Monat alone. You need to sell the job of selling Monat to other people.
Income Disclosure Review – The Story the Numbers Tell
The below chart is based on Monat’s 2020 Income Disclosure, using the average income. The blue bar represents the percentage of participants. The green dollar amounts on top of each bar are the average annual income in that category according to Monat’s Income Disclosure from 2020.
Almost everyone within Monat is a Market Partner. This rank makes up 92.26% of participants and they make on average $161 per year. However, this does not take into account your annual membership fee and the start-up kit purchased. The only people making above a living wage of $68,000 are Managing Market Mentors and above, which make up .14% of the company. The odds are not in your favor, not at all.
10 Monat Statistics You Should Know Before Joining Monat
- 92.26% of all active and inactive participants are Market Partners. This is the lowest rank in the company.
- $0 is the median amount earned by Market Partners. $161 is the annual earnings of Market Partners
- Only .01% of the Market Partners have reached the top rank of Senior Executive Director (SED)
- Only .14% of Individuals selling Monat earn on average over $30,000 annually
- Only the top .01% are making on average over $1 Million annually
- There are only 7 Top Ranking Earners within Monat
- It is estimated $281 Million of commissions were paid in 2020
- You must buy a product pack of a minimum of $99 to join as a consultant
- There is an annual fee of $49 when you’re a consultant
- 96% of consultants in Monat earn .12% of the total income, while .06% earn 91% of the income
Is Monat a Pyramid Scheme or Scam (My Opinion Based On Facts) and Should you Sell Monat?
Legally, there is no evidence that they are a pyramid scheme in the eyes of the law. An illegal pyramid scheme does not have any products or services for sale. However, in my opinion, anyone recruiting others to join the business with the promises or insinuations that if you work hard enough you can make money – is deceiving that person. Certainly, it is extremely unethical if it’s presented to someone that if you join up, it is possible to make money from your phone and live a life of luxury. The numbers tell the story, and that isn’t the case.
Should you Sell Monat to Make Money? It is my opinion that no, you should not. The fact is, the numbers show you will probably spend more money on products and fees than any actual income you will make. The products are expensive and quite controversial. If you spend a short time reviewing the BBB or a google search you will see many articles about claims of poor product quality.
Why You Should be Skeptical of Network Marketing/MLMs
Network marketing also known as multi-level marketing (MLM) is something you should have a healthy skepticism of (and in my opinion avoid). Let’s talk about some of those things:
The majority of people who get involved with MLMs lose money.
This has been proven time and time again by reviewing income disclosure statements and this study that was published by the FTC.
This study is a little dated, however, I have reviewed many Income Disclosure Statements and find that the results are still valid. See all the Income Disclosure Statements I’ve reviewed here.
Focus on recruiting those already struggling financially.
Oftentimes, when people are recruiting others on social media, it starts with a relatable story about how that mother was struggling to help support herself or her children. Therefore recruiting someone who is unlikely to have money to spare for a “business opportunity” and will likely lose money.
Uplines Make Money Off Downlines Losses
The way multi-level marketing and network marketing businesses are structured is that those in the upline make money off the sales of those in the downline. Oftentimes, MLMs require a certain amount of personal volume (PV) to stay active in the company. This results in consultants spending money to buy products to remain active. This results in them losing more money while their uplines earn commissions off those “sales”
Lack of Transparency In Where Sales Come From
Currently, MLMs are not required to produce any reporting that identifies how much of their sales come from customers or from those involved with the “business”. This makes it very difficult to establish where the line falls between MLMs and Pyramid Schemes
The FTC warns that MLMs and Pyramid Schemes can look very similar.
The FTC has an entire article (click here to read) on its website that has a lot of great resources, including questions to ask someone who is looking to recruit you.
Many network marketers will argue their MLM isn’t a pyramid scheme because pyramid schemes are illegal. However, illegal things happen every day until people are caught. I would not give this any merit.
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