If you are trying to figure out, is herbalife a pyramid scheme or a scam, we explain everything about the Herbalife business model, how it works and what chances you stand of actually making money.
If you are looking into Herbalife, it is for one of two reasons. The first is that you want to use the products for yourself. The other reason is that you are looking for a little bit of extra income. We will be focusing on the latter, which is the supposed business opportunity that Herbalife Offers.
In this Herbalife review, we will be looking at and assessing the business model, and explain to you whether you can make money from it as is promised.
Herbalife Review Summary
Herbalife is a Multi Level Marketing company specializing in dietary supplements. The key of their business model revolves around training members to recruit other members and to increase their size of their network and generate sales of the supplements.
While there are members of Herbalife that make a decent amount of money, most don’t and to be part of the few, you would have to understand what you are signing up for. It requires a lot of work and an understanding of how members at the different levels of its hierarchy make money, which is primarily through the recruiting of a downline, people under you who will buy the products and gain you points for you to move up the ladder.
So is Herbalife a pyramid scheme? Technically it’s not, but it works a lot in the same way that pyramid schemes do.
What Is Herbalife
Herbalife is a Multi Level Marketing company that sells health supplements. The company has been around since the 1980s and is one of the top 5 biggest MLM companies in the world. It is similar to other popular MLM companies like Young Living and the similar Forever Living.
It operates in 94 countries and has approximately 4.5 million distributors across the world. The company is a well-known brand worldwide, and has brand ambassadors that include the likes of Christiano Ronaldo and the football club, LA Galaxy.
The Herbalife range of products includes health shakes with an emphasis on weight loss.
Herbalife produces a range of diet powders and other nutrition products that are not sold in stores and can only be bought from an independent distributor (another person signed up as a member).
The products initially comprised shakes and snack bars with an emphasis on weight loss, but in recent years, Herbalife has expanded into sports supplements as well as beauty and cosmetics products.
How Herbalife Works
The way that the Herbalife business model works is very complicated so this section will be longer than I usually like to write, in order to give you a proper understanding of how Herbalife works.
The TL;DR (Too Long, Didn’t Read) explanation is that in order for you to make a lot of money, you have to bring a lot of people, and they have to bring in a lot of people. All of you must then buy the Herbalife products and the nearer you are to the top of the pyramid, the more chances you have to make money.
The business model has 13 levels which have different names. If you have tried reading a Herbalife pamphlet, you probably found yourself confused. I am quite sure that all of these different names are put there precisely to confuse you as it took me hours just to get a decent understanding.
I have worked out an explanation that simplifies things if you ignore the official Herbalife terms.
What Are The Different Levels at Herbalife?
Level 1 (Member) 25% Discount
Level 2 (Senior Consultant) 35% Discount
Level 3 (Success Builder) 42% Discount
Level 4 (Qualified Producer) 42% Discount
Level 5 (Supervisor) 50% Discount + 5% Commission
I have left out higher levels since the chances of getting there are unlikely for most people and it would add more confusion to explain those levels.
Details of Herbalife Levels
There are 4 Factors you need to understand if you want to ascent up the levels in Herbalife.
- Volume Points (VP) – All your points
- Personally Purchase Volume (PPV) – Points from money you spend personally
- Unencombered Volume Points – Your points, excluding points people in your downline use to qualify.
- Royalty Override (RO) – percentage you earn from your downline
There is a base price for all of their supplements, and when you sign up as a member, you receive your first level of discount. At this level, you are signing up as a member just for personal consumption, and not as a distributor.
Once you are a member, you get different levels of discounts on the same products.
The way it works is that as a member, you can get products for cheaper if you bring more people into your network.
So for example, if you want to buy Herbalife products from me but are not a member, I would charge you $100 on a $100 priced product. If you sign up under men, you get a 25% discount meaning that you pay $75.
Qualifying for Higher Levels
At the next level, if you are a member and are at the first level, you can get an increased discount that means you pay $65 instead of $75. In order to get to the next level, you have to sign up a given number of people, and collectively, you and your network must spend a certain amount for you to qualify for the next level of discount. (See image below)
The maximum discount level available for the supplements is 50%, which is available for supervisors and all levels above that. Below are a list of the membership levels and the requirements to qualify or each different level.
Where things get tricky, is that to determine discounts, they use the points system, which makes it more unclear just how much you have to sell in order to qualify for the different discounts.
This makes it different to understand exactly how this business model works without making a big investment of effort and money into the recruitment processes. So depending on where you are in the world, you will likely pay a different price.
But for estimations’ sake, you can assume the volume points to be worth about $1 each, as shown in the video we have linked later on in the article.
How Do You Qualify To Be A Herbalife Supervisor?
To become a supervisor, where you have a 50% discount and earn commissions from your downline, you have to buy around $4000 worth of products a month. An additional rule is that of that 4000 spend, 1000 must be unencumbered.
For Personal Consumption?
The Herbal quality supplements are not a high quality shake. They do not specialize in supplement, but in the MLM business model.
The price of Herbalife supplements far exceeds the price of well-known supplement that are used even by professional athletes. The price is sold to non members at approximately 10 times the price that it costs Herbalife. That is how they can afford to put deep discounts into the different levels. It only makes business sense that even at the highest discount level, the company must still be able to make a profit.
For example, take the Herbalife Protein shake, vs Optimum Nutrition Gold Standard Whey Protein (one of the highest rated and popular protein supplements in the world). The Herbalife shake is $53 for 616g while $60 buys 2267g.
So you pay more than three times the amount of one of the best products for a product that is of a lower quality. This doesn’t make a lot of sense when spending. And if you are trying to sell the stuff and someone asks for a comparison, it would be difficult to justify the price difference.
At the time of writing, there are 13 different levels for members and distributors. How you ascend the different levels is on the points based system and requires your network to achieve minimum goals. These goals are not cumulative and expire at the end of each month. Additionally, once you have made it to a certain level, you have to requalify every year in order to stay at that level and continue reaping the higher rewards.
The business model is not based on customers buying, but by distributors buying. That is why you can only buy Herbalife from a distributor, whose job is to recruit you into being a distributor as well.
Who sells Herbalife?
Herbalife is largely promoted by aspiring entrepreneurs and fitness influencers. If you have come across the brand, it is likely through an acquaintance of through content creators, particularly on Instagram, who have the placed branded items in their posts.
As a regular person, you would be selling products are primarily sold family and friends up until the point where you have built up your own network.
Can you make money with Herbalife?
Yes. Whether you WILL make money with Herbalife is a different story and depends on many factors. Depending on where you live and what the laws are around herbalife, it can be considered as a legitimate business opportunity. The disclaimer here, comes in the messaging of this business opportunity.
Can you make thousands of dollars by selling Herbalife products? This is highly unlikely. 90% of people who sign up to Herbalife do not make any money and most of the entry level members quit within the first year.
The main way that Herbalife partners make money is through recruiting more people who in turn have to recruit more people under you for you to make increasing amounts of money. I know someone personally who is making about $2000 a month with Herbalife so it is definitely possible.
But it is important to know what you are getting into before you dedicate serious effort or money into it.
Is Herbalife a Pyramid Scheme?
In the technical sense of the word, herbalife is not a pyramid scheme but there are hidden dangers. By definition, a pyramid scheme is a business model that recruits members through promises of payments without any underlying product or investment.
The company does, however, skirt the thin line between what is a pyramid scheme and what isn’t. So much so that in 2016, the company had paid a $200 million settlement to the Federal Trade Commission and agreed to “fundamentally restructure” its business following accusations of being a pyramid scheme.
Because there is a product here, it means Herbalife is not a pyramid scheme in the strictest meaning of the word. The logic is that if all else fails, there is still a product that you can consume or sell.
One of the biggest tells when judging whether something is a scam, is how long that product or service has been around. If something illegal, it is unlikely to last very long. As a result, scams and pyramid schemes come and go. Herbalife has been around for 40 years, so at the least, you can have reasonable certainty that they won’t vanish without delivering product you have paid for.
That said, they do go to great lengths to hide how things really work in their systems and are quite misleading.
Should You Sell Herbalife?
Would I recommend adopting Herbalife as a business? That really depends. In order to succeed with Herbalife, you have to be very good at recruiting other people. There are people who are good at that kind of thing and if you are one of them, you can always try it.
But would I recommend it to someone who didn’t know how everything worked? No.
It took me quite a long time to wrap my head around the way the Herbalife business model works. Even now, I don’t know how it works at the highest levels.
But what I know is that what they are selling you be different to how things actually work there. And if you don’t take your time to understand all the complicated levels and rules for qualification, you might be in for a nasty surprise.
Technically not a pyramid scheme – A pyramid scheme is a business model with no real products. With Herbalife you are receiving a product that you can consume or sell. There is a potential to make money if you put the requires amount of effort into recruiting and managing your network.
Promotes Health – Herbalife products and messaging encourage people to lead a healthier lifestyle
Points based qualification – this hides how much money you have to spend. They call it financial abstraction, and the purpose is to make you spend more without realising it because you don’t think in terms of points, and not how much money you spend.
Recruitment heavy – while it may seem like the business is centered on the products, it is more about getting people to sign up under you so that you can earn commissions from them. So put in other words, the main customer is in the Herbalife business model is you, the distributor, not the people you sell to. The monthly targets to keep your positions means you are the one that are buying all the time with hopes to sell what you buy.
Sales Focused – in order to make money with Herbalife, you have to constantly approach people. If you aren’t out going, Herbalife as a business will not work for you.
Not scalable – When you are running a business, you typically want to be able to expand and focus on higher level task while you delegate lower level tasks. With Herbalife, because products can only be bought from a distributor, expanding the business with available technology and the internet is not as feasible as it should be.
Hidden fees in the levels – on top of the starting fee, there are annual processing fees that you have to pay at higher levels.
Herbalife is a MLM corporation that has been around for a very long time. If you understand how the business model works and find it to be a match for you, then it wouldn’t
The focus becomes less about your consumption, but about how you can get the people under you in your network to recruit more people in to their networks.
The underlying product itself, the dietary supplements, is not where the value lies. The short of it is that you buy supplements at an inflated price, and then sell them to people for a more inflated price.
What are alternatives to Herbalife
If you are an entrepreneur and looking for a way to make a passive income, there are more productive ways of creating a business than Herbalife.
You can start an affiliate website today and promote any products that you want that people are already looking for. This means products from companies like Amazon, Apple, Groceries, virtually anything that can be bought online.
I make 4 figures each month with websites and all from home. You can to build a website just like money, promote whatever products you want, and make passive income without having to chase people around.