It seems the number of advertised “work from home” “opportunities has gone ever higher since the advent of prolific social networking.
A not insignificant portion of these opportunities really are legitimate – 31, Avon, Mary Kay … – but a lot of them at the very least feel scammy.
The good ones tell you everything you need to know up-front:
- “franchise” or licensing fees
- buy-in cost
- required sales to maintain active status
- expected monthly commitment
- growth paths
The scammy ones do not – they have poorly-written, ambiguous, or unstated expectations, require lots of cold calling, expect you to pay-in an enormous amount with little-to-no understanding of how you will get paid later, they’re really “affiliate” marketing, etc. They’re the timeshare of the ‘independent consultant’ business. They’re the 2AM infomercial of the “work” world – you know the type, “for the low low cost of 3 easy payment of $39.95 I will teach you how to make money sending envelopes!” Btw, the way you make $1000s sending envelopes is by promising people to teach them how to make money by sending envelopes.
Many people I know have a tendency to get sucked into the more scammy of the varied wfh things – using the common catchphrases of “if you’re tired of being a Just Over Broke (aka “job”) worker, this is for you” or “in just 10-15 hours a week, earn $500-$2000 a month” or “I’m getting ready to launch a great new product, and I need you to be on the secret board of directors in the prelaunch stage” and more similar to them.
Let’s look at the the first one I mentioned: “10-15 hours per week to ‘earn’ $500-$2000 a month”. If you work (whatever this involves, it’s always left very nebulous), 40 hours a month and make $500, you’re making $12.50 an hour – about 50% above minimum wage, but you haven’t paid taxes yet – and you’re on the hook for all of your SSI (not the half you usually are by being a “real” employee). That means you pay 15.3% to SSI and Medicare (and remember, still no income taxes taken out yet). 15.3% of $500 is $76.50. Compare that to working for a “real” employer where you only pay 7.65% (because they pay more than half of it). 7.65% of $500 is $38.25. That’s a major difference.
What if you’re at the high end of the mentioned range? $2000 a month (which is only $24000 a year, btw – a third less than teachers start in the state of Kentucky), and we’ll say it took you 60 hours to earn it. That’s $33.33 an hour. If you could sustain $33.33 an hour (by, oh I don’t know, having a real job?), you’d be earning $69333 a year (2080 work hours in the year). The problem with these types of “opportunities” is that they’re not consistent. And the hours range always (in my observation) corresponds to the bare minimum of the “earnings” range. If it takes you 60 hours to make $500, you’re only making $8.33 an hour – a dollar more than minimum wage, and you’re on the hook for double the SSI/Medicare taxes – which, over the 60 hours, shows a difference of only 44 cents per hour more than minimum wage. 44 cents. Why not just get a job?
What if you’re truly successful with one of the “work from home” thingies? Well, then you start making the infomercial rounds, and you’re the guy they show with the 12 mansions, the 8 yachts, the cars, the women, etc. But you’re also not working “10-15 hours a month” – you’re engaged with the “opportunity” full-time+. You’re probably operating your “business” 70-90 hours a week.
If you’re going to work 70-90 hours a week, why not start your own company and own *everything* you do? You will, most likely, pay far less in taxes than as an independent contractor.
Are “work from home” “opportunities” all a scam? No. But do they consistently yield the earnings levels advertised for the hours put in? Not that I have witnessed.
For more information, this Money.SE question, “What warnings would you tell a friend about to enter a multi-level marketing (MLM) business venture?“, is a great resource:
- MLM is not really a selling job
- Be careful not to stockpile inventory, you’ll end up with $4000 dollars worth in your garage that you’ll never use
- MLM is really a recruiting and training sales people job
- Don’t think you are going to get rich at this part time
- There are a lot of millionaires from MLM but they work a lot of hours recruiting and training
- What does the business do
- How do you make money
- How do they make money
- Why does this business need you
- What do you bring to the table that the business doesn’t already have (skills, contacts, money)
- How realistic are your time expectations – is this to be a part-time occasional endeavor, or your full-time occupation
- Is there a product
- Is the market saturated
- Put as little of your own money into it as possible
- Take as much out of it as you can as soon as you can
- Don’t count your money as earned until you actually get it in your hands as ‘cold hard cash’
- Remember if it’s too good to be true, it usually is – no matter how many of people assure you it’s not
- Don’t go in thinking you’ll beat the system by trying harder than everyone else: the only way you’ll make any money is by recruiting lots of people, and selling products that can be obtained for cheaper elsewhere at a normal store
- Make sure you are paid on volume, not people