[Today’s blog post will be a little quicker than the norm, especially for one where I analyze an MLM company. I originally had it planned to go live while I was at FinCon 2013, a conference of personal finance bloggers. It’s good networking and I learn a lot about how to make this site better. (I’m always looking to give you the best blog for your dollar. Wait, you aren’t contributing dollars? Oh well, too late now, enjoy the free show.)

Unfortunately, I came back to my car breaking down and my pregnant wife getting hospitalized (briefly) and she’s okay now. (The two were unrelated.) It’s taken some time to get everything together. Did I mention that the Red Sox are in the World Series too? Busiest of weeks!]

As I mentioned in the beginning, I usually put in dozens of hours of research into these articles. Having done this many times before, I’ve found that MLM companies typically have distributors who are… well… “nut jobs” (for lack of a better term) that like to harp on one minor irrelevant aspect of the write-up and use that as a plea that the whole article must be completely off-base because it was so poorly researched. However, we’re smart enough not to throw out the baby with the bathwater, right? Today, due to the time-constraints above, I’m going to try something a little different. I’m going to use my previous extensive experience to thin slice and show why you’d probably want to steer clear from the FlexKom business.

First, here’s why I’m writing about FlexKom… Several weeks ago, I got an email from Lynne:

“Just curious about what you may know about a new MLM (they say it really isn’t) called FlexKom. Supposed to be up and running in Europe and breaking into the US market now. Any thoughts?”

Short and sweet! At the time, I was available to do a little research. I watched a video (more on that later) and instantly thought it sounded like Lyoness another MLM using a loyalty card system. I’m not alone as this website seems to think the same. I had looked into Lyoness a couple of times before and though I haven’t published an article on it, there are some pretty big problems. (If you want to know more about that BehindMLM has a very good review).

My response to Lynne was that if FlexKom claims that it isn’t an MLM, they are being completely dishonest with you. Their compensation looks like any other MLM with the bonuses for recruiting people. The video at that website even showed the pictures of car bonuses at the bottom, one of the time-tested lures of an MLM. The other give away is the recruiting of people, who recruit people, etc. (clearly this is the more obvious direct one, but I thought I’d have a little fun with pointing out the car bonus first).

I’m conflicted about presenting this video as I don’t like to help market scams, but it so complex it is worth watching the video. The video even makes a point that it is complicated. I’ll presume that you are watching the video or have some understanding of FlexKom because trying to explain it here would take many, many words. While the video is a little on the long side, I believe you really only need to watch the first 3 minutes to see enough to run away.

The video starts off with a lot of hype that it is changing the economy of a country. Which country? It doesn’t say. How revolutionary? Again all numbers are left out. It then says that this isn’t hype and that you will “believe by understanding” and “you won’t need anyone else to convince you”… essentially hitting you over the head with Neuro-linguistic programming (NLP).

The video goes on to explain that you can buy a FlexKom franchise license, similar to buying a McDonalds, but it has no overhead or staff. How much does this franchise cost? According to the video it’s $4,000. Yes, you are a buying a $4,000 ID card that gives you permission to sell their system. I can sell you a LazyManKom card for much, much less and let you use my system.

To vastly oversimplify this $4,000 license gives you the ability to recruit local shopkeepers to the program and earn a profit (if you recruit enough).

The video makes a poor comparison to a McDonalds’ franchise. This is a classic poor MLM analogy that I’ve written about years ago. McDonalds don’t make their money recruiting other McDonalds and owning a McDonalds franchise typically brings you thousands of customers. My local McDonalds doesn’t have to go around and advertise, nor does it have to build a business by recruiting people. It sets up shop and people flock to it. My McDonalds’ business isn’t predicated on showing others a complex video to explain how it works.

In addition, and this is the big one that I wanted to write about today. McDonalds adheres to the laws of supply and demand. If I want to put another McDonalds next to where one already exists, McDonalds tells me to go stuff myself (I spent some time at FinCon talking with English bloggers and am stealing this phrase for my own). McDonalds franchises are very controlled and their locations are carefully figured out.

With MLM, anyone can join… the parent company doesn’t care. In fact, FlexKom would seem to have no problem if everyone in the world were paying a $4,000 license. Essentially there’s a basic disconnect between supply and demand. They can be supply many licensees where there are no shopkeepers interested. FlexKom licensees can recruit other FlexKom licensees, but that is like McDonalds recruiting another McDonalds, it simply doesn’t make sense as you are creating more competition.

There’s a very good article about What’s Wrong with MLM. I’ve written articles showing other things wrong with MLM, but this does a great job of highlighting the supply and demand issues. It shows that MLMs have no problem pitching a sales opportunity even if there’s no demand for it… which means it’s not really an opportunity. That’s exactly what I see in this FlexKom sales pitch.

What’s particularly deceptive about the video I watched above that the person used catch-phrases like unlimited income, claimed that it was all “facts” and that it was happening with thousands right now. He didn’t mention that “unlimited income” doesn’t exist on the planet Earth, that the facts leave out details such as the scenario I outlined above of people buying a license and not being able to get shopkeepers on board, and that there are likely hundreds of thousands of people losing money for the few that are making it.

Again this is just basic thin-slicing, but take a moment and think about it: Is FlexKom setting you with success by limiting competition as a typical franchise does or are they just trying to encourage everyone and anyone to pay them money for a business opportunity that may not exist?

Updates

Flexkom POS 4S Scam

A commenter, Wouter Hol, has put together a revealing review of a very, very overpriced Android tablet (480 Euros) that Flexkom is selling as a Point of Sale device.

As you can see the Flexkom tablet is “not that bad” according to the software that Hol used. The specifications are horrible compared to current Nexus 7 that can be had for at least 250 fewer Euros. The video also shows that the Flexkom software works just fine on an Android tablet that is available on Amazon for just 60 Euros.

Flexkom reps may claim that the value is in some included cards that come with the system, but Wouter Hol shows there really is no value in the cards in another video.