Please evaluate my brother-in-law's plan?

December 26, 2012 12:36 PM

Brother-in-law wants a loan to start a home-based business. Please evaluate if his plan seems profitable?

My wife's brother has asked me for a loan to start a home-based business (with his wife also being involved). Can you please evaluate their plan? Metafilter probably has more per capita people who work from home or are self-employed, so I assume his plan will get a fair consideration. I will give them a printout of this thread so they can see a candid neutral perspective.

As I understand it, the business involves making transactions on Dubli by "clicking". And here is a Youtube video giving their estimated earnings. Between the two of them, they plan to put in 40 hr/wk on this business.

The loaned money would let them "join" at certain financial tiers and cover the costs of training sessions plus equipment. Their plan is to repay the loan with interest at the end of two years.

What do people think of this business? Does it seem like something where they could have a reasonable expectation to gross $50k/yr during the next two years without additional expenditures?

Privately I calculate they would need to gross $50k/yr from their efforts in order to "break even". This assumes that instead of doing this business (and taking out a loan), one of them was a dedicated stay-at-home parent while the other worked 40 hr/wk for minimum wage (W2 employee).

I am aware of the standard advice about family, but I will be either be making the loan or offering 40 hr/wk work as an attendent in my car wash/laundry business. Either way I will not be supervising them, or interacting with them more than I currently do.

posted by 99percentfake to work & money (35 answers total)

Sounds like a MLM scam.
posted by ssg at 12:43 PM on December 26, 2012 [15 favorites]

I googled "dubli scam" - About 35,700 results. This sounds more than a bit not good.
posted by pointystick at 12:45 PM on December 26, 2012 [13 favorites]

I have never heard of Dubli, but when I got to the bit "join" at certain financial tiers, my alarm bells for pyramid scheme/MLM scam went off. A google search indicates that many people believe so, too.

It's highly unlikely they could make $50k/year doing any kind of MLM scheme.
posted by stowaway at 12:46 PM on December 26, 2012 [7 favorites]

Why can't they get the loan from a bank, if the business is actually viable?
posted by Sternmeyer at 12:46 PM on December 26, 2012 [15 favorites]

You should never invest or get involved with a "business" unless you can figure out why the customers for said business would pay money for the product. In other words, what value is being added. As said above, seems like a Multi Level Marketing scam (a redundant phrase in my world).

If you have a real business and could offer one of them an honest job, I think you'd be doing them a far greater favor.
posted by randomkeystrike at 12:47 PM on December 26, 2012 [1 favorite]

Uh, this is the first thing that came up when I googled it:


This Website is protected under the CDA ACT (read below)
There is an open FBI investigation to the activities of Freeman Carl Reed and a possible
Class Action Lawsuit and this website is here to help more people to come forward and speak.

Based on this, I'd say HELL NO! Stay AWAY!

Danger! Danger! Will Robinson!

Also, your BIL should not be allowed to run with scissors.
posted by Ruthless Bunny at 12:48 PM on December 26, 2012 [9 favorites]

Presented without comment.
posted by China Grover at 12:48 PM on December 26, 2012

Just listing to Troy McClure talk about Dubli set off my bullshit meter. What is "clicking"? What is a "customer base"? It sounds an awful lot like a pyramid scheme, if you ask me. A quick search of "Dubli scam" brought up this forum result:

http://www.fraudwatchers.org/forums/showthread.php?t=28229

The biggest red flag is the jargon and complicated "scheme" Troy McClure rattles off.

Anyway, even if it's not a scam, you, as a de facto angel investor would have to ask yourself:

1) do you understand the business model enough so that you can truly evaluate the risk of receiving ROI (in this case getting the loan back + interest + truly helping out a family member)?

2) Does this venture match your own personal values?

Personally, as for my own personal values, any kind of work that involves "clicking" and building up "customers" at lower tiers does not align with my personal values.

If I were to say "no", how I would do it is I would say that I didn't understand the business model and can't therefore analyze risk. Period.

If you like, offer them that business loan in the future if they have a business plan to back it up.
posted by KokuRyu at 12:49 PM on December 26, 2012 [2 favorites]

It's an MLM. It says it's an MLM right in the description. MLMs are a great way to lose money, even when they're run honestly and transparently, because the business model is fundamentally flawed.

And given the complaints out there on the Internet, it doesn't seem like this particular MLM is run honestly or transparently.
posted by Sidhedevil at 12:50 PM on December 26, 2012 [1 favorite]

I think the rest of this thread speaks for itself. But just to add, for any business that makes money it should be pretty easy to explain why it makes money. If they can't sum up in a sentence or two what they're doing and why other people are paying them to do it, that's a very bad sign.

For example, if you ask why banks make money it's because people are paying them for the service of storing and managing their $$$. Even if you can't answer whether a specific banking idea is implemented right or not, it's pretty easy to see that the basic concept works. Or, if you ask why Facebook makes money it's because it sells excellent information on many people to advertisers. Again, there's clearly something there worth doing.

I can't for the life of me work out what DubLi is actually doing. I think it's something to do with holding reverse autions for expensive things?
posted by katrielalex at 12:52 PM on December 26, 2012

"Here is a YouTube video" selling suckers on the program as part of the MLM model.

Making money for working from home involves producing something of tangible value to someone else.
posted by Sidhedevil at 12:56 PM on December 26, 2012 [2 favorites]

This is an MLM scam. They make the majority of their money via the "training" fees, not via any actual product.

Please do not give them money to do this. Please talk them out of this. Generally with these scams nearly everyone loses the entirety of the money they put in, while constantly being told that they'll make more if they just get some more training, and upgrade their position.

There are a LOT of scams like this out there, with very similar sales pitches. A sort of confusing barrage of tiers and dollars that you'll be making; shots of the founder enjoying expensive things (which are often rented just for the video shoot.)

----

And I'd like to note that your Brother-In-Law shouldn't feel bad for having nearly fallen for this scam. Marketers like Freeman (Buck) Reed are extremely sophisticated, and have spent decades perfecting their ability to persuade people to do things that are good for Reed, and bad for the person. It's hard to overstate how skilled these con-men can be.

Thank you for checking before you wrote a check. You've done your brother-in-law a service.
posted by grudgebgon at 12:57 PM on December 26, 2012 [10 favorites]

Check this research paper out evaluating the business models of hundreds of MLM companies (spoiler alert: everyone loses money except for the handful of people who started it). Dubli is listed in the annex as one of the companies whose business model was evaluated.
posted by Aubergine at 12:59 PM on December 26, 2012 [7 favorites]

If you want to make money "clicking", then sign up for Mechanical Turk.

No up-front fees, but you also probably won't come close to $50k a year.
posted by b1tr0t at 1:27 PM on December 26, 2012 [1 favorite]

This sounds like a scam to me.

I'm assuming you'd like to give this family a leg up in the world. So I wonder how much they're asking for and what they're currently earning. Is this "home business" an answer they came to after unemployment?

And let me get this straight, your calculations went something like this:

Federal minimum wage is $7.25. 40 hours a week comes to about 14,500/yr as a regular paycheck employee.

50,000 is their expected gross yearly. You expect their net to be about equal to 14,500? As in, expenses of ~$35k/yr? (presumably much lower after an initial period?) How much do these training courses and "equipment" cost?!

Could that loan be put towards vocational school or community college with a higher earning prospects?

Lets make a huge assumption, that this isn't a crazy scam. Lets assume a 10 year scope with 3 different income scenarios.
1. Minimum wage employee (assume no increase);
2. Dubli "home business" with a $35k loan;
3. two years in community college to earn an associates of nursing degree with a $35k loan;

Average gross income per year, subtracting and averaging out loan costs, subtracting lost income to attending school.
1. 14,500
2. 49,900
3. 51,800 (source)

Obviously things are way more complicated than this bit of back-of-the-envelope math here, and I make a lot of assumptions (like they'd be able to go to school, 0 taxes or interest). But the basic idea is this: a lump of money today, can provide a temporary cushion to yield higher returns in the future. Are you going to bank on this scam, or something way more stable?

And, I know you probably think you're being nice offering them a minimum wage job, but thats not really the kind of life I'd wish on any of my family members. (Even an in-law ;) ) It is that kind of earning prospects that make these scams seem so appealing. These scams claim anyone can do them, and real job training has a high barrier to entry. Money is a large part of that barrier (as is high school education). If you're holding the money piece to the puzzle, put it to better use.
posted by fontophilic at 1:46 PM on December 26, 2012 [3 favorites]

I got as far as "...making transactions on Dubli by "clicking". "

Do not loan him the money. Tell him that you believe it is too high a risk. He can pout and piss and moan or whatever. But you won't lose the money.

If you decide to fund him, give him the money. It is not a loan, it's a gift. That way, when the money is all gone and he has nothing left, at least you don't have a debt standing between you and him.

Listen to the other people in this thread.
posted by Xoebe at 1:50 PM on December 26, 2012 [2 favorites]

If you have $50,000 to loan them, half of that money would get them set up in an actual business (house cleaning and odd jobs, for example) they could each do part-time while trading child care.
posted by Sidhedevil at 2:02 PM on December 26, 2012

And people are assuming they're really going to gross $50,000 with DubLi. They are not. They are going to lose all of your money and then not have any earnings, so they would have come out ahead by working in the car wash---$15,000 is a shitty income for a year's work, agreed, but it's way better than -$50,000.
posted by Sidhedevil at 2:05 PM on December 26, 2012 [1 favorite]

Another thought might be to pay for your brother-in-law's wife to get the training, certification, and equipment she would need to be a licensed home-based childcare provider (I say her not because of any bias I have that women are better at that job, but out of a recognition that that's going to be the bias of most potential customers).

Then she'd have income potential while not having to pay for her own children's childcare, while the brother-in-law could work at the car wash while looking for something with better pay.
posted by Sidhedevil at 2:10 PM on December 26, 2012

Please evaluate if his plan seems profitable?

They will lose their shirts on this obvious scam.

What do people think of this business?

It's an obvious scam that takes advantage of the gullible.

Does it seem like something where they could have a reasonable expectation to gross $50k/yr during the next two years without additional expenditures?

Absolutely not. That is the hook used to reel in the fish.

But let's answer the other question. The request is coming from your wife's brother. Should you loan them the money, even given all of the above?

Is it a trivial amount of money? Will they learn a valuable lesson? if you do not loan them the money, will you spend the rest of your life in a family doghouse or being carped at by your wife for not helping them reach their dreams?

You should consider gifting them the money because typically the people who are attracted to scams like this will fall for them over and over again, and eventually they will get you to cough up. If this time is the cheap time, might as well get it over with (and start distancing yourself from your wife's family).
posted by rr at 2:13 PM on December 26, 2012 [2 favorites]

typically the people who are attracted to scams like this will fall for them over and over again

Years ago, a friend emailed me about a job she had lined up. All she had to do was purchase some products and training materials and soon she'd be reaping profits. I don't remember the details, but it smelled like a scam to me and I told her so. Now, this was way back in the mid-90's, and email was new to both of us. She had inadvertently cc'd the prospective employer on her email to me, and I had inadvertently replied all in my response. He saw the whole exchange and she didn't get the "job."

I'm always happy that I accidentally kept her from falling into that trap, but years later, she still does it. These days it's more reputable "network marketing" companies like Pampered Chef and Amway, but the fact that she never sticks with one for more than a year or two is an indication to me—if not to her—that theses things just don't pay out for anyone but the creators.

This is all a long way of saying this is a scam. Do not give your in-laws any money for this venture (loan or gift; either way you're just pissing it away). The best thing you can do, aside from the car-washing gig, is educate them on how to spot a MLM scam.
posted by Terminal Verbosity at 2:44 PM on December 26, 2012

I read somewhere - on MSNBC maybe? - that MLM's prey on exactly the kind of people like your BIL: people who earn minimum wage and don't have the education or skills to earn much more than that. I agree with Fontophilic: these MLM scams are appealing because they promise a better job and life than what someone can realistically get without more education and/or training.

It probably would be better for you to offer BIL a job in your business. And if you want to invest money in his future, offer to pay for a reputable associate's degree in something practical from an accredited community college (NOT a for-profit college, another scam that targets the vulnerable) or for his wife to get an Early Childhood Education credential and daycare license.

If you can afford it and consider it a gift rather than a loan, help your in-laws by all means, but not by enabling your BIL to get taken to the cleaners by a MLM.
posted by Rosie M. Banks at 2:57 PM on December 26, 2012 [3 favorites]

The best thing you can do, aside from the car-washing gig, is educate them on how to spot a MLM scam.

Going down this path is more likely to just give them more exposure to more scams.

Once people have the mindset that there is some secret method to making easy money and the only "trick" is finding the right one, there is really not much you can do other than interpersonal damage control - i.e., buy your way out while it is cheap.

MLM scams are like spam - one receives a message from [e-mail] which says that their special delivery order has been delayed and they should CLICK HERE to arrange a delivery and either deletes it (because it is a scam) or doesn't (because they can't be bothered to learn the simplest lesson imaginable). They work *entirely* because there is a set of people who are willing to suspend disbelief in the face of even the most obvious, unbelievable bullshit.

You don't get to be an adult without having had ample opportunity to develop the anti-scam spidey-sense and then pick it up later when a well meaning in-law dashes your hopes by telling you this particular MLM is a scam.
posted by rr at 3:12 PM on December 26, 2012

Please do not ever give people money for shit like this, no matter how much you love them or no matter how much your family nags you to do something for them. Your money should not go to ripoff artists who prey on your relatives' lack of information.

$50,000 is a lot of money. You could do a lot of good for your wife's nieces and nephews with that money. Setting up college funds for the kids would be better than giving their parents money that is just going to get stolen by unscrupulous people. Paying the tuition for one or both of the parents to get career training is a bigger benefit than lining some Danish scam artist's pocket.

They have a right to make their own mistakes with their money, I suppose. Giving them your money to make mistakes with is being an enabler rather than being supportive. It's also being a bad uncle, because you're allowing the parents to piss away a resource that could help their kids.
posted by Sidhedevil at 3:15 PM on December 26, 2012 [1 favorite]

Thank you for these responses. I count 22 posts by 18 unique people, and not one of them has said the plan merits further consideration. At least a dozen other unique people "Favorited" some posts without leaving additional commentary. That's about 30 "no" votes without a single "yes".

I am going to turn down his request for a loan. I am printing this thread (along with copies of the Fraudwatch and MLMWatch material) and will give it to them tonight.

I will offer them the attendent job (either one full-time or both part-time). I agree it is hardly a good job -- it involves things like scraping mud, cleaning toilets and wiping down the machines! But it will provide some income (plus health) while they use the flexibility to continue evaluating their options. Both my brother-in-law and his wife are currently unemployed.

Any other comments?
posted by 99percentfake at 3:25 PM on December 26, 2012 [1 favorite]

To quote the bard: #7 this rule is so overrated / keep your family and business completely separated
posted by toothless joe at 4:36 PM on December 26, 2012

Help them get a job and teach them to spot an MLM scam. If they want to make money clicking things, Amazon's Mechanical Turk (mentioned and linked above) is truly a legit way to do so, but they will be making maybe a couple of dollars an hour max, and even there you have to be watchful for things that are too good to be true.
posted by asciident at 4:42 PM on December 26, 2012

Sounds like a good plan. One thing that jumped out for me is how much these schemes victimize people who very often have highly limited resources to begin with. It's bad enough when someone who can't afford it is out a few hundred bucks, but $50K is a lot for anybody without a private jet to lose so quickly and uselessly. If you loaned them the money and it all wound up in the hands of the Dubli scheme, that just gives the scheme more resources to target other vulnerable people, many of whom won't be lucky enough to have a resource like you for support. Even if the money is really worth it for you in the name of family harmony, that money isn't harmless and directly goes to rope others in.

Offering them the attendant job and otherwise trying to give them a hand (perhaps by serving as a good reference and/or hooking them up with career services in your area) seems like the right thing to do that both helps them and is a fair and honest arrangement. That's huge, especially if it gets them health care as well!
posted by zachlipton at 4:44 PM on December 26, 2012

If they were gullible enough to even consider this, they need education. And regular salaried jobs.
posted by spitbull at 5:03 PM on December 26, 2012

We went over the printouts, and they took most of it pretty well. They were bothered by the assumption that they were uneducated, but...that's a whole other discussion. I realize things are tough right now and not everyone had access to quality vocational advising coming out of high school.

I also want to say I don't think they are scammers. Rather, I think they are desperate and feel trapped by their circumstances.

Tomorrow they will both start as part-time attendants, and my wife agreed to show them how to sell on eBay this coming Saturday. The health plan starts immediately.
posted by 99percentfake at 9:13 PM on December 26, 2012 [4 favorites]

They were bothered by the assumption that they were uneducated, but...that's a whole other discussion.

I'm glad it went so well. If it helps, I think the assumption in this thread that they are uneducated can refer specifically to education about these types of schemes and other scams. Plenty of very smart people, including those with advanced degrees and high-end jobs, have been completely taken by outright frauds. Schools don't teach this stuff either. Developing a good internal bullshit detector is a skill (honed in part by reading about these kinds of things ending badly), and there's nothing shameful about not being so experienced at it, but it is an important skill to work on because this won't be the last time something like this comes up.

"Business opportunities" like this (I've been doing some reading on Herbalife recently, which appears to have some similarities but isn't the same as Dubli) are looking precisely for people in exactly the situation you've just described: "desperate and feel[ing] trapped by their circumstances." Their pitch and story is designed to sell an easy solution to that desperation, and I've seen several recommend borrowing money from friends and relatives to pay the startup costs. It's not a surprise that they were taken in when the whole system has been designed to appeal precisely to people in their situation.
posted by zachlipton at 11:13 PM on December 26, 2012 [3 favorites]

I'm always happy that I accidentally kept her from falling into that trap, but years later, she still does it. These days it's more reputable "network marketing" companies like Pampered Chef and Amway, but the fact that she never sticks with one for more than a year or two is an indication to me—if not to her—that theses things just don't pay out for anyone but the creators.

My cousin makes pretty good money selling home furnishings via one of these kinds on "Tupperware Party" kinds of companies. But she does not fall into the MLM of it, she just busts her ass selling merchandise.

But, like the rule about banks and internet sites ("if you aren't paying money, you aren't the customer"), any job that requires you to pay *them* money to get started means that *you* are the customer, not the employee.
posted by gjc at 7:23 AM on December 27, 2012 [2 favorites]

So...here is the two month update/resolution.

Thankfully they quickly moved on from the MLM idea.

My wife helped her get started on eBay. So far she has netted $1700 there and made additional money from two garage sales that other relatives let her have on their property. She's run through most of their knickknacks, so I suggested that other relatives let her sell their castoffs for a 50/50 split. She has the goal of netting $10k from these endeavors through 2013. Although it isn't strictly a business, I think it does build experience and teach some useful skills.

My brother-in-law tried to consider some other businesses. Some of the ideas were very unworkable, but eventually he latched onto the idea of (with my help) buying an existing unattended laundromat and converting it to a full service facility with him as owner/operator. We started negotiations with the current owner but it fell apart when my brother-in-law neglected to do the background work that I suggested he perform to assess viability. At that point, I delayed my offer to finance his start in business for at least two years because he is not ready.
posted by 99percentfake at 11:25 AM on February 28

Although it isn't strictly a business, I think it does build experience and teach some useful skills.

Be careful with that line of thinking. As I'm sure you know, the IRS, will certainly think that is is a business. BiL will need to file taxes for that eBay income, because eBay will be reporting it to the IRS. Accounting may be the next thing to look into, it will certainly be valuable when they start moving more dollars.

The eBay thing seems like great business training. You have to bust your ass to acquire decent product. You have to provide excellent customer service or eBay will leave you hanging. Easy money seems to be very rare in eBay, though there are probably undiscovered niches out there. Startup costs should be much more manageable than the traditional retail approach. Inventory management and the cost of carrying inventory are both very real problems.

Depending on the kind of products your BiL is selling, the Fulfillment by Amazon program may also be worth investigating.
posted by b1tr0t at 5:59 PM on February 28

Congratulations to your SIL on getting a business started on Ebay. She absolutely must have her ducks in a row with the IRS as they will consider it a "business" especially if it is making above a certain amount of money.

Is there a reason why your BIL is so dead-set on owning a business instead of working for someone else? If your SIL wants to work at home while caring for the kids, that is understandable, but is there a compelling reason for both of them to be self-employed? Have either of them tried looking for regular jobs?

If your BIL wants to own a franchise (is this what the laundromat is?) then he really needs to do his research. Bureau of Consumer Protection guide to franchises link. There are good and bad franchises and it's important to plan carefully before investing money.
posted by Rosie M. Banks at 3:11 PM on March 2