Amway Quixtar Business Myths - Executive Diamond Income Statement

Executive Diamond Income Statement

Court records of divorcing distributors can be an especially rich source of information. Public documents available from the Placer County California Superior Court detail the income, expenses, and net profit of an Executive Diamond Distributorship. Subsequently, the business was valued at $600,000, or just two times 1995 net earnings. This distributor reported a profit of $301,000 for 1995. This is a nice income, no doubt, but it is a far cry from having a million dollar income that so many distributors believe such a level to have. Secondly, without the revenue from the "system", and keeping the same level of expenses, the distributor would have a net loss.

Interesting things to note from the data:

Despite a gross profit of $516K, only $301K was reported as net profit. One can conclude that business expenses in Amway/Quixtar rise as the pin level rises. In this case, it cost $214K to run an Executive Diamond distributorship, 100 times as much as a typical IBO.
The bulk of sales must be tools as one direct distributor is unlikely to have $1.7 million in product sales in their own downline (see the cost of goods sold). A direct distributor might have between $200,000-$400,000 in sales. (7,500PV x $2/PV x 12 = $180,000). About $200,000 of the $1.7 million would be the cost of goods sold of Amway products in his own direct distributorship. The remaining $1.5 million must be the cost of goods sold for tools and system related items for resale.
The downline of approximately 3,000 (see court document below) distributors would have a potential total sales of $5.1 million, at an average sales of $1706/distributor. At $1.1=1 BV the $5.1 million would be a maximum of 4.63 million BV, possibly much less.

Calculation of Best Possible Amway Income

The maximum possible Amway generated income might be $266,900, or just 51% of the businesses gross profit. In this case the system might have generated 49% of his gross profit.

Assume 1% of 4.63 M BV is for various Amway Diamond bonuses, or $46,400,
Assume 4% of 4.63M BV for the Amway leadership bonus, or $185,500. This would imply at most 25 Q-12 legs and put him on a level far higher than Executive diamond.
$35,000 for his own Direct Distributorship.

Total business overhead expenses of $214,00 almost exceeded the income generated from the Amway product bonuses of $266,900. The business would have recorded a profit of $52,900 without the gross margin generated from the system of selling tapes, seminars and other business support materials.

Calculation of Most Likely Amway Income

The most likely Amway generated income might be $116,000 or just 22% of the businesses gross profit. The system might have generated 78% of his gross profit.

Assume 4% Leadership bonus for 9 Q-12 qualifying directs. 4% x 7,500PV x 2 BV/PV x 9 x 12 months = $64,800.
Assume 1% Diamond bonus on the 9 Q-12 qualifying direct legs. $16,200
$35,000 for his own Direct Distributorship.

Total business overhead expenses of $214,00 exceeded the income generated from the Amway product bonuses of $116,000. The business would have not been profitable, a possible loss of $98,000 without the gross margin generated from the system of selling tapes, seminars, books and other business support materials.

Exhibit "F" Sitcler Enterprises Comparative Income Statements
	12/31/91	12/31/92	12/31/93	12/31/94	12/31/95
Gross Sales	1,504,685	1,634,845	1,927,728	2,043,359	2,263,945
Cost of Goods Sold
Purchases	978,227	1,100,737	1,313,485	1,343,932	1,747,857
Freight	3,877	6,647	9,108	8,786	0
Function	161,579	144,402	136,389	0	0
Other costs	0	0	0	179,471	0
Total Cost of Goods Sold	1,143,683	1,251,786	1,458,982	1,532,189	1,747,857
Gross Profit Gross profit % of Sales	361,002 24%	383,059 23.4%	468,746 24%	511,170 25%	516,088 22%
Expenses
Advertising	7,316	7,483	5,458	0	2,266
Car and Truck Expense	0	0	0	5,464	13,246
Commissions and Fees	9,517	9,041	56,792	22,698	20,525
Insurance	7,010	6,287	4,455	5,773	7,209
Legal and Professional	2,650	2,070	1,525	2,996	2,023
Office Expense	4,834	6,861	6,258	8,256	6,676
Rent -Vehicles, Equipment	11,309	15,385	23,226	13,309	13,490
Rent - Business Property	12,016	17,148	22,625	24,579	23,095
Repairs and Maintenance	0	0	7,782	7,253	4,223
Taxes and Licenses	3,776	5,609	3,284	6,674	5,815
Travel and Auto	22,896	23,626	29,935	40,903	50,320
Meals and Entertainment, Net	4,578	3,357	4,704	3,996	3,945
Utilities	11,237	13,738	15,446	13,980	12,523
Wages	19,935	21,823	23,792	25,553	23,284
Symposium Tickets	46,678	42,467	0	0	0
Outside Services	495	0	0	0	0
Moving Expense	619	210	0	0	0
Dues and Subscriptions	0	0	1,510	1,811	0
Printing	0	0	0	4,719	0
Employee Expenses	0	0	0	934	0
Miscellaneous	0	0	0	2,478	13,923
Total Expenses	164,866	175,105	206,792	191,376	202,563
Total Other Expenses	13,071	15,791	9,237	32,153	11,684
Net Profit	183,065	192,163	252,717	287,641	301,841
Source: Individual Tax Returns, Schedule C

Additional court documents reveal how the Executive Diamond needed to complete the divorce as soon as possible since the situation of living with his future wife while not being divorced from his first wife was hurting his income in the Amway business. This is "since the distributors are for the most part right-wing, fundamentalist Christians who cannot move on in their acceptance of me and my future wife until I am remarried, causing major confusion and de-edification of me in the business". From declaration below

Impact to his business included:

Loss of speakers Fees on the INA circuit
Loss of directorship on the board of INA
Loss of Jim Floor monthly diamond meeting
Granted new leadership to downline business concerned with living situation

Declaration in Divorce Procedure (for a scanned copy of declaration click here for my downloads page)

1	DIRK R. AMARA, ESQ. #78709 AMARA & KELLER
2	160 CHERRY AVENUE AUBURN, CA 95603
3	TELEPHONE: 916/888-1511
4	Attorney for Respondent, ROGER SITCLER
5
6	IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
7	IN AND FOR THE COUNTY OF PLACER
8	In the Marriage of:	Case No: SDR 6275
9	PETITIONER: GAYLE SITCLER	FURTHER DECLARATION OF ROGER SITCLER
10 11 12	AND RESPONDENT: ROGER SITCLER	DATE: 5/13/96 TIME: 1:30 P.M. DEPT: 2
13
15	I, Roger Sitcler, declare:
16	Since I filed my original request for the bifurcation of the
17	marital status, I have recently had the opportunity to review
18	the declaration of David Black in opposition. Unfortunately,
19	his declaration is so misleading and completely lacking in any
20	factual basis, that I am compelled to respond. In that regard,
21	I make the following additional comments:
22	First, Mr. Black cites no factual basis for his conclusion
23	that dissolving the status part of the divorce would somehow
24	have an adverse effect on the valuation of the business. To the
25	contrary, this continued delay creates a significant negative
26	impact because there is absolutely no appearance of marital
27	relationship between myself and Petitioner. As I have

1	previously indicated to Mr. Black as recently as this past week,
2	Gayle's involvement in the business is limited to paying bills,
3	paying bonuses, accounts payable and office management. The
4	approximately 3,000 distributorships with which I am involved, 588
5	of which attended the March Leadership Conference in San Ramon,
6	have not seen Gayle and I together since August of 1995. They
7	all know we are getting a divorce and I have attended all the
8	numerous functions alone. These include home meetings, "Nuts
9	and Bolts" meetings, sponsoring, and day-to-day contracts with
10	my many distributors. Larger functions in which the Petitioner did
11	not participate include the Regional meeting in September, the
12	Free Enterprise day conference at Arco Arena (a three-day
13	event), our Christmas product promotion at the office in
14	October, the Go Diamond Weekend for leaders at the Direct
15	Distributor level and above, held in Monterey, California in
16	November, and the March Leadership meeting, where it was decided
17	by upline distributors that she shouldn't attend. In short, all
18	of my connections know we are getting a divorce. Any delay in
19	the divorce or in my ultimate remarriage which is set for July
20	6th will have a major negative impact on the business since the
21	distributors are for the most part right-wing, fundamentalist
22	Christians who cannot move on in their acceptance of me and my
23	future wife until I am remarried, causing major confusion and
24	de-edification of me in the business.
25	Secondly, the statement of David Black inferring a
26	connection between bifurcation the status portion of the
27	marriage and the business valuation is without basis. The

1	following factors incidental to the dissolution proceeding have
2	already impacted out business, which include:
3	1. I am no longer on the INA speaking circuit resulting in
4	$40,000 per year in lost income;
5	2. I am off the INA Board of Directors;
6	3. I am off the Jim Floor Monthly Diamond meetings;
7	4. One of my major businesses has asked for their own
8	leadership and have been given it due to my living with my
9	future wife and not been remarried, which will result in a major
10	economic loss in March of 1997.
11	Further adding to the difficulties I am encountering in my
12	contacts with distributors, Diamonds and Emeralds, is
13	petitioner's comments to them, as they are continually reminded
14	by her that I am not divorced and am living with my future wife.
15	Many of my contacts are aware of my scheduled wedding date of
16	July 6th and based on my fourteen years in the business,
17	generating these contacts, I feel strongly that they will look
18	favorably on this remarriage which will ultimately serve to
19	reverse the negative impact of the dissolution process.
20	In summary, not only do I feel Mr. Black's declaration is
21	a complete distortion of the truth, I am requesting substantial
22	attorney's fees pursuant to the provisions of Family code
23	Section 271 for having to respond to his spurious declaration.
24	I declare under penalty of perjury under the laws of the
25	State of California that the foregoing is true and correct.
26
27	Date: May 8, 1996 Roger Sticler.

(for a scanned copy of declaration click here for my downloads page)

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