The Boston Diaries

The ongoing saga of a programmer who doesn't live in Boston, nor does he even like Boston, but yet named his weblog/journal “The Boston Diaries.”

Go figure.

Monday, May 06, 2013

The only people that get rich with “get-rich-quick” schemes are those that are selling the “get-rich-quick” scheme.

From
XXXXXXXXXXXX <XXXXXXXXXXXXXXXXXXXX>
To
sean@conman.org
Subject
Chuck Stebbins
Date
Mon, 6 May 2013 12:57:39 -0400

Sean,

Read your "Tampogo" article while researching Chuck Stebbins. Chuck is now with a company called XXXXXX XXXXX. Actually the name of the company is changing to XXXXXXXXXXX. XXXXXXXXXXXXXXXXXXX is the website.

I've invested some money with this company and awaiting the next step. If you have any insight or interest in Chuck's new business, please let me know.

He's writing in reference to one of four entries about Tampogo. I haven't really given it much thought since I wrote the articles four years ago, and it's interesting to note that the company no longer appears to be around (fancy that).

I can't find any connection between Chuck Stebbins and this “new” company, which is selling an opportunity to sell some diet-aid product. It's not coming across completely as a “multi-level marketing” scam, but some of the numbers the introductory video is showing are misleading.

Okay, the thrust appears to be you “invest” $5,000, and in return you get 10 tablet computers (wouldn't surprise me if they wholesale around $60/piece) for an “in-store interactive display”, 100 units of the diet product, and some guides about shilling selling the product. You place the “in-store interactive displays” in stores (nail salons, doctor offices, car washes(?!)) and split the profits 50/50 with the store.

Okay, sounds straightforward to me. But here are some numbers the introductory video is currently showing (not the full table, but enough to show what's going on with the numbers):

Small POP Reinvestment Model, $5,000 Investment, 50/50 with retail partner
    Month 1 Month 2 Month 3
Reinvestment 12%   900 1,238
POP Units   10 14 19
Sales   15,000 20,625 28,359
Cost of POPs 240 2,400 900 1,238
Gross Income   7,500 10,313 14,180
Network Fee 50 500 688 945
Retail Partner   2,300 4,363 5,998
Your Gross   2,300 4,363 5,998
Labor Route Help 0 0 1,500
Your Net   2,300 4,363 4,498

Now, the “product” is $50 (okay, $49.95). Month 1 assumes the “starting package,” that you place them all out on day 1, and 30 (or 28, 29, or 31) days later. The numbers are largely consistent, although it helps to look at things slightly differently:

Month 1 revenue on 300 units sold (10 per POP)
Gross Income 15,000
Inventory -7,500
Network Fee -500
Cost of POPs -2,400
Retail Partner-2,300
Net Income 2,300

That makes it easier to see what is going where.

One issue already—the “starter pack” only comes with 100 units; that's still 200 units short of this projection, and so you need to spend (from what I can determine using these numbers) another … um … $5,000 just to top of the inventory (ouch) [this company also claims that the “starter pack” is worth $11,495, but given the figures from this, it's actually worth around $7,500 unless they really expect the POP units to retail at around $500 a piece—in any case, just looking at the numbers presented in their introductory video just … yeah … not good].

But the real issue I have is with that 12% reinvestment. $900 is not 12% of $2,300 (it's more like 40%!). No, that 12% is based off the gross income minus the inventory (or $7,500). That's before all other expenses! Okay, let's roll that in:

Revised Month 1 revenue on 300 units sold (10 per POP)
Gross Income 15,000
Inventory -7,500
Network Fee -500
Cost of POPs -2,400
Retail Partner -2,300
“Reinvestment” -900
Net Income 1,400

Ouch. Okay, now let's look at month 2:

Month 2 revenue on
Gross Income 20,625
Inventory -10,312
Network Fee -688
Cost of POPs -960
Retail Partner -4,333
“Reinvestment” -1,238
Net Income 3,095

And already the numbers are in trouble. Not only is that 12% “reinvestment” pre-net, but it's not even enough to support the additional POPs—it's actually $60 short! Also, the sales figure is bogus because I can't make it come out to whole number of units and the number. In fact, the numbers for months two and three are close but not quite right (averaging a bit under 30 units per POP per month).

And that 12% reinvestment figure is criminal, given how they've defined it, and the cost of the POPs across the months is inconsistent (some months what is listed is actually less that what it would really be; other months it's a bit more).

But the biggest problem I see is the end-game. At the end of year 2, they “show” you earning over $1,000,000 a year. But in order to get that, you need to have 332 POPs. That's quite a feat, but maybe doable. But when you start having two, three, ten, people all doing the same thing in the same area?

Um … good luck?

Really, all I'm doing here is applying basic math to the figures given. That, and some common sense (which does seem to be in short supply these days) and personally—this is a business I would give a pass on.

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