Before I toss out some questions, there has been some additional information brought to light about the Arbonne Bankruptcy.
First, the company was over $800 million in debt not the $500 million that was originally reported.
Second, if Arbonne comes out of this (many companies do not), they will still be strapped with another $120 million in debt and be owned 85% by the banks that are carrying that debt.
Third, Arbonne borrowed another $20 million more as part of this deal.
Frankly, I am much less concerned about how Arbonne comes out of this and a lot more concerned with how this whole thing is going to impact the individual Arbonne consultant. With that in mind…
What do you say to a potential consultant who is sitting across from you at a coffee shop listening to you tell the Arbonne story about the bankruptcy?
We now know that 2007 – 2009 were not good for Arbonne with the company losing a net of 120,000 to 250,000 consultants each year. I keep hearing things like "this is really good for us" and it is "a better time than ever". Really? We add bankruptcy on top of an already massively bleeding (in terms of losing consultants) company and the words that are coming out of the leaders mouths are "this is awesome"?
Why is Arbonne borrowing another $20 million? That might be the scariest thing of all. The talk has been that cash flow is not an issue, yet the company is borrowing another $20 million. A study I found showed that 32% of companies that file Chapter 11, file again within 4 years, especially when they emerge from bankruptcy with too much debt.
Further, the study suggests that "pre-packaged" Chapter 11 filings usually work to fix the capital structure of the distressed company and largely overlook the strategic and operating shortcomings.
I’ll leave you with this…
What does your business look like today? Be honest. Not what you dream it will look like and not what it looked like in 2005-2006. Today.
Do you believe that Arbonne’s bankruptcy will help get your business where you want it to be?
I will say this as a small-time “Consulant:” I signed up last July after months of pressure from a family friend who appeared to be doing well. Also on her team was another family friend who was doing well. I did quite a bit of research online, the business seemed legitimate, so I signed up at the $109 consultant level and did the next month buy an RSVP package ($700 of product for $350) to try the products and have products to demo.
Overwhelmingly, everyone I have shared the products with likes them. The products do work. I like them. I sold a reasonable amount. Do I think they are worth their inflated price? No. I think they are worth the price after the 35% discount, but as a consultant, if you give everyone your discount, then you are not making any money.
Before joining, I was told that Arbonne is debt-free. I was told that I should buy multiple kits to demo (I didn’t). I was told that my DM was one month away from qualifying for her Mercedes (she wasn’t). I was told that NO Arbonne products contain mineral oil (not true) and other ingredients like parabens (not true). I was told they were organic (not so), vegan (debatable), and gluten-free (debatable).
Prior to joining, I WASN’T told that Consultants have to bring 2 Preferred Clients or Consultants into the program every quarter or they lose the 35% discount. I wasn’t told of (what I consider to be) Arbonne’s abusive shipping costs (based on retail price, not box weight). I wasn’t told that Arbonne would collect the retail price sales tax of every product instead of the discounted price, and collect even on “free” or “campaign bonus” products. I wasn’t told that to sign anyone up even only as a Preferred Client, I would need their Social Security Number.
I found your blog in October after a frustrating 3 months in the business. I did sign up enough clients in my first quarter to remain active but after I found your blog I abandoned that idea and quit working Arbonne altogether. I have been patiently watching since for a bankruptcy filing and now here it is. Even up until yesterday, I still received emails from my DM to seek out new clients and consultants and push sales to “help Arbonne through this crisis, it’s what’s best for ALL OF US….”
I realize that higher-ups that are still clinging to Arbonne will chime in and say that it was my DM that wasn’t honest or didn’t give me enough information and that what she did shouldn’t reflect badly on the company, but in MLM the reps ARE THE COMPANY and this is what they are all doing. Arbonne wants sales, what their independent managers are doing produces sales (even if only to each other or to new “Business Builders”), and the company has done nothing to protect or educate the individual Consultant. In fact, prior to joining it is impossible to obtain any substantive information on the business EXCEPT FROM the person sponsoring you and in the interests of sales I believe the company simply turns a blind eye to all of these shady tactics; that Arbonne believes all sales are good sales, all sign-ups are good sign-ups regardless of what representations were made to get them.
I still have not received any email from my DM or Arbonne regarding their Chapter 11 filing and I don’t expect to until they are forced to mail it. In fact I emailed my DM this morning about the Chapter 11 news and she sent me an angry reply denying it and I had to direct her to the Arbonne website where the news is right there, plain to see. If I were not educated, I would still not know about it and could theoretically still be trying to sign up people into my downline. I could be embarrassed by referring people to the website to buy items only to be greeted by the “Financial Restructuring” news.
I have a bad taste for this company now and that is not going to go away. Good thing my investment was minimal enough for me to chalk it up to a semi-expensive lesson in high-end skin care.
I’m disgusted with the way this was handled. Bad Arbonne!
They are telling consultants now, not to go into detail about this bankruptcy. They are instructed to say, I”m not an expert but here read this letter from ARbonne. Everything is OK in 60 days. How dumb is the average american? I guess it doesn’t say much about how dumb a person can be. Yes, you are suppose to be an expert on knowing where your money goes. To intimidate someone and say you are not an expert and don’t go into it. How absurd is that.
What is going on now is major PR and marketing that everything is OK.
How dare you ARbonne still deny! Admit your part and say we made a mistake and who did all that spending.
Get educated about BIG BUSINESS HONEY!!! Arbonne was and still is a CASH COW!!! Companies restructure all the time to relinguish debt! Harvest Partners milked Arbonne because they ARE a CASH COW!!! This company is poised for its most explosive growth ever still after three decades of leading with integrity in this industry!!!!!!!! Do your homework… or better yet DON’T!!! You will just miss an opportunity to be a part of what will be the largest health and wellness company in the WORLD!!! As for Arbonne’s growth 600% in the last 5 years is unheard off sweetie!!!You need to do yourself a favor and take business 101 and get educated! Yes! Arbonne is work and IS NOT a get rich quick scheme…most are too lazy to do the work required to become successful in this business! OH! You mention the products not being worth the price!!!!!!!!! You must be INSANE!!! Arbonne is in the ultra premium category for swiss skin care which is usually reserved for the ultra wealthy… BUT you dont pay ultra premium prices!!! The research and development that goes into them is absolutely astounding!!! I started my Arbonne business with 29.00 and two launch parties and the rest is history!!! Unlike most small businesses I saw a return on my minimal investment AND a profit within 6 months!!! If it wasn’t for Arbonne I would not be doing MLM because the other compensation plans SUCK!!! Our products are the best and we have true champions leading the way…Do yourself a favor and really consider what your giving up!!! THIS COMPANY ROCKS!!!!!!!!!!!!!!! Arbonne is a GIFT!!!!!!
Exec. District Manager
Arbonne International
Rhonda S. Holmes
856-357-0341
holisticwellnessnurse@gmail.com
I am not an investment banker, but here is my take.
The $800m in debt has to go somewhere. From what I can see, the $93m Harvest Partners put in originally to buy the company will be written off by them (though they did take $200m in dividends over that time, so they got their money), taking the debt down to (a theoretical) $707m.
That $707m in debt is not going to disappear. Debt is not forgiven in a Chapter 11. They will “trade” that debt to the banks to which it is owed for ownership percentage. The debt is still there. It has to be repaid. With under $300m annually in GROSS REVENUE (not profit), that is not going to happen anytime soon, if ever. The banks who are now the “owners” will want dividends. Payment of dividends, commissions, manufacturing costs, shipping, tax deposits, operating expenses, etc will leave little of that GROSS REVENUE left to pay back any debt and make the company whole again.
From what I see of the numbers, Arbonne’s debt exceeds its gross revenue by more than double. Their $200m in assets are irrelevant. Those assets consist of office buildings, warehouses, pre-printed literature, and perishable product. None of those things are going to get Arbonne back into the black. Given the full picture of their debt, in my opinion it will not be possible for Arbonne to recover. Might they continue to operate for a while, even a long while? Yes. But in the long-term you will have banks owning a company whose product is non-related to their experience, is not turning a profit, and is essentially unsellable given the overwhelming debt load.
That they are being allowed to borrow another $20m, or can even get a lender to lend them $20m, is laughable.
I predict the end of the Mercedes allowance.
I predict a “new and improved” compensation plan.
Right now there are 2600+ Arbonne items listed on Ebay. I predict that number to go 5000+ when the news starts sinking in.
All Consultants need to be informed that as part of their participation in the Direct Selling Association, Arbonne must offer a 90% buy-back of your unopened product. It is in the P & P. Be informed that by requesting a buy-back you will be terminated as a Consultant. If you have unopened product you cannot sell, call them for an RMA number. If they won’t cooperate, call the office of the bankruptcy trustee and complain. You will get your RMA number. I think product returns are going to be a problem for Arbonne’s restructuring if enough Consultants educate themselves about it.
OH!!!! Wish I could continue to chat but I dont have time for blogs really!!!!!!!!!! My business is on FIRE and I happen to be on the way to a Mercedes Presentation for one of our newest Regional Vice Presidents in Easton PA!
Best,
Rhonda:)
Well, I can’t say I didn’t see that coming.
just wondering if they can go public…list on the stock exchange/
“If it wasn’t for Arbonne I would not be doing MLM because the other compensation plans SUCK!!! Our products are the best and we have true champions leading the way…Do yourself a favor and really consider what your giving up!!! THIS COMPANY ROCKS!!!!!!!!!!!!!!! Arbonne is a GIFT!!!!!!”
Love your passion Rhonda!
This Chapter 11 is especially unfortunate for the new consultants. Most people will not want to begin a business if they are uncertain they will be compensated for their work. With a bankruptcy on the books, I don’t know how anyone could believe Arbonne will be able to pay earned commission.
If business remains constant, perhaps they could pull out. But I suspect business will drop due to the Chapter 11 announcement. Which will only make the situation more difficult.
If they restructure their compensation plan (which is almost certainly a necessary next step), that will make matters worse again.
I wish the best of luck to all the Arbonne consultants out there.
Time to get a plan B. Good luck you guys and I hope it works out fine for you.
I just happened onto this forum thread when I was reading about bankruptcy in a different MLM. What stands out for me is something that I have seen often in my years as a professional network marketer and home business strategist. It is difficult for the average person to sort through the nuances of a compensation plan, or discern the absolute truth about a product line, from the sales pitches about the same.
When I coach/consult with people about choosing a company, I strongly suggest a number of things, including a real thorough understanding of all “rules” for getting paid (leg balancing, number of sign ups, volume, etc…). I want people to get a good handle on the product line, the ownership of the company and an understanding of where the company is from a business/financial standpoint, not just from a distributor standpoint.
Personally, I tend towards companies that are smaller and more family run. But that is just my preference. I like to meet the owners and feel like I am more than just a cog in the distributor wheel.
Best of luck to all of you who have poured your hearts and souls into your Arbonne business. I have usually heard good things about this company, but the latest financial news is scary.
Peace and Abundance,
Deborah Tutnauer
Host of ITS ALL SUCCESS TV!
I learned yesterday that Arbonne has filed for Chapter 11 bankruptcy.
I was an RVP with Arbonne but decided to leave the business in the fall of 2008 because I knew Arbonne was out of momentum and things didn’t feel right. However, I am still a raving fan of their products and use them every day!
One of the big “selling points” from Arbonne’s point of view was that the company was debt-free. I am absolutely SHOCKED that the company is in over $800 million in debt($500 million was originally reported).
There are a few lessons to be learned from this. First of all, be smart. You should never believe everything you hear. We have to do our due diligence when choosing a company to represent. Second, take Seth Godin’s advice and know when to stick and when to quit.
And let’s cut to the chase – Arbonne is out of momentum bankruptcy or not. Very few people will be able to make a significant income joining after hyper-growth.
Now more than ever it is incredibly important to always have your income diversified so if something happens to one source of your income, your world won’t be turned upside down.
My heart goes out to all the consultants that have trusted this company with their future. This is a major blow to them, their families. They will be in my thoughts and prayers.
Ellen
Best of luck to all of the Arbonne consultants during this time. The next 60 days will be trying. Be Strong!! This industry is the very best out there and we all support each other through think and thin!!! Prayers are with you.
This reorganization is not a happy time for anyone involved with Arbonne. And it does not have to mean Arbonne cannot bounce back and be greater than ever.
It will require courageous leadership and vision….long range vision for the challenges will be significant short term.
Arbonne if the leaders choose can have history on it’s side.
Ps. I am not an Arbonne distributor..I am a competitor. And I for one am dam glad Amway, Herbalife and Nuskin field leaders held fast and grew through their challenges. God knows what or who might have taken their place.
In the last 1970’s Amway was sued by the FTC for being illegal. Consumers and distributors were much less educated and sophisticated back then and being sued by the FTC for being illegal was worse than any 2010 Chapter 11. ( Which by the way is just a legal way to exchange the debt for equity. The debt does go away. The banks are exchanging debt for ownership. Arbonne is already in a vastly better position by filing than they were last week.)
Imagine the shock waves that went thru Amway. Imagine how the leaders felt about recruiting back then. I imagine most quit. Some didn’t. In the late 70’s Amway was doing less than a billion in sales. Today over 8 billion.
In the early 1980;s the FDA went after Herbablife …a full court press to shut them down nationwide. Mark Hughes the owner was so belligerent he stood up in Senate hearings and told the world he would defy the FDA . It was a very bad time for Herbablife. At the time Herbalife was doing a few hundred million in sales…today 2 billion.
And the last billion in sales have grown from Herbalife since that health company CEO died of alcohol and drug abuse. In the aftermatch, Herbablife went private; changed ownership and CEOs like their socks; went public and bounced a billion in new sales.
In the early 1980’s the FTC/FDA went after Nuskin for illegal drug claims. Law suits, national bad press…a total mess. At the time Nuskin was about a 100 million dollar company. Today close to 2 billion.
History is on Arbonne’s side primarily because their field leadership is totally committed to a long term vision. Someone will recognize the off balance sheet value of these leaders; that 25 year track record product line and they will buy it for the right reasons….to continue the legacy and build an empire.
Let this be a lesson to founders, owners everywhere. Investment bankers are interested for only one reason….how much can we suck out of this and how fast.
Borrower beware.
Apparently I just read that we are suppose to get an email about this bankruptcy. I haven’t received it yet. Legally I thought it had to be sent in direct mail. Our NVP hasn’t emailed us either. All I got from Arbonne was that we are raising money from our sales to Haiti in February. The nvp only sent a batch email about a training with some personal coach. However no response.
Now, I also have a DM who also didn’t know since she wasn’t home but away. She didn’t see the restructure until she launched a new consultant. The new consultant’s husband freaked when he saw it. Especially since he works in finance and now at the party his wife sold 1,000 worth of products which put her in first step district. What a mess since I think our NVP really should have told this if she knew.
Now all you other consultants who keep coming on here. How would you handle this. How are you going to tell new consultants about this,. No matter how nice they make the front page of the restructure look like. Your average person who is not around all lingo will say no way, especially one that works in finance.
ANy input on this???????
Petter Morck must be rolling over in his grave to see what has become of the company he started 30yrs ago. I am a former Arbonne consultant and never had a good feeling about Harvest Partners. Investment bankers only want money, Arbonne used to be a very family feeling company, feel bad for my friends still w/Arbonne.
AS I’m looking for answers from you guys. Look below at what a consultant on WAHM.com actually posted. Could someone here explain how could ARbonne be debt free by March on this. Read what she posted and truly believes.
I got this from my NVP today. One more step in the right direction!
Hey Guys!
I encourage you to go to :: Arbonne International ::, and click on the interview/Q & A’s with CEO Kay Napier. We are so excited about the financial restructuring! The case Judge basically agreed to everything we requested, and has supported us 100%! We believe this whole process will be over by NTC—about 7 weeks away. We are so grateful of CEO Kay Napier’s leadership in once again putting Arbonne debt-free! This is going to be an awesome year of growth in this company! If you have been holding back, this is the perfect timing to get involved again, before our third big momentum! If you have any questions, please give me a call!
Donna
— On Fri, 1/29/10, Arbonne VP Support wrote:
Dear Donna McPheeters (15154547),
We are glad to tell you that just two days into our restructuring, we have already made significant and positive progress!
To view the most recent developments, please log on to arbonne.com > Internet Consultants > Arbonne Restructuring > First Day Motions Update from CEO Kay Napier.
Thank you for your continued confidence and support.
Sincerely,
VP Support
Chloe,
They are trading their debt for % of ownership to the banks they owe the money to.
The only write-off I have seen in any of their paperwork is that Harvest Partners will lose their initial $93m investment and 85-90% of the ownership of the company.
The company will not be debt free.
This is the equivalent of Arbonne being $800m in credit card debt, refinancing that $800m into a second mortgage, and saying they’re better off. Just because a different bank owns your debt or you doesn’t make it go away.
I am revolted by the statements being released by the company and the IC higher-ups. They are at best uneducated and misunderstand the process or at worst outright lying to keep everyone calm.
I still did not get any email from Arbonne on this bankruptcy. I was told they were doing it by email. This should have been done with direct mail. No one person on my team has received it. ONly a wholesale buyer.
I am very sorry to hear about the situation that the parent company has put Arbonne reps in. They have opened up a legal issue with reps saying the company was debt free, when in fact it was not.
As a long term 30 year veteran of this amazing industry, it never ceases to amaze me how greedy and stupid corporate entities can be. If Arbonne survives the BK, and I’ve read the entire filing, it will be 85% owned by a consortium of banks. That in and of itself is a serious cause for concern as the federal government moves against banks with riskier loan positions.
Don’t be surprised that the company comp plan is changed dramatically to increase cash flow. Bonus elimination, lower incomes and higher prices will be the result.
Chloe – who cares if you got the email or not – go to the website and read it! Also – if you have been doing the business you should ALL of your consultant’s and preferred client’s email addresses so YOU could send them an email about it! Stop whining and complaining – step up and take ownership and do what you think is necessary to do! THIS is why people are not successful in this business – it has nothing to do with your upline, downline, sideline, or outline, or the company really – it’s because most people like to complain, make EXCUSES, and not take responsibility! Just do what you need to do to make things happen! Complaining on yjis blog gets you nowhere! Good Luck!
Who Cares:
You are scolding Chloe for not taking the initiative to do what the COMPANY IS NOT DOING THEMSELVES.
The company has everyone’s email address. A notification should have gone out ahead of breaking news. There are still plenty of people who have not received it, including myself and everyone I’ve talked to in my line. Consultants should not have to go completely outside of their company to find ESSENTIAL information VERY NECESSARY to running their business! It’s not like the average Arbonne IC has a retail store and can just say, “Oh well, Arbonne’s bankrupt, I’ll just stock Avon now, it’s no biggie!” Arbonne distributes the only products their IC’s are selling and right now they are acting like childish assholes.
What Arbonne did is not ok. This business (or any sales business) is about GOODWILL, and hiding behind spin, late or nonexistent notifications, and outright misstatement of facts is not going to create any GOODWILL for Arbonne.
Whomever at Arbonne is driving this PR bus right now is killing the company, and their IC’s businesses right along with it. I honestly am surprised that there aren’t more IC’s foaming at the mouth about the HORRID disservice Arbonne has done to them. It’s perplexing.
Thanks Kathy. It is actual law, that a company must
send written notice. Arbonne worked it out that they
would send emails because they wanted to save money.
They promised to comply. I guess me just forwarding a
pasted copy to downline and clients is what I have to do.
I guess they will really be on arbonne’s side when they get
it from me and not from head office. Well there goes the trust
for another 500 people.
Dear Who cares,
I am in agreeement with Cathy in regards to Chloe. The company should be sending the letter.
I also disagree that success comes from you and you alone. IMO, who you represent and what you represent are critical to your ingrerity. Most people I know list that as the number one reason they choose to do business with someone – they trust them!
If that trust is broken, you stop believing in what you are doing and you lose your passion. You lose your passion, you lose your motivation – we all know that success comes from activity.
And that becomes something to act upon. You need to make a decision to stay and work with what you know – or you leave. I think that holds true for any decision with life.
Good luck to you Chloe and Kathy and all the other consultants trying to work through this.
Traci
I am not a consultant of Arbonne and have never tried the products. However I am with another direct sales company and have been watching Arbonne for a couple of years now. In 2008 my parent company was approach to buy out Arbonne and they said no. They were approached again in 2009, and again my company said no. We were told by the CEO then that they were in finacial trouble. We learned this in an executive meeting in 2008 and again in 2009. I have talked to several consultants with Arbonne and they new absolutely nothing about it either time. I feel that alot of direct marketing companies have had troubles in this economy but I feel that they should be honest with their consultants. If it wasn’t for the consultant there would be no company in the first place. Consultants are the strength of these types of companies. We were told that they way their company structured their compensation plan it was deemed to fail sooner or later. The CEO that informed us of this has been with direct sales all of his adult life. Extremely smart business person and is CEO of one of the most successful and largest direct marking companies in the world today.
Anytime my company has something going on that could impact my business, I was always informed in writing and in somecases a phone call from the corporate office. I think that is just good business. I agree with Kathy, the company has everyone’s contact information, no consultant should have been blindsided with this. Keeping everything so secret and not being honest to its representives gives them an uneasy feeling (or it should). I wish everyone the best during this time. I hope that it works out the way it should for each of the people it has and will impact.
Rhonda,
I understand that you are passionate about your company, but if I were talked down too like you were talking down to the other people who had concerns, I would never join your team or your company. I am glad they you are successful with your business, but that doesn’t make it less scary for others who maybe just starting or are depending on this for their sole income. Maybe it is you that needs to take some classes in respect and how to interact with others. As a leader you should know that. I was completely turned off from your company after your first sentence. These people are truely concerned about their future with Arbonne and you berate them. Shame on you. If that is the gift Arbonne has I wouldn’t want it and couldn’t imagine who would. I hope you have continued success with your business as all others involved.
Best Wishes
MC I totally agree on your comments regarding Ms. Rhonda! I am an Executive Director with Mary Kay and I agree that any changes that effect the employee’s or consultant’s should be revealed. It is unfortunate for the consultants who have not been told the truth and have every right to be upset. Good Luck to you all, whether you stay with Arbonne or move on to other ventures.
WOW ! The sugar coating of this is unbelievable. Yes, I am worried, yes this is my sole income and yes I have been told several times that this ‘is great for the company’. I am close to getting my mercedes, it should be an exciting time. I have an opportunity presentation next week that I will deliver to about 15 guests – how do I stand infront of them and say this is a life changing opportunity and mean it ? Well, I guess it will be life changing for some of us, but not in the way I had expected.
Aren’t you going to tell them the truth about restructuring or are you going to avoid that? You have to upfront with that. Is it more important in getting a car(which remember, you don’t own but lease-unless you have 50,000 cash to buy) or having a successful business with being honest???????????
I was only reading to educate myself on what is actually happening with Arbonne. Chapter 11 is a big deal and should not be taken lightly and disregarded as Arbonne has made everyone to think. The only thing that really stuck out from most of the blogs was the info given by the person “who wasn’t an investment guy” but sure spelled things out – I would be very nervous if those statements are accurate. The other bit of info I found interesting was the blog from Rhonda – from that rant I am shocked she has a successful business. Yikes!