Part of the guide: Network Marketing Lead Generation
I’ve been in and around this industry part-time since 2002, and in over twenty years I’ve noticed something strange: the one honest document most network marketing companies publish is the one almost nobody reads. It’s called the income disclosure statement, and if you learn to read it properly, it will tell you more truth in one page than a hundred opportunity calls.
The catch is that it’s usually written to be technically accurate and practically misleading at the same time. So let me show you how to actually read one.
In this guide
What an income disclosure statement is
An income disclosure statement (IDS) is a document — usually a PDF or a page buried in a website footer — where a company reports what its distributors actually earned over some period. Companies publish them mostly because of legal pressure. The FTC’s business guidance on multi-level marketing makes it clear that earnings claims have to be truthful and not misleading, and an IDS is part of how companies try to cover themselves when their field is out there posting car photos.
Here’s the thing: even a slanted IDS contains real data. You just have to know where the slant is.
The five things to check before you believe a single number
1. Find the real denominator
This is the big one. Ask: earnings as a percentage of whom?
Many statements only count “active” distributors — people who ordered product or hit some qualification in the period. Everyone who signed up, bought a kit, made nothing, and quietly quit gets removed from the math before you ever see it. If a company says “the average active distributor earned $2,400,” the word active is doing enormous work. The people who earned zero and left are exactly the outcome you’re trying to estimate your odds of, and they’ve been filtered out.
If the statement doesn’t tell you what percentage of total enrolled distributors the numbers cover, assume the real picture is worse than what’s printed.
2. Median beats average
Averages in this industry are almost meaningless, because income is wildly top-heavy. One person earning $2 million and 999 people earning $50 “average” to over $2,000 each. The median — the person in the middle — is $50.
If an IDS only gives you averages per rank, look at how many people are in each rank. That’s usually disclosed, and it’s usually brutal: the ranks with impressive averages typically contain a fraction of one percent of the field. I wrote about this dynamic in my list of MLM red flags — top-heavy income structure is one of the most reliable ones.
3. Gross is not income
Nearly every IDS reports gross payments from the company — commissions and bonuses before any expenses. It does not subtract the autoship orders, the event tickets, the samples, the tools, the travel. For a lot of participants, expenses exceed commissions, which means a “$1,200 earner” on the disclosure may have actually lost money that year.
The statement usually admits this in a footnote, in small type, phrased something like “figures do not include expenses incurred in the operation of the business.” That footnote is the most important sentence in the document.
4. Watch the time period
Some statements report monthly figures, some annual, and some “annualized” — meaning a distributor who had one good month gets that month multiplied out as if it happened all year. Monthly averages also hide volatility: a rank you touched once in December can put you in that rank’s row even if you spent eleven months earning nothing. Check whether rank earnings are “average monthly income of those who achieved the rank in any month” — that phrasing inflates everything.
5. Read the footnotes before the table
Everything the table giveth, the footnotes taketh away. Who was excluded, what “active” means, whether zeros are counted, whether the numbers are gross — it’s all down there. Read the footnotes first, then the table. It completely changes what you see.
You have been paid late before
You have watched the number on the dashboard not match the number in your account. What is different now is simple: it settles on a public contract you can check yourself, not a dashboard I control.
Read the contract →Most participants earn little to nothing. No income is guaranteed. You can verify every payout on the public smart contract.
A worked example
Here’s a simplified example of the format you’ll actually encounter. The numbers are illustrative, but the structure is the standard one:
| Rank | % of Active Distributors | Average Annual Earnings |
|---|---|---|
| Distributor | 78% | $310 |
| Senior Distributor | 15% | $1,850 |
| Director | 5.5% | $9,400 |
| Executive Director | 1.2% | $47,000 |
| Presidential | 0.3% | $290,000 |
Footnote: Figures reflect gross compensation paid to Active Distributors and do not include expenses. An Active Distributor is one who placed a qualifying order in the period. 62% of all enrolled distributors were not Active.
Now read it the way I just taught you:
- The footnote says 62% of enrolled people aren’t even in this table. So the “78% earning $310” row really describes 78% of the remaining 38% — roughly 30% of everyone who joined. Most people who signed up earned effectively nothing and don’t appear at all.
- $310 is gross. Subtract a typical monthly autoship and that row is underwater.
- The rank that looks like a career — Executive Director — is 1.2% of actives, which is well under 1% of everyone who enrolled.
Same document, very different story once you do the denominator math yourself.
What the FTC found when it read 70 of these
This isn’t just my cynicism. In September 2024, FTC staff published a report analyzing income disclosure statements from 70 MLMs. Their findings, from the companies’ own published data: many participants received no payments at all, the vast majority received $1,000 or less per year, and in at least 17 of the 70 companies, most participants made nothing. The report also documented the same tactics I listed above — spotlighting top earners, omitting the percentage who earned zero, and ignoring expenses. The FTC’s consumer alert summarizing the report is a five-minute read and worth every minute.
When I finally sat with numbers like these honestly, it was a big part of why I stepped back from building network marketing seriously. Not because nobody earns — some people genuinely do — but because the printed odds are the printed odds.
If there’s no disclosure at all
Some companies don’t publish one. In the U.S. there’s no federal law that specifically forces them to — but truthful-earnings-claim rules still apply, and a company whose field is flashing lifestyle while the company publishes nothing is telling you something. Ask your prospective upline for the IDS. If the answer is “don’t focus on that, focus on the vision,” you have your answer.
The customer-first takeaway
Here’s the real test an IDS puts to a company: if the income table is ugly — and it almost always is — then the product has to justify itself without the opportunity attached. Would a normal person buy this at this price with no comp plan? That’s the whole question, and it’s the difference between a product business and a recruiting machine. I’ve written about what a real customer actually looks like, and it’s the standard I’d hold any company to before joining.
Read the disclosure. Do the denominator math. Believe the footnotes over the table, and the table over the testimonials.
And if you’re rethinking how you want to build income online in the first place, start here — it’s the honest version of what I’d tell a friend.
Three posts a day. One email a day.
Everything I publish, in one short daily email. Real numbers, no hype, unsubscribe in one click.
Get paid 100%, on-chain, the second the sale clears
Most affiliates earn little, and that is disclosed up front. The difference here is not a promise about what you will make. It is that you can verify every payout yourself, on a public contract, in about twelve seconds.
See how the payout works →Most participants earn little to nothing. No income is guaranteed. You can verify every payout on the public smart contract.
The worked-example table did more work in two minutes than every hype video I’ve sat through in a decade.
The line that stayed with me wasn’t in the numbers, it was “even a slanted document contains real data, you just have to know where the slant is.” That’s a decent description of most persuasion generally, not just this document. Worth asking of any pitch: where specifically is the slant, and who benefits from you not finding it.
Hollis names something I have felt without having the words for it – that the slant in a written document is itself a kind of honesty, if you know to look for it, in a way that a purely verbal pitch, offered with warmth and no paper trail at all, never quite affords you the same opportunity to catch.
Sorry if this is a basic question, but if I ask my recruiter for the actual income disclosure statement and she gives me the compensation plan brochure instead, is that a mistake on her part or is that, like, the tell Hollis and the article are both describing, because I genuinely cannot tell yet if I’m being paranoid or if I just noticed the thing everyone’s been trying to teach me to notice.
It’s the tell, Bonnie, not paranoia. I’d add: you don’t need to confront her about it or make it a whole conversation if that’s not comfortable for you. You can simply look up the company name plus “income disclosure statement” yourself, in writing, on your own time, and never have to ask anyone anything out loud at all.
The FTC staff report on seventy companies is the part worth sitting with, because it’s not anecdote, it’s the companies’ own submitted numbers aggregated by a third party with no incentive to flatter them. What I’d want to know before trusting the conclusion fully: were those seventy companies a random sample of the industry, or seventy companies that happened to already have published disclosures, which would itself select for the more transparent end of the distribution and probably understate how bad the non-disclosing majority actually looks. Selection effects like that don’t invalidate a finding, but they do mean the true picture is very likely worse than even this report suggests, which is an uncomfortable thing to say out loud about a report that was already unflattering.
Fine, sample selection matters. Look, but even granting the seventy companies skew toward the more transparent end – if the transparent end still shows most people earning next to nothing, what exactly does that imply about the companies that wouldn’t even publish? Worse, presumably. The caveat doesn’t rescue the industry. It indicts it further.
Raj’s question is the right one academically. Practically, most people deciding this month don’t have time to interrogate sample selection. The table alone tells you enough.
Raj, I can only speak to one company, but I checked in March: the disclosure covered the most recent calendar year, and it did include the active-distributor footnote language almost word for word like the example in this post. So at least in my case the framing wasn’t hypothetical, it was exactly what showed up when I opened the actual PDF.