Recently, I have been approached by a few people asking me for my two cents about joining an energy broker MLM such as Ambit Energy. Instead of just giving my opinions on top of my head (people’s cents come pretty cheap everywhere online these days), I decided to do in-depth due diligence on the company and opportunity to put myself in the shoes of those that are seriously considering joining the company.
So in addition to my own research, I also consulted advice from industry veterans and “insiders” such as Troy Dooly (MLM Help Desk), Len Clements (InsideNM.com), Ted Nuyten (BusinessForHome.org), and Rod Cook (MLM Watchdog).
Here are my findings…
Ambit Energy was founded in early 2006 at a Potbelly’s restaurant in Addison, Texas, USA over a couple of turkey sandwiches. Introduced through a mutual friend, Jere Thompson and Chris Chambless met for lunch to discuss energy deregulation. They liked the opportunity, and they liked each other.
During lunch, they made a few important decisions: to build the finest and most respected retail energy company in America, provide affordable electricity and gas, and to never sacrifice their integrity for growth.
In 2008, Ambit recorded revenues of almost $200 million and nearly $325 million in 2009. In 2010 the biggest achievement was being named “America’s Fastest-Growing Private Company” by Inc. magazine, which placed Ambit on top of the publication’s renowned “Inc. 500″ list.
At this time, Ambit delivers energy services in New York, Maryland, Pennsylvania, Illinois, Texas, New Jersey, and California. The company is a member of the Direct Selling Association (DSA). The company has more than 150,000 independent sales consultants. Revenue for 2010 was $417 million and in estimated to be $650 million in 2011.
Ambit Energy provides power and natural gas in 9 states in the United States and has a mission to be the finest and most respected retail energy provider. All across America, state governments are evaluating the impact of deregulating their electric monopolies to provide their citizens with greater choice, lower prices and more innovative products. Several states now allow competition. Texas was an early leader. California is the most recent state that deregulated its energy. Other states may continue to follow in the future.
If you’re an Ambit Energy residential or commercial customer, Ambit Energy wants to reward you for becoming a loyal customer by offering competitive energy prices and creating an attractive customer rewards programs in the industry.
You may read more about Ambit’s Compensation Plan, Management, and Top Producers at BusinessForHome.org.
Competition: The “Energy Wars”
While competition is normal for all businesses, the competition is especially intense with energy MLMs because energy (electricity and natural gas) is a commodity and the product is the same with every energy reseller. The only difference is price. At the moment, Ambit Energy has at least ten other direct competitors:
- ACN (yes the telecommunication company is going into energy as well)
- Ampegy (Spark Energy)
- Choice Consumer Marketing
- Dynastar Energy
- Ignite Energy
- Independent Energy (Energy Plus)
- Invado Energy
- North American Power
- Viridian Energy
The MLM Help Desk has a few articles covering this Energy War you may want to check out…
- The MLM Help Desk MLM News Report: Are The MLM Energy Wars Heating Up?
- MLM Watchdog: Energy MLM Legal Wars
Concerns Voiced By Industry Insiders
If you are interested to see what industry veterans and “insiders” have to say about Ambit, here are some excerpts I’ve discovered after doing my due diligence or personally interviewing them:
“Energy (MLMs) is a high risk niche because energy is a commodity though some of these companies truly have their act together.”
- Troy Dooly of MLMHelpDesk.com
“My main concern is that there is very little income potential from the overrides on power, especially when the provider is a reseller. There just isn’t enough margin. So, like long distance and cable services, they charge several hundred dollars up front as a ‘training fee’ then pay out large ‘Customer Acquisition Bonuses’ (CAB) from that training fees. And there are many problems associated with this model…”
- Len Clements of InsideNM.com
“If I were you I’d be very careful about building a business with a non-unique product or service which such a limited market. Don’t get me wrong, the idea of getting paid of something you’re already using sounds amazing, however, if you don’t have access to a major market share then only the few top dogs who really hit it are going to make the serious money. And if the product or service is not unique, you pretty much have major competition that’ll have price-wars with your company which makes it hard to create a loyal customer base funding your residual income stream, and further making it harder for the little guy on the bottom to win.”
How These Concerns May Affect Your Future Success
The problem with this is two-fold: First, it’s a one time event. To keep these lucrative CAB bonuses flowing requires the constant, never ending influx of new distributors. Secondly, it is only paid from the recruitment of new distributors. In fact, some companies, like ACN and Ignite/Stream Energy, and even Ambit, have all been sued in civil court for being pyramid schemes for specifically this reason (CAB bonuses). So far ACN has won 3 out of 3 cases and I think the other two are still going. Last I heard Ambit had the case thrown out, but 5th Circuit appeals court reopened it. Eventually both cases will probably settle, but all of these energy companies have to remain undefeated. If even one loses on the basis that CAB bonuses make it an illegal pyramid, then that can create a precedence that will be used to attack all of them on.
More Details About Ambit and CAB Bonus Lawsuits:
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Eventually the cases currently in court will probably settle, but all of these energy companies (and even companies that have CAB Bonuses as a central component to their compensation plan) have to remain undefeated in court or else their compensation plans will be deemed an illegal pyramid.
“If even one (court case) loses on the basis that CAB bonuses make it an illegal pyramid, then that can create a precedence that will be used to attack all of them on.”
- Len Clements of InsideNM.com
Perhaps this is why Troy Dooley calls Ambit Energy and any energy MLM company a high risk niche because of the many variables which can affect the margins from reselling energy.
The Bottom Line
Ambit Energy is a well-managed company and well positioned in the energy MLM sector. However, just like getting into a marriage, a smart and responsible distributor must consider the long term prospects because the last thing one would want to do is to pour your blood, sweat, and tears into building an MLM business that has serious flaws with its foundation.
- Timing: In certain states such as California that recently became energy deregulated, it’s first movers advantage.
- Easy to Market: Getting prospects to save or make money with something they are already buying should not be a hard-sell in a tough economy compared to a product that requires purchases with disposable income.
- Large Bonuses But Minimal Residuals: Substantial income comes from recruitment CAB bonuses and not residuals from recurring energy purchases due to low margins.
- Limited Market Potential: The limited ability to open up new market can affect your business’s ability for long-term growth and stability.
- Legally “Untested” Comp Plan: The fate of CAB bonus driven comp plans are still legally up in the air. The last thing you want happening is building a very successful business then the company having to change its compensation plan in the future due to a court order and have your income significantly reduced.
Whichever side you decide to take, I’d like to personally congratulate you for your decision to take back control of your life and join the network marketing industry. I hope this review provides you with vital insider information that can help you make your decision.
To your health and prosperity,