(MONEY Magazine) – To celebrate our 25th anniversary year, MONEY is spending 1997 helping the residents of Elgin, Ill., a typical American town (pop. 85,000), get smarter about their personal finances. As part of this effort, in each issue we are presenting a financial makeover of one Elgin household. This is the fourth of 11 such profiles.

Last year, along with 1.3 million other Americans, Pete Almeida, 32, and his wife Kimberly, 31, made a bid for personal prosperity by starting their own home-based business. In September, the couple signed on as part-time distributors for New Vision International, a two-year-old Tempe, Ariz. marketer of vitamins, minerals and health products. Their goal: to generate extra income for their bulging household, which includes four young children (Pete, 7, Katelynn, 5, Nicolette, 3, and Jeremiah, 1), two mutts (Shevis, 7, and Baby, 6) and a parakeet (George, 4). "We want Kim to continue to be able to stay home with the kids," explains Pete, a seven-year veteran of the Elgin Police Department. He earns $42,000 a year in base salary as a patrolman and another $14,000 or so annually from overtime shifts and a part-time job teaching criminal justice at the Elgin Community College two afternoons a week. "But it's hard to live a middle-class lifestyle on just one income," he adds.

That's especially true given the Almeidas' extraordinary generosity. Most of the family's monthly expenses--a $750 mortgage payment on their cramped two-bedroom townhouse, $475 for groceries and $300 for utilities--are not unusual. But Pete and Kim also donate more than 20% of their gross income each year to their interdenominational Christian church and to other causes. That's more than 10 times the U.S. average. "Charity is one of the most important values to teach our kids, and the best way to teach is to do," says Kim, a soft-spoken former flight attendant. Adds Pete: "The amount we give is not negotiable."

Their kindliness has come with a price, however. This hard-working couple haven't saved a penny for their retirement or for a down payment on a much needed bigger home. And they have just $1,000 put away for their four kids' college education, entirely in U.S. Savings Bonds.

"The major reason we started a part-time business was to earn extra money to pay our bills and save a little for the future each month," explains Kim. Although the Almeidas considered more than four ventures, they were enticed by New Vision's low start-up costs--little more than a $6 initiation fee. And the family is genuinely enthusiastic about the benefits of vitamins and minerals. So far, however, the Almeidas have netted just $161 through February from the business (see the chart at right).

Indeed, the Almeidas may have chosen the wrong course to achieve their goal. That's because New Vision is a so-called multilevel marketing (MLM) company, like Amway, Mary Kay Cosmetics and Shaklee vitamins. To make money in a typical MLM, new recruits such as the Almeidas must sell the company's products and sign up dozens or hundreds of other salespeople, known in the MLM world as distributors. Potential profits come from commissions (3% to 8% at New Vision) from products sold by distributors themselves, as well as sales generated by the recruits they've signed up. Although many of the nation's 500-odd major MLMs are perfectly legitimate businesses, their pyramid structure and aggressive selling tactics have given the 50-year-old industry a somewhat shady image. Hard data on failure rates for MLMs are unavailable, according to Corey Augenstein, publisher of MLM Insider Magazine, but he notes that many start-ups "come and go every day."

To be sure, New Vision appears to be a reputable company. Neither the Arizona attorney general's office nor the Federal Trade Commission has taken legal action against the business. But the economics of multilevel marketing do not promise great riches for the Almeidas. According to New Vision co-founder B.K. Boreyko, the company's 40,000 active distributors earn an average of only $300 a month in gross commissions. And in order to be eligible for even a portion of these commissions, distributors have to buy at least $100 worth of New Vision vitamins and minerals each month, either for their own use or to resell. To get the maximum commissions, they must spend a minimum of $300 each month on New Vision products.

Accordingly, the Almeida kids and parents have been consuming about $135 worth of the company's Enzyme Enriched Vegetable Juicecaps, OPC Grape Seed and the like monthly. These mandatory purchases not only represent a new annual expense topping $1,600, they cut directly into the couple's profits.

A further barrier to big profits is the hectic nature of the Almeidas' lives. Pete routinely puts in 50-hour weeks with the police department, plus another eight hours or so a week for his class and another eight hours in the spring coaching his son Pete's T-ball team. Kim has her hands full keeping up with the two toddlers, overseeing her church's nursery-care center and shuttling her older kids to school and flute lessons.

As a result, the couple currently devote fewer than 10 hours a week to their business, which they run out of their bedroom. They spend most of that time doing paperwork and calling relatives, friends and acquaintances to encourage them to become distributors. While the Almeidas have sold scarcely any products themselves, since September they've signed up 77 distributors who generate total monthly product sales of roughly $3,600.

The couple have made little time for critical business development, such as mailing out motivational and promotional audiotapes they can buy from the company for $1.25 apiece or making follow-up calls and visits to sign up customers and recruits. Nor have they attended to the humdrum chores essential to successful entrepreneurial ventures. For example, Pete and Kim have yet to establish a separate checking account or phone line for their New Vision activities.

More troubling, the Almeidas haven't figured out how much they could realistically make with New Vision and what it would take to do it. "We've been wishy-washy about getting focused," admits Pete. "We know we need to get our act together if the business is going to succeed."

THE ADVICE

MONEY asked David Nissen, a certified public accountant and small business consultant with Mueller & Co. in St. Charles, Ill., and Michael Janicki, a Fairfield, Conn. family-business consultant and columnist for MONEY's own small business magazine, YOUR COMPANY, to advise the Almeidas. Their recommendations:

--Look for a new business that emphasizes your talent for selling. Both pros agree that Pete and Kim should reconsider their involvement with New Vision, given the low probability of success for MLM participants in general. "When people are recruited to join MLMs, they're told about the success stories," says Janicki. "They don't hear about the majority of distributors who don't come close to meeting their goals." Dropping out couldn't be simpler: The Almeidas would just stop selling products and recruiting new distributors. (For tips on starting and running a successful home-based business, see page 142.)

--If you're determined to stick with New Vision, sharpen your focus. Nissen and Janicki urge the couple to write a business plan and set annual sales targets. "If you aim at nothing, you normally hit with remarkable accuracy," says Nissen. He recommends that the Almeidas determine annual goals for product sales and new recruits, based on their income objectives and financial goals. Although Pete's police pension will provide adequate retirement income, Janicki estimates that the Almeidas would need to save a total of $5,900 a year, starting now, to pay for four years of public college for each of their kids. That means their business must generate $10,000 a year or so in revenues, before taxes and expenses.

--Set aside more time for the business. "Both Pete and Kim need to spend at least 10 more hours a week meeting face to face with potential recruits and buyers," says Nissen.

--Segregate your business and personal lives. The Almeidas need to set up a separate bank account, phone line and credit card for their business. "Practically, that helps entrepreneurs with record keeping," explains Janicki. "Psychologically, it helps them feel like theirs is a real business." Nissen adds that if the Almeidas eventually buy a bigger home, they should carve out a separate space for their business. "That way, they can take a home-office deduction, which will lower their tax burden," he says.

A few weeks after meeting with the planners, the Almeidas were determined to remain with New Vision. However, they had set aside a separate checking account and credit card for their start-up. "We're serious about building a business," says Pete.