April 14th, 2007
MLM Compensation and Perks
When doing due diligence on an MLM company one of the key areas is evaluation of their compensation plan. First, compare the target company plan to industry. For example, it would not be proper accounting to consider "wholesale discounts" as part of commission expense. Therefore, any comparison to industry would have to include wholesale discounts as a deduction from Gross (Retail) Sales. Why? Because no serious person doing the business would buy at retail (making Gross Sales a meaningless figure). For additional comments on discounts see the post made 10/17/06, Direct Sales Compensation and Discount Structure (Industry).
Dr. Charles King and Tim Sales developed a great video on this subject called Brilliant Compensation that gives a strong explanation of this subject. They readily point out that the reason a multilevel company exists is because of marketing efficiency and elimination of distribution costs. If a company does not have a good multilevel marketing plan then they should market in a more conventional way and completely eliminate distributors. What does this mean for you as a Distributor? From a company perspective you are number one!
As the video points out, the more money that an MLM company can get to the Distributor Base (not just a few Key Distributors) the more profitable the company will be and the faster the company will grow. As a Distributor, company momentum is extremely important to your growth and your organization so you don’t want a company with the wrong focus killing momentum.
Whatever you do don’t become a distributor for a company that has their money and spending focus on something other than their Distributor Base (defeating the purpose for being a Network Marketing Company by definition). If they are spending over industry ratios on expenses other than Commission Expense. they may not be a long-term company or player. This is a significant consideration! The best products in the world are no good if they can’t be sold. There is no way that a company marketing employee is going to do better at marketing than a Networking Distributor (otherwise it wouldn’t make sense for the marketing employee to be anything but a Key Distributor themselves - think about it). Distributors have not only built the company, and created it’s existence, they keep the company in the game. The founder has provided the opportunity, which any distributor should be very thankful, but without you the founder’s company wouldn’t exist. Any company that doesn’t understand this dynamic is not worth your time and effort working to get to the Residual Income level. When that is the case, you won’t spend the money for that airline ticket needed to support your downline that you created and support. You are the company!
|
