Small MLM checks - The sad truth of network marketing



Read More: Sponsoring and Recruiting

Where's my bonus check?A few days ago, I had a conversation with a lady who reached a very significant pin level in one of the largest and oldest MLM companies. She is no longer with this company, but her story is one that's not too uncommon within the MLM industry and should serve as a lesson to all of those who really want to live the MLM "Dream".

From the outside she and her husband had what you could call "success". They were always on stage, speaking and telling inspirational stories at company events. Every week they trained their downline on how to promote the business and its products.

What was missing?... The Money!

Over their years with this company, they had tirelessly built a downline organisation numbering in the thousands. They should have been on an executive level earnings, but their monthly bonus check was less than two thousand dollars!

So what went wrong? Did their company rip them off? Well, sort of...

The problem was their business was plagued by downline attrition. New distributors would come and go very quickly. Their downline simply could not generate the volume that was required to achieve the level of income they were promised. They and their leading distributors did their best, but they could not motivate the people in their downline to build the business.

Downline attrition is a growing problem in the network marketing industry as the internet continues to distract people with endless get-rich-quick money making opportunities. Now, it's more important than ever before to get the right people people into your business. (And business opportunity seekers are the worst types of people you can have.)

They worked very hard to build that business, doing endless belly-to-belly prospecting that quite frankly, most networkers do not want to do.

So did they sponsor the wrong people? Perhaps...

But on closer inspection of the company's business model and its compensation plan, their lacklustre results were for the most part, inevitable. This company ran a compensation plan that only benefited the very few distributors who got to the top. The people in the field, who would work hard in their spare time to build their dream, who sustained the business, were rewarded virtually nothing for their efforts.

The large distributor "training system" that they were apart of did not encourage retailing but rather endless recruiting, which of course, benefits the distributors at the top. The massive attrition was no surprise. Nobody wants to work hard for nothing.

The moral of this story is you can't succeed unless you understand the business model of your MLM company. First and foremost, good business partners are essential. You can not afford to have business opportunity seekers who hop from company to company. But you must have a compensation plan that rewards people in the field for their efforts.

Network marketing is a hard game. There's nothing more de-motivating than spending time and money showing the plan every day, sponsoring just a few and not see any tangible result for it.

Does your company have a fair and rewarding MLM compensation plan for everybody involved or does it only reward those few at the top?

To your MLM Success,

Wayne

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About the Author: Wayne Wu

Member Since: 09/12/2008

Company: The Profitable Networker

Industry: MLM

Primary Web Site: http://www.ProfitableNetworker.com

Comments



Gotta know how you get paid

It's sad the number of people who join a company excited by the hype of the person sharing the opportunity. Yes, big incomes can be made. But, do you know HOW you really get paid and what it's REALLY going to take for you to make it?

If you don't understand this, and then lay out a 2-5 year action plan to get there, chances are you'll fall by the wayside.

Yes, 2-5 years is the minimum most people can expect to make some decent to serious money, and that 2-5 year clock starts AFTER you really get what this business is; develop the mindset it requires; and take the consistent action steps required!

EXPECT Success!
Jackie Ulmer
http://www.JackieUlmer.com

Jackie Ulmer — Thu, 11/19/2009 - 9:10am

Realistic Expectations

Absolutely! With all new distributors, I have them sign a commitment form. It clearly states that this is a 3-5 year plan, not a 3-5 month plan, so that they understand upfront what is involved.

There is no other performance-based professional, i.e. insurance, investments, etc. that is any different. When you enter one of those industries, it's common-knowledge that you are in a 3-5 year plan, and that is just to get your business established.

So, why should the network marketing profession be any different? It isn't, except that we have a much better way to create long-term security via residual income.

What's Your 'Someday'?
Patty Gale
http://www.PattyGale.com

Jackson J. — Fri, 11/20/2009 - 7:50am

Deletion of Attrition.

This is the main reason I got out of Success University. They went faster than they came.

Even with a funded proposal system in place the attrition monster still reigns supreme. I gave up hope until I found a company which is a hybrid of the old worn out MLM model.

It operates on the customer to affiliate ratio. In other words a business should provide you the means to acquire more customers per affiliate. The recruiting model which most MlM companies use dooms people to failure. It's not a true business because you end up with more distributors (affiliates) than customers. The customer recruiting model is superior in comparison.

With this business and an unbelievable new funded proposal system I discovered things are looking good.

I can sleep at night knowing the empire I'm building will not crumble due to attrition and leave my compensation check questionable.

John Griffith

John Griffith — Fri, 11/20/2009 - 8:44am

Doomed Before They Get Started?

Downline attrition is such a problem becasue most people who agree to the terms & conditions never read the policies & procedures they supposedly agreed to and they don't really know all the hoops to jump through to received their check. Before making any committment, the new affiliate should read their p&p's & do the math on the compensation plan to determine how many customers/affiliates they would need to realistically have a chance to earn their desired income. Once that is figured out, that 2-5 years could be a very enjoyable experience.

Irma White — Fri, 11/20/2009 - 9:03am

Watch out for MLM companys

I've been involved in MlM companies that Lost their Power and sold off or shut down!I was training with a company been business for 10yrs and invested into it, Went seminars for 2 yrs, and overnight they close their doors, I'm not saying stay away from MLM companies, But watch the ones you get involved in, DO YOUR HOMEWORK! Networking can be a job, I'v been involed in social networking for 5yrs and still waiting on my success, So stay focus! on your why!!

Timothy Willan — Fri, 11/20/2009 - 10:22am

Compensation Plan and Bonus Structure

I've been involved in a few MLMs and I can say from experience that it's important to have a bonus plan that pays quickly and can support your efforts while you build over the long haul for the mega-bucks that can be made in the right MLM. It's also important to focus on the product, not just enrolling people - the product is what makes any company successful if you are looking down the road for stable, ever increasing residual income. Find a company with a product you can be passionate about that you use yourself - if you are not purchasing and using the products yourself, how can you expect others to want to use them. It took me three tries before I found the company that fits my needs, desires and passions. You should not base your decision about which company you become affiliated with based solely on the compensation plan. If someone is trying to convince you to join their company based on the compensation plan alone - I say "run for the hills" because if they are not talking about their product (which is the basis for the company), they will not be around for long.

Jacqueline McLa... — Fri, 11/20/2009 - 10:53am

Focus on building a business not a bank balance

In the conventional business world there are good businesses and not so good ones, why should the home business industry be any different? Good guys and bad guys abound wherever one finds oneself. The key is to remain conscious and empowered. Also, historically MLM and network marketing has been promoted as some odd kind of "simple system ATM opportunity" rather than as a true business that should be treated as such. Is it any wonder so many people fail. It's no different from expecting a mouse and getting a lion!

Marcus Baker — Fri, 11/20/2009 - 1:57pm

Yep, I Know A Guy Like That. Check This Out...

For years I was with this nutrition company and I saw this one guy at the meetings all-the-time. When a launch event happened, he would be a big speaker. He won all kinds of awards.

Now I'm not saying that he was doing wrong, but I am revealing the truth about the "old school" methods he uses. This guy still calls all the cold leads that he can. We even met once and he told me that he had been in MLM for 10 years now.

He finds peoples' business cards, he speaks with strangers, with waitresses, with whomever he encounters...

Now here's the good part! He sells some kind of insurance full-time, while working his business, part-time. He says that he knows everything about sales and was willing to train me to recruit on a professional level.

My bet is that he's doing the cold hard persuasive sales that get short-term commitments with loads of buyers remorse. That's why he's still stuck at the full-time job after 10 years.

He's failed to adapt to the modern ways of the industry. Am I saying he won't make it? No. Am I saying that he's doing it wrong? No.

Whatever works for you, go for it.

Do I think he's losing money and experiencing the downline attrition that Wayne mentions right now? I would probably say yes.

Here's even more reason why I believe Wayne is right on the money.

My former upline members did their training in the traditional old school ways and they dusted my words off their shoulders when I discovered attraction marketing.

But years earlier, before I discovered attraction marketing, my sponsor had seen my drive, and decided to give me free money.

Basically she had given me my own downline and I was still receiving a monthly residual long after I quit actively working to grow a business with this company. I was still a customer, but anyway, that monthly check went from somewhat decent per month to nothing, as people began dropping out left and right.

This was right when the economy started to go bad.

So yes right now it is very important, as Wayne mentions, to learn how to get the right people that will truly significantly grow your business.

The downline attrition problem is something you probably want to avoid, especially during these times.

And it's important to know as Wayne mentioned, your compensation plan, and if it's going to really help the people that are just learning.

If you just happen to be scanning the article and responses here, please go back and read Wayne Wu's very informative piece.

Billy Alley — Fri, 11/20/2009 - 4:53pm

Attrition, Compensation Plan, Expectations

Wayne, this is a great article and has motivated really good comments too. I agree that before getting involved we need to understand the compensation plan (how we are going to be paid), the importance to sell products (it is a scheme if we only can make money signing distributors) and the reality that it is NOT a get-rich-quick plan. It takes work and patience.

Angelica Ried — Fri, 11/20/2009 - 5:53pm

It's definitely a 3 - 5 year plan

Thanks Jackie and Patty for your replies.

I couldn't agree more that it's a 3 - 5 year plan to build a solid foundation in this industry, as with any other industry.

One brilliant marketer that I follow and I'm sure many of you have heard of, Eben Pagan, says it takes about 2 years of dedication just to get good at something, and takes about 5 years to master it.

It's a bit unfortunate there's so much "enticement" in this industry. While it's motivating to hear inspirational stories and photos of big houses of some hot-shot on the stage, you rarely get the full picture and that gives people false expectations.

Wayne Wu — Fri, 11/20/2009 - 6:19pm

Thanks Jacqueline. When I

Thanks Jacqueline. When I first got involved in MLM, it was all about recruit, recruit, recruit... because nobody wants to sell right? Selling is a JOB!

But thankfully I am now a lot wiser. I cannot emphasise how important retail sales really are. You can't sustain a business with recruiting.

Customers will buy from you for life if they love the product. Distributors will always look for the better deal.

Wayne Wu — Fri, 11/20/2009 - 6:25pm

Thanks Billy, Spot on. You

Thanks Billy,

Spot on.

You can't hard sell people into network marketing because this is NOT a sales business. It's a relationship business.

Sure we sell products and opportunities. But we need customers who buy from us repeatedly to be profitable and we need distributors to stay with us if we're going to have any kind of success.

That's why it's a relationships business and not a sales business. Sales are temporary. Relationships are permanent.

And that's what attraction marketing is all about - developing relationships.

Relationships first. Companies, comp plans and products second.

Wayne Wu — Fri, 11/20/2009 - 6:39pm

Compensation Plan is NOT the Issue

The mere fact that the company in question was one of the largest and oldest is surely proof that the system works. Yes, only a few make it, but for someone to suggest that this will be any different with their company is deceptive. The reason why so few make it has less to do with the product and compensation plan, and more to do with the attitude and behaviour of the individual distributor. Personal development is key - not one compensation plan versus another.
Kim Willis
www.whoiskimwillis.com

success222 (not verified) — Fri, 11/20/2009 - 8:18pm

Everyone vs Someone

I would contibute hear that a big part of the problem with Downline attrition is that people approch downline building with a evryone insteed of a someone mentality. The everyone approch builds buy alowing anyone to join your group weather its the right company team or sittuation for them or not then when any thing happens people quit. The someone approch says Im looking for a certine type of person to join with me and to work with in a way that wil help us both if you look for the someones and et them know they are valued they will be less likely to quit when tough times come.

Ken Tallman — Sat, 11/21/2009 - 9:45am

Small MLM checks - The sad truth of network marketing

Thanks Wayne,i am learning how to build my downline,this articles helps and i will share it with my team.
Hollis

Hollis Chapman — Sat, 11/21/2009 - 10:04am

Thanks for all of your participation

I just want to say a big thank you to everybody who's participated in this discussion.

This has been my first featured post on Better Networker and I'm humbled by the number of responses I've received. Hopefully, it's the first of many as I continue to seek to add value. Thank you.

All the best,

Wayne
www.ProfitableNetworker.com

Wayne Wu — Sat, 11/21/2009 - 6:32pm

Aren't We Fooled????

Hi Wayne,

Thanks for this post. It is so true, sometimes you as a member of the MLM watching all the biggies at the top wonder why you cannot get there. Generally the downline is not let in on these insider secrets. However, is there any kind of test of guideline, which can enable me to know if the MLM I am a member of is on par regarding its compensation plan?

Rosanne Reid
God Bless You!
www.rosereid.cyberwize.com/presentation

Rosanne Reid — Sun, 11/22/2009 - 4:22pm

The Comp Plan Test!

Hey Rosanne,

Yes, indeed there is a test that you can use to know if your MLM's compensation plan is on par.

The best thing you can do is whip out your calculator and work out roughly how many people you would need in your downline to make $10,000 per month, assuming they are on a regular average volume autoship.

The MLM industry average is about 2,000 people. There are some companies that require as many as 10,000 or more, while there are some companies that require just 300 - 400.

I hope that helps,

Wayne
www.ProfitableNetworker.com

Wayne Wu — Mon, 11/23/2009 - 8:41am

Only 3% succeed

Hi Wayne, My dad taught me many years ago that very few people succeed. I know now what he is talking about. It takes time and energy to be successful at anything including any MLM business. However, it is important to look carefully at the business model and do your homework. It is also important to find one that fits with your lifestyle so you don't have to change your buying habits to be part of it.

Thanks for the post!

www.careermomsworkonline.com

lesley robertson — Mon, 11/23/2009 - 11:38am

The Bigger Picture Of Network Marketing

This is a great post Wayne and one that should open eyes to what people can expect in building a network marketing business if that is their only focus.

I have been in this industry for almost 30 years and have done just about every prospecting method there is for off-line marketing. Because of my work effort, I was able to go full time in my first year and have never missed a bonus check ever since. But the point I want to make here is that most do not do this well today.

Also, some of your downline will move on to other interest over the years and treat their business as a hobby, some will join other opportunities they get introduced to by close friends, some will have a falling out with their upline and simply quit the business, and some will simply die off over time etc.

So my biggest challenge over these last few years has been on how to increase my total income over what I earned the previous year. If the geometric growth would work out as many networkers teach, (You find 2 who each find 2 and so forth), then you should reach a level over time where your income continues to grow larger each year even without you.

We all know that this can't work and does not work that way because if it did, over these past 50 plus years of networking, there would be nobody left to recruit.

Also, when I entered the industry, there were only a hand full of companies in this industry. With the introduction of the Internet, this has now flooded the market today. So it is even harder to build today than ever before.

However, that is what is still being taught today. If you work harder then everyone else, are a center of influence, have a lot of luck on your side, and don't stop trying, you may fall into the 3% who make it. But today, there is a much better way to do this and it can be done a lost faster.

I was really surprised to find that one network marketing company had over 750,000 members but only 4,000 - 6,000 that came to the convention every year. That's over 740,000 people that may not be making it at all with that company but support the few who do by using the products.

Since coming on-line less than 2 years ago, I now have many streams of income which has doubled my income my first year and most all of it is money I don't work for other then Internet Marketing content I learned to produce thanks to people like Mike Dillard.

I still have my network marketing as one of these income streams, but I no longer focus on just that income stream. In fact, a few months ago I developed my own coaching program which will more than double my income again next year if it does not grow any bigger than it is today.

So if you want to enter the network marketing industry, be sure to not make it your only focus for your income stream. Get Mike's training and learn to do it the right way and soon you too will have your own product just like Mike has done.

If you do that, you will join those who can really say that they truly own their own business. Think about it.

Bob Andolina

Robert Andolina — Mon, 11/23/2009 - 3:27pm

A Benchmark to Limit Attrition

Hi Wayne,

First, I'd like to point out that I think you used the PERFECT image for this article. Mr. Moneybags with his pockets turned out and his empty hands turned up captures the essence of the seemingly successful (top-hat and all) network marketer who is actually broke beautifully.

I understand the recommendation about calculating how many distributors it will take to reach $10,000/month, but the newer compensation plans tend to be multi-layered, so there are different strategies one could employ to get to %10,000/month. One person who is a skilled salesman and marketer might personally recruit a lot of people, but another person might recruit a couple of key players who do really well, and yet another has a well-developed team building strategy so everyone in their downline recruits a few, who do the same. These different combinations will return different levels of compensation, depending on the specific plan used by the company. It's not as cut-and dried as simply plugging in X number of distributors and getting a result.

I'd like to suggest an alternative means of measuring the long term viability and profitability potential of a given company. It's a little more straight-forward, and this is it:

Is there a market for the product, independent of the opportunity associated with it?

That is, are there a significant number of people who will happily exchange their money to purchase the product or service the company offers and expect nothing more in return for their money than that product or service?

If the only people getting involved with the company are distributors who are trying to build a profitable business...RUN! This is not a sustainable business model for you, as a distributor (unless you are at the very top and are good at spinning the company mantra into a believable opportunity to people on a regular basis).

Please, make sure a large percentage of the people using the company's products and/or services are simply happy customers, before you decide to do business with them.

Lane Romero-Reiss

Lane Romero-Reiss — Mon, 11/30/2009 - 1:00am


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