The 50-70% Pay Out Myth Busted
Ever heard?
My company pays
50%, 60%, 70% to distributors…
I guess that claim refers to Commissionable Value and not Sales Revenue. What is Commissionable Value? It is usually a percentage of your Sales Revenue.
If you analysis the payout to distributors for a number of Public Companies as Herbalife, NU Skin, USANA, Mannatech and RBC Life Sciences it comes closer to 37% – 40% over Sales Revenue on average.
5% is the maximum for an individual distributor over his commisionable team volume as residual income.
So if your group is selling $100,000 commissonable value per month, you receive $5,000 if you are qualified.
However Direct Selling is still a great business, 5% residual income is awesome!
Rank Company Revenue 2010 in Million Commission in Million Pay out % Herbalife Nu Skin USANA MannaTech RBC Life Sciences Average
From the annual reports 2010:
Herbalife:
Apart from 25-50% Retail Profit that Herbalife distributors are able to earn, once you are a Supervisor with Fully Qualified or Qualifying Supervisors in your first three downline levels, you may qualify to earn Royalty Overrides of 1% to 5% of your Organization Volume.
Commission is called Royalty Overrides. Pay Out: $900 million =33%
Nu Skin:
Historically, our distributor compensation plan has paid out to distributors approximately 42% of commissionable sales. We believe that our commission payout as a percentage of total sales is among the most generous paid by major direct selling companies.
Commission is called: Selling Expenses. Pay out $646 million = 42%
USANA
Commission is called: Associate incentives. Pay out: $233 million = 45%
Mananatech
Based upon our knowledge of industry-related network marketing compensation plans, we believe our global associate career and compensation plan remains strong in the industry and is currently among the most financially
rewarding plans offered. Together, our commissions and incentives range from 44% to 50% of our consolidated net sales.
Commission is called: Commissions and incentives. Pay out: $97 million = 42%
RBC Life Sciences
We compensate Associates for their sales activities through our Associate compensation plan. This plan allows Associates to earn higher commissions as their sales and the sales of their downline Associates increase.
Commission is called: Associate network. Pay out $6 million = 40%
Myth busted….
Get more information, facts and figures about RBC Life Sciences, click here for the RBC Life Sciences overview.
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However it is a great business, 5% residual income is awesome
1) Develop a Positive Attitude toward the Industry:
Ignorance, greed and lack of basic business knowledge help to cast a shadow around the industry still. To develop a positive attitude about the industry, we all have to focus on truth and bottom-line integrity. If anyone leads with how much money they are making, how much money they think you will make and how great the compensation plan is…run. This is a great industry, in-fact, 80percent of all women earning six figures today do so with a Modern Network Marketing organization, not in a corporate job or on Main street U.S.A. People often hold a higher standard for network marketing companies than they do any other “traditional business” or “investment strategy.” ENRON, WORLDCOM and let’s toss in Bernie Madoff into the pot.
When you start with a modern network marketing opportunity, you have to take a good look at the company. Personally, I would not invest my time or good name into any investment without speaking to a top Executive or a Founder. I also would want to look into debt while developing a clear understanding of company vision.
Most solid companies pay very much the same. You are not going to earn what can be considered an income if you only focus on compensation plan and how much the other guy made in his first six months. Period. With that being said, Network Marketing or Direct Selling is a very straight-forward and practical business start-up. Be honest with yourself first, study, learn and then when you are confident, go out and share that experience with great heart and integrity.
2) Marketing:
Getting a little more off subject but it rounds out well here, what ever happened to the science of marketing? Globalization is pushing the worldwide economy all over the place, but it’s network “marketing” for a reason. Every single person reading this has to understand that if you are marketing a dollar amount or compensation percentage…you are not going to build credibility or trust. You are also not doing your product line and organization any benefit. You do not want to attract people who are focused on how much money they can “theoretically” earn. The minute they face 10 rejections out of ten invites to a webinar, video presentation or conference call…they will quit and claim the industry itself doesn’t work.
Marketing requires integrity first. I don’t toss that word around, it means creating a foundation that is safe, trustworthy, trusting and absolutely consistent. Marketing is a “time” commitment. If you market correctly and remain disciplined and consistent, you will be rewarded. Remember, network marketing pay’s you for your success, not your potential. Now many enter the industry with great success at a job or in life, but they start with a clean slate in an industry that can be very abstract if you don’t understand the disciplines of marketing, management, business ownership, investing, finance and life! Trust me, many successful Corporate Executives and Main Street USA business owners do not do well in Network Marketing for accountability issues that are compensated for in a normal business environment where employees, job title and a good location may help drive a level of “success.”
3) Money:
Unless someone is a savvy recruiter with influence in a community, for the most part new network marketers are going to have trouble placing prospect into a business. Many sharp and intelligent prospects will try to “out-think” things reinventing the wheel rather than following leaders who may have already paved a duplicatable path. Be honest about the money. You absolutely want your prospects to look into your company. Don’t hide the fact that you are a Professional Network Marketer and don’t go holding a surprise meeting under the guise of a Barbecue or dinner at a hotel. Meet people where they stand. Authentically listen. From the very first sentence you speak or email that you send…you are marketing and creating an example that people will either trust and duplicate, or doubt and probably never want to speak with you again. Remember, your friends and prospects have Ego’s just like you do. Respect them.
The money comes. The more you work, the less any final exact percentage will matter, it’s like comparing apples to apples.
Yours in Success,
Peter Dean Bouloukos
Bozeman, Montana
Mission Viejo, California
[email protected]
Ted, your readers might like to know a few things about compensation plan budgets. One..if the company is private, unless you are privey to audited financials, you will have no idea what the actual payout is. Companies and people can and do say anything. Most private companies are not audited so even if you are looking at what you think are reports or financials you may not be looking at apples to apples accurate data.
Public companies…although the data is accurate since it is independantly audited, it is never apples to apples. “Selling Expenses; ” Commisions” etc etc are all different ways of classifying an expense catagory. Sellling expenses can include all commsions; all incentives, prizes, recruiting expenses ( you know all those “deals” the new guys got), even losses on conventions etc. Commisions can mean anything on which a distributor was 1099ed ie cash, prizes, trips etc.
The reality of business is that if you have a physical product that is consumable and is proprietary and valuable the cost of that product better be 15-20% of the wholesale cost. If it is not…it is a weak product that will not likely stand the test of time. If you have a software or service/educational product the actual cost could be less however the valuable life cycle of the product is likely to be in months or a couple of years vs the decades required for residual income.
If your product costs are 20% and your actual cash commisions are 40% that only leaves 40% for the company to pay its taxes, all overhead, invest in infastructure for the future; salt away cash for the future, legal, research and develpment of new products and international expansion. The reps get 40 and the company gets 40. That is a good partnership that can work long term. Reps get 50 and the company gets 30 is a recipe for a derailment.
Those who like to hype that their company pays more than 50% in acutal cash commisions are promoting a trainwreck.
I would take Herbalife’s 32% over a 50% payout any day. 50% of an eventual zero is……
Hi Peter.
Thank you so much for this post. I have a question: I have the “80% of women who are 6-figure earners achieve this through network marketing” at least once before, but I can’t seem to find the source. I have recited this fact, but I’m not comfortable in doing so, without knowing the source. Can you tell me where you got this information from? I believe it; I would nevertheless like to document it.
Your MLM Urchin Associate in Training! 🙂
Shakira Ali
Young Living Essential Oils
Compass Coaching – a women’s personal development co.
Where dooes your “Herbalife 900 millions commission” come from ?
In 2010 Herbalife sales were 4.3 billions, revenue was 2.7 billions.
Herbalife pays 73% x 4.3 billions, that’s 3.14 billions.
1.6 of these 3.14 are the (4.3 – 2.7) distributor discount.
So Herbalife paid $1.54 billion commission – it’s 57% of the revenue.
That’s 25 to 7% wholesale commission (difference between discount levels).
15% (5% up to 3 levels) Royalties
7% Tabulator Bonus
1% Mark Hughes Bonus Award
Our Wholesale Commissions, Royalty Overrides and Bonuses are based on the public prices (not discounted).
Hi Sir/Madam,
Have you heard of this company call eCosway, ( the only company so far, apparently ) that have a retail store front; almost 1800 stores worldwide? Can you confirm the payout which I have estimated at 33-37% for the distributors in the last 2 or 3 years? Please confirm the figures & publish it if you deemed to be fit!
Thanks
Jim