Today, I’m going to discuss how to predict your MLM Income. This might just be the most important article on my blog.
Before you join ANY network marketing company, it’s vital that you take the time and figure out how big of a team you need to reach your income goals. You need to know what you are getting yourself into so you can make an informed decision.
Your business needs to be predictable so you can have realistic expectations. The only way you can make this happen is if you take out a pen and paper and follow the advice I am about to share with you.
How to Predict Your MLM Income
Not all compensation plans are created equal. Some sound sexy. Others look boring and outdated. But, it’s easy to manipulate people with fancy buzzwords that make one compensation plan SOUND better than another one. It’s not until you peel back the onion, and take a closer look, that you will know what you are really looking at.
In my opinion, there are THREE major things you need to know to predict your MLM Income. Take into account the active distributor rate, the average order size, and the payout percentage. I’ll cover these three things in greater detail in the paragraphs below.
Average Order Size
On average, how much money does each active distributor and customer spend each month?
In some companies, that number might be $40. In other companies, it might be upwards of $300 per person. It varies a lot from company-to-company.
Why does this matter? Because the larger the average order size per person, the fewer people you need in your group to reach your income goals.
For example, 100 people each ordering $100 per month in products is the same volume as 250 people each ordering $40 per month in products.
Find out what the number is for the company you are thinking about joining. Talk with three or four reps in that company and have them figure this out and share it with you.
Once you know the average order size per person, you will know “how many” people you need ordering each month to hit the volume goals you need to achieve your income goals.
Active Rate & Retention
You might not be able to find this statistic out from the company itself, so you will need to ask around.
What percentage of the company’s distributors are active each month? In my own experience (disclaimer) I’ve found the active rate to be anywhere from 20 to 30 percent of the total distributors.
I’ve talked with many other successful distributors and most of them have told me that about 30 percent of their team is active in any given month.
This means that if you have a team of 1,000 distributors, at most 300 of them order in any given month. The other 700 do NOTHING.
This is a VERY important statistic to know. Do not overlook it. Ask around. Most people won’t tell you the truth because they believe it will scare you off (or they don’t know the answer themselves).
You also want to look at retention. In other words, how many months, on average, do people order before they stop ordering? To me, this statistic really shows how much people like or dislike the company’s products.
Most people will quit doing the business within their first year, but if they keep ordering the products because they want to, you know the company has great products.
Find out the answers to this question before you get involved with any company.
What percentage of the company’s total revenue is paid out in bonuses each month? From what I’ve studied in the industry, that number is normally somewhere between 35 and 45 percent. On average, a rep will earn about 5 to 8 percent of their total team’s volume.
No company can pay out 100%. They have overhead and expenses, just like any other business. That being said, you want a company that rewards its distributors fairly, while still having products that are priced competitively.
Example Income Prediction with a MLM Company
Let me give you a hypothetical example, just to get you thinking. Let’s assume you work with ABC Health Products (fictional company).
You want to earn $5,000 per month with the company. In this company, the active distributor rate is 25%, the average order size is 100 points per person, and you get paid based upon the points.
On average, you get paid 5% of your total team’s volume. In this example, here is what you would need to do to accomplish that $5,000 per month goal.
- $5k per month in commissions equals
- 5% of 100,000 volume points
- To get 100,000 volume points you need 1,000 distributors each ordering 100 points per month
- To get that, you would need 4,000 distributors on your team (since only 25% are active in any given month)
Compare these numbers with three of four different network marketing companies and compensation plans to see for yourself. The results will be mind-blowing.
Ultimately, you are looking for a MLM Company with great products you enjoy AND a company where you don’t need tens of thousands of people to earn a full-time income. You will quickly discover that most compensation plans are designed exclusively for the heavy hitter, not the part-timer.
I would also compare a few different compensation plans to see what amount of volume and team size you would need to earn $500, $1,000 or $2,000 per month. Most people joining the company are part-timers, and you will want to be able to share these numbers with them.
The only other consideration I would throw in here would be the wholesale-retail markup. This varies from company to company, but is normally 15 to 40 percent.
If you are good at retailing, you can make a great income just by selling the products. Serving 50 to 200 customers personally could provide a full-time income, without recruiting anyone.
If retailing is your primary focus, make sure you find a company with a good markup on retail sales.
There you have it folks. These are my best tips on how to predict your MLM Income. I hope you read this post a few times to truly understand the information.
Your business needs to be predictable. You should know EXACTLY what you need to do to predict your MLM Income, just like you would in any other type of business.
What are your thoughts? Do you agree or disagree? Leave a comment below to let me know what you think. I look forward to hearing from you.