As MLM and compensation plan consultants, we have observed that there are 10 types of problems faced by network marketing, MLM, and party plan direct selling companies.
In this video, we will not only list them for you but also provide guidance on how to solve them.
Step #1: Watch our video below to learn more.
How To Eliminate Your Problems
The first step in solving problems is to recognize that you have them. The second step is to get to work to eliminate them. Let’s get busy!
A Recruiting Culture
To have a recruiting culture, a company must do all of the following:
- Provide enough information and support early in the life of new representatives so that they feel comfortable enough to consider recruiting others.
- Teach representatives how to recruit.
- Share the methods of your top recruiters with others.
- In your compensation plan, don’t provide higher titled representatives with big rewards for recruiting, while offering lower titled representatives comparatively little.
- Include in your compensation plan the right rewards for helping new recruits to recruit early.
- Encourage and reward recruiting through an attractive Fast Start Program in your compensation plan where your fast start goals are set properly.
- Recognize recruiting separately for both new and established independent representatives.
To know how they’re measuring up, companies need to measure their rates of recruiting over time and examine who is doing the recruiting and when recruiting is first occurring.
Does your company have a recruiting culture?
If not, do you know what you’re missing and what you need to do to have a recruiting culture? Give us a call at Sylvina Consulting. We can help you to create a recruiting culture at your direct selling company.
A Balanced Compensation Plan
A balanced compensation plan is a compensation plan that rewards new representatives, business builders, and leaders appropriately for the specific behaviors it is designed to motivate.
Did you know that all multilevel compensation plans should motivate and reward these specific behaviors?
- Personally purchasing your products or services
- Selling to customers (non-participants of the income opportunity)
- Introducing the income opportunity to others (sponsoring)
- Building a team
- Training, supporting, and nurturing others
- Becoming a leader personally
- Personally developing leaders
- Helping other leaders to develop leaders
- Meeting or exceeding minimum activity requirements
- Being promoted to a higher rank or title
- Meeting or exceeding rank maintenance requirements
- Staying active and engaged in the business (retention)
The Big Picture
The budget you’ve allocated for field compensation, as a percentage of sales volume, needs to be spent wisely.
To begin, you must ensure that there are early opportunities for new representatives to make enough money to compensate them for their time and effort in selling your products or services and recruiting and training others.
Business builders must be rewarded for building teams. Just as individuals should be measured by their personal sales productivity, the sales volume produced by a team should help to determine the rate of compensation for the business builder.
Leaders should be rewarded for identifying and nurturing potential leaders on their teams, even if the potential leaders are not personally sponsored.
The compensation plan’s title promotion requirements should be set in line with your target goals for the percentage of people you wish to attain them. The higher a representative climbs in title, the more challenging the requirements should be to promote to the next title.
Higher titles can offer larger bonus percentages and/or new bonuses not provided to others.
Each type of commission or bonus should reward at least one of the behaviors listed above. Similarly, each behavior should be rewarded with one or more types of compensation.
For example, Fast Start Bonuses often motivate behaviors #1-4 by rewarding the recruiting of representatives who generate personal sales volume.
Art + Science
Compensation plan design is both art and science.
Selecting the basic structure and defining the rules to motivate and reward desired behaviors for your company is a scientific endeavor. Ensuring the components work together to produce results is an art.
If you are not a scientist and an artist, talk with us at Sylvina Consulting. We are experts at designing and improving compensation plans.
Retention starts with recruiting. If your company isn’t recruiting new representatives, your business will grow smaller. Retention is just as important as recruiting. Retention is keeping your recruited representatives active in the business as long as possible.
The impact of retention is huge. Do you know the average rate of retention of direct selling companies?
According to the Direct Selling Association, the average direct selling company retains only 20% of those enrolled one year earlier.
This means if your business enrolls 1000 representatives in January, one year later only 200 will still be active (if your retention rate is average).
A retention rate of 40% is great, while a retention rate of 50% or more is outstanding!
Here are some steps you can take to improve your rate of retention:
- Retention begins as early as the day the representative receives his or her starter kit. Ensure that the kit provides a great first impression.
- Within 24 to 48 hours of the receipt of the starter kit, follow up by telephone with each new representative to offer support and to answer any questions. Demonstrate that your company truly cares about each and every representative.
- Design your income opportunity so that it is as easy, fun, and lucrative as possible. When an activity is easy and fun, people stick with it longer.
- Not every sponsoring representative is a good trainer. Do your part to fill in the gaps. Offer company-provided training in multiple methods (including in-person training, telephone training, web training, and text-based training materials).
- Listen to your sales force. They’ll tell you where they need help. When you listen, your sales representatives will feel that you value their input.
- Set weekly, monthly, quarterly, and yearly goals. Most salespeople are very goal-oriented. Goals give people focus. Give your people focus!
- Monetary rewards are great, but verbal and written recognition of achievements is just as important. While you sell products and/or services, view yourself as being in the recognition business. When you do this, your retention rate will improve appreciably.
- The company’s attitude is contagious, so have a positive attitude. Also, show your enthusiasm and excitement. People like to be around others who are enthusiastic.
- Get out on the road! You can’t lead a national or global sales force if you’re always in the office. When company leaders travel to visit with the sales force, many good things come as a result, one of which is a higher rate of retention!
- Make communication with your sales force a top priority! Be consistent in your ongoing communication with your sales representatives. Become the support system that can be counted on, day in and day out.
- When you do your part to improve retention, you’ll have happier independent representatives. Happy independent representatives are more productive. When they’re more productive, they’ll stay active longer.
- Always follow the golden rules of customer retention.
Are you concerned about your rate of retention?
For an assessment of your business to help improve your retention rate, contact Sylvina Consulting.
When Should You Ask For Help?
You may be wondering when is it time to ask a direct selling business consultant for help. If so, I have a list for you. Here is when you should get help:
At The Very Beginning
When you are just getting started in building your company or even if you are just at the idea stage, talking with a qualified direct selling business consultant will help you to make the right decisions now and in the future. Even more important, you will also avoid making big mistakes.
When You Are Hesitating
If you are questioning whether you are on the right track, this is another good time to ask for help. You’ll either learn you’re in good shape or you’re not. You won’t need to just hope or pray about it. Either way, you’ll sleep better.
When You Are Planning
If you are working on a business plan or a business concept document, getting the eyes of an experienced direct selling consultant to look over what you’re thinking is a wise idea. Remember, it’s less expensive to fix a plan than a business.
Before MLM Software
The first step should be to engage an MLM consultant or a party plan consultant who helps launch and improve companies. Then, when you’re ready, retain an MLM attorney and choose your MLM software provider. First steps first.
During Compensation Plan Development
You won’t know if your compensation plan is good unless you have it designed or reviewed by a compensation plan expert. If you have even a small concern over the viability of your compensation plan, get a second opinion.
Before You Launch
Have you had your business professionally reviewed? If not, before you launch is the last best time to get help. After you launch, correcting your mistakes may be like fixing a train while it’s rolling down the track. It can be done later, but it may be hazardous work.
When You Are Questioning Everything
If you are at the point where everything isn’t going as smoothly as you planned, and you can’t figure out what to do to fix the problems, don’t be an island. Get help by engaging a qualified direct selling consultant.
When You Want To Be Successful
The smartest people in the world ask for help from even smarter people. When I don’t know the answer, I ask an expert. You should, too. It’s complicated building a direct selling company. If you want to increase your chances for success, bend the ear of a direct selling business consultant.
When You Want To Grow Faster
If your business isn’t growing fast enough, you need to do something. The question is what, and the answer isn’t just one thing. Do you know what to do? Most people don’t. Have your business professionally reviewed to find out what to do. Don’t just ready, fire… then aim!
Introducing New And Improved Products
Product development is not a task you should check off your list. That’s because it should never be completed!
Independent representatives and their customers expect you will offer new and improved products. Direct selling companies want their representatives to consume or use personally more of their products. Both network marketing and party plan companies recognize that the success of their representatives is based in part on selling to the same customers more than once.
Simply put, new products and product reformulations are essential to help keep representative-customer relationships intact.
About Product Development
Did you know that product development is a 12-step process? The steps include:
- Generating ideas
- Filtering ideas
- Developing a product concept
- Researching the market
- Creating a prototype
- Testing the prototype
- Refining the design
- Producing the initial run
- Testing the product for efficacy and customer acceptance
- Adjusting the design as needed
- Producing the second run
- Creating product descriptions and training materials
That’s 12 steps to do before your new product is ready to be sold at large!
If yours is a party plan company, it’s likely you have a catalog. Timing new product introductions with the release of the next catalog make good business sense.
If your products are few in number, or if you don’t have a catalog, that’s OK, too. You are free to release new products without concern for the timing of catalog printing.
Whether you announce new products annually, quarterly, monthly, or periodically, doesn’t matter as much as having a pipeline stocked and ready for new product announcements on time.
When you release new products or new product formulations, make the release a big deal. Celebrate the unveiling of new products as a big accomplishment, but don’t congratulate yourself. Instead, focus on the benefits independent representatives and customers will experience from the new or improved products.
If the number of new products released at any one time is relatively small in number (one to five products), you could offer your independent representatives an option to enroll in a new product “auto-ship” program where they would receive one of each item, perhaps even at a discounted price. To learn more about auto-ship, click here.
Another approach is to limit the shipment of new products to representatives who meet specific criteria (a minimum title of X or personal sales volume of Y or some other measurement).
In your excitement to announce and begin selling new products, don’t forget to include training materials. That’s part of the 12th step.
New product introductions are essential to the success of all direct selling companies. Whether yours is a party plan company or a network marketing company, product development is a task that is never done.
Training Done Right
Your company’s success depends in part on how well your independent representatives are trained. Are you training on the right topics, in the right ways?
Your independent representatives need to be trained on several topics. These are:
- History of your company and your company story
- Your products or services, and their features and benefits
- How to use your sales aids
- Where and how to sell and recruit
- Your company’s Policies and Procedures
Not everyone learns best the same way. This means that your representatives should learn what they need to know by:
- Reading information in print or on your website.
- Listening to information on audios.
- Watching videos (or PowerPoints) on how the business is done.
- Observing what their sponsors and upline mentors do
Quality Over Quantity
In today’s “give it to me now and fast” environment, training is performed best in bite-sized chunks. Present information that can be read, listened to or watched in less than 10 minutes at a time.
Your goal in creating training materials should be to use as few words in as few minutes as possible. If you can say something in three sentences instead of thirty sentences, do it!
Learn From Others
While you may develop and deliver some great training programs, some of your independent representatives will create effective training content that you may wish to include in your company training materials for everyone’s benefit. This is a good thing.
If you do include ideas that originate in the field, be sure to recognize the contributions of the contributors publicly. If you do, this will encourage more creativity from your field.
It would be great if everyone who joined a direct selling company became a leader. Unfortunately, this doesn’t happen. Instead, leaders comprise a small but important minority, usually 5-15% of a sales force.
Most leaders in a sales force aren’t naturally born that way.
Leadership development is the name given to a system that identifies prospective leaders and provides them with training, tools, support, and recognition. Your Leadership Development Program should attract and build strong leaders.
An investment in the future of others, leadership development is a priority of all successful direct selling companies. Leaders are vital to the growth of all direct selling companies. In fact, the strongest predictor for the future direction of a direct selling company (up or down) is the number of new first-level leaders.
What is a Leadership Development Program?
A Leadership Development Program is a company initiative with eight steps. The steps are:
- “Leader” definition.
- “Potential Leader” definition.
- Leadership development
- Leadership training.
- Leadership activities.
- Leadership rewards.
- Leadership promotion.
- Team building culture.
Each step answers an essential question. Here are the eight questions:
- What is a leader?
- What is a potential leader?
- How will potential leaders become leaders?
- What do leaders need to know?
- What do all leaders do?
- What do new leaders receive when they become leaders and what do the upline leaders get when he or she helps in leadership development?
- How do the company and the field promote the leadership opportunity?
- In addition to promoting leadership, how will the company and the field promote teambuilding?
Do you have an effective Leadership Development Program? If not, you should talk with Sylvina Consulting to get help to build or improve yours.
MLM Software Advice
Did you know that knowledge is power? Truly, the more you know, the better software decisions you will make for your company.
Your Company: Similar But Unique
While similar to other companies, yours and all other direct selling companies are also somewhat unique.
- The sponsoring relationships between your representatives need to be tracked. This is called genealogy tracking or lineage management.
- Representatives have both personal sales volume and one or more types of group volume, each of which also must be tracked as orders are processed and accepted.
- You need to calculate and pay commissions and bonuses according to the rules of your compensation plan.
- You should provide your representatives with useful information for them to run their businesses.
For these and other reasons, software that can be used to run other businesses isn’t sufficient to run a direct selling business. As a result, you will need direct selling software.
Direct selling software is used not only to help contain your administrative costs while increasing your efficiency and accuracy but also to provide your sales force with tools to better manage their businesses.
Like a three-legged stool, your business will be supported by three elements:
- Your Products/Services
- Your Opportunity
- Your Information Systems
Direct selling software should include the following functions:
- Representative Enrollment
- Lineage (Genealogy) Management
- Inventory Management
- Order Processing
- Hostess Rewards Program
- Accounts Receivable
- Compensation Plan Calculation
- Contests and Incentives
- Report Writing
- Imports and Exports
- Corporate System (Back Office)
- Representative Personal Web Sites (Portal / Intranet / Rep Back Office)
Are you doing all that can be done to grow your business?
For direct selling companies to be healthy, the income opportunity that you have created for your representatives needs to be compelling and rewarding.
A properly conducted business evaluation will provide you with useful suggestions to improve your income opportunity and your business.
In a Business Performance Evaluation, your business is examined in detail by Sylvina Consulting. All of your available materials plus requested statistical performance information is reviewed.
If desired, we can visit with you in person to observe your company in action and to interview your management team and owners.
Included is a comprehensive report that contains both our observations and recommendations.
With more than 30 years of experience working with more than 400 direct selling companies, our clients have included companies in development, young businesses, and larger multinational firms.
With wisdom and advice from Sylvina Consulting, you can take your business to the next level!
Key Operating Indicators
For most direct selling businesses, the commission period is a calendar month and the calendar month is also a common measure of time for key operating indicators.
What do the best direct selling companies measure?
The best companies measure EVERYTHING.
I recommend that measurements are performed and compared by “class” or other groupings. A class is a group of sales representatives who joined the company in the same month and year. Other group measurements can be based upon geography, demographics, training, and/or lineage.
Here are some examples of the key operating indicators that direct selling companies measure on a regular basis for analysis of trends over time and between groups of representatives:
- Total number of people who have signed representative applications
- Total number of people who have recruited at least 1 representative
- Total number of people recruited by the recruiters
- Percentage of the sales force who are recruiters
- The average number of recruits per recruiter
- Separately, the total number of people who have recruited 1, 2, 3, etc.
- Percentage of recruiters who have recruited 1, 2, 3, etc.
- The average number of months needed for a person to recruit her first person, second person, etc.
- Number of sales representatives on the books during a period
- Total sales for the period
- Number of orders for the period
- Number of reps within who have placed an order, by order type, this period
- Average order size by order type
- Average sales per rep by order type
- Percentage active
- Representative activity lag is the average number of elapsed months since representatives placed their most recent previous orders
- Activity lag percentages, the percentages likely that a rep will order again if inactive for 1, 2, 3, 4, 5, 6, etc. months
Sales to Representatives
- Number of sales representatives who joined, by class
- For each class, the sum of the first 6 months, 12 months, or lifetime sales from the respective sales representatives
- The average value of sales from each representative
- Number of sales reps who joined in each class or group
- Percentage of sales reps that were active within 1 month, 2 months, 3 months, etc. of their application date
- The average lifetime in months
- Percentage of terminated representatives who rejoin
- Percentage of inactive representatives who become active again
Sales to Customers
- Average purchase amount per customer
- The average number of items purchased per customer
- The average number of orders placed by a customer
- Customer activity lag is the average number of elapsed months since customers placed their most recent previous order
- Average time lag between customers first and second, second and third, etc. orders
- Percentage of representatives at each title who promote to the next highest title
- Average and range of a number of months elapsed for promotion to each title from the previous title
- Average and range of earnings per title per period
- Compensation as a percentage of sales by period
- Compensation by bonus type as a percentage of sales by period
While the information measured and the consistency of measurement are both critical components for all direct selling businesses, the interpretation of the data and the decisions that are made from it are equally important.
Understanding Cause and Effect
If a company finds that representatives who pursue a special training program have higher than average production, recruitment, and retention… does this mean that the training produced the results or that the representatives who were most interested in or qualified for the income opportunity elected to undergo the training?
Without a control group, the cause and the effect are open to subjective interpretation, which means the conclusion may not be dependable.
If a company’s monthly sales are increasing and the number of active representatives is growing, does this mean everything is going well?
Not necessarily. Look at the trends of all of your key operating indicators.
If the retention measurements are headed in the wrong direction at the same time, trouble is already here but the bubbles from rapid growth may be hiding the trouble.
When recruiting slows, the downward trend in retention will take precedence. Sales will “suddenly” appear to reverse directions.
Some might say, “If we only knew…”, but the data was already there. Either the relevant report wasn’t produced or it wasn’t viewed.
Meaning in Numbers
Compare your numbers not only to your history but also to others.
Is your company firing well on all cylinders? How can you tell?
By working with a direct selling expert, you can get help not only in designing your key operating indicators but also in reviewing them for comparison with industry values and trends.
Key operating indicators can have multiple uses.
When companies ask us to review their businesses to recommend changes to grow the company faster, we ask for statistical information to analyze the performance of the compensation plan. The information requested consists in part of key operating indicator data.
We have seen that many companies do not measure and report key operating indicators. With good key operating indicators, a company can learn of the challenges sooner in its compensation plan and other business processes. With earlier notice, a company can respond to overcome challenges faster.
Contests and Key Operating Indicators
While most companies do not change their compensation plans specifically to generate short-term bursts of business, they design contests and incentives for this purpose.
How do you know if a contest or incentive is successful?
You know by measuring the results. And how do you measure the results?
The results should be measured by comparing key operating indicators over time.
A Broad Set Of Key Operating Indicators
Direct selling companies operate much like other businesses. They want to attract and retain sales representatives and customers and for sales to increase consistently over time.
With a broad set of key operating indicators, a direct selling company has the tools to measure its business. To pull it all together, the company also needs the discipline to generate the indicators on a periodic basis and to obtain help when needed to design or review its key operating indicators.
Jay Leisner is the president of Sylvina Consulting. Sylvina provides business development, compensation plan, and technology consulting services to all direct selling companies, from startups at the concept stage to large multinational firms.
Successful direct selling companies don’t hide from their problems. They identify them, shine the light on them, and conquer them. For help conquering yours, contact Jay at Sylvina Consulting at 503.244.8787.