This article is about these choices. Shortly, I will explain the strategies and consequences of each one.
Mandatory or Optional Monthly Fees
If you are or will be charging your independent representative’s monthly fees for services, you will need to decide if your fees will be a requirement to remain a representative or if they will be optional to receive specific tools, benefits, or services, none of which are required.
When you choose to make your monthly fees required, you will observe the following effects:
- For a very small percentage of reps, your monthly fees will motivate them to continue selling and/or recruiting for a short period of time.
- However, because most reps do not generate sales and earn income every month, for most of your reps the required monthly fees will become the final reason they quit.
- Some of your reps will continue to pay the required monthly fees for extra months when they forget to quit, which is financially healthy for your company.
If you believe that the tools, benefits, or services your company provides are essential to the success of your representatives, you probably want all of your reps to use them. However, when you make these fees optional, most representatives won’t pay for them!
A survey of direct selling companies with optional fees for replicated websites revealed that only 20-35% of representatives choose to pay for them.
The majority of your reps will choose not to pay for optional tools, benefits, or services for these reasons:
- They don’t believe the tools, benefits, or services are worth the money.
- They are not earning income every month from their independent rep businesses to cover the cost each and every month.
Nearly all representatives don’t like to be charged fees in months when they are earning no money.
Some direct selling companies include in their enrollment options or starter kits one or more months of optional or required services. This approach looks great on the surface, but it merely delays the inevitable effects. When the specified number of months has passed, the effects listed above will be observed.
Did you know you have other options? If not, you will know this momentarily. Keep reading!
Mandatory When Active
Here is one innovative approach you may wish to consider for your company that will put your important tools, benefits, or services into the hands of every representative, but not charge every representative for them.
Make your monthly fee mandatory, but assess them only upon representatives whose monthly income exceeds the monthly fee. In months where one’s income is less than the mandatory monthly fee, no monthly fee will be assessed.
Bury Your Fees
Don’t charge monthly fees. Instead, calculate the expected revenues from your mandatory or optional monthly fees per representative over their first year and add this amount to your enrollment fee or starter kit prices.
Optionally, implement an annual renewal fee to collect this amount again on representative annual anniversary dates.
Now you understand when it comes to charging your independent representatives required or optional monthly fees, the approach your direct selling company takes has consequences. Choose wisely.
Also, don’t forget that your MLM software will need to support whatever approach you choose.
If you need help making your choice, contact Jay at Sylvina Consulting by calling 503.244.8787 or by filling out this quick form.