happiness v failure in network marketing mlmWhat is the meaning of failure? If a distributor only makes a few hundred dollars a month, does that mean they have “failed?” What would that make the distributor who doesn’t make any money from network marketing at all? Or the one who loses money?

It’s difficult, in a sense, to lose money as a network marketing distributor in today’s world. This is due to the policy changes in direct selling companies. Most network marketing companies offer a full refund (or at least a 90% refund) to distributors who have changed their minds and want to return their starter kits.

In addition to policy changes within the company, the majority of leading MLM companies offer earnings disclosures on their websites which disclose the level of earnings and average earnings of all active distributors. Some consultants join a direct selling company to simply become discount buyers of the company’s products. These sorts of independent business owners don’t actually make money with their distributorship since they aren’t pursuing the opportunity to begin with.

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This blog post is the companion post to the video: Role of Compensation Plan in a Successful Direct Selling Company. The following is the transcript of MLM Attorney Jeff Babener’s own words:

Hi, I’m Jeff Babener of MLMLegal.com. I’d like to talk to you today about the compensation plan. It better be good.

Does a compensation plan make or break a startup MLM company? History suggests that a good compensation plan is helpful and absolutely necessary. Does it drive financial success? Probably not. Will a bad compensation plan contribute to failure? Probably, together with other unlucky breaks. As industry expert Michael Sheffield notes with respect to a good compensation plan, “Its absence will be noted more than its presence.”

Is there anything new under as far as compensation plans are concerned? Probably not. The goal is always the same regardless of the type of compensation plan: motivate varying behaviors of distributors, ranging from direct sales, to building wide to building deep, to supporting a downline, to maximizing sales volume production and retention.

It is of key importance is that the compensation plan is easy to explain to recruits and that it is perceived as fair and balanced.

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Expert MLM Attorney, Jeff Babener, discusses how companies should handle discussions about compliance with their distributors. It is important for direct selling companies to be clear about what claims/statements distributors, consultants, members, representatives, etc. can and cannot claim about their earnings and products.

Interviewer: What I want to do now, Jeff, I want to turn our attention to compliance. Because this is an important key issue for any company, for any business owner, for any consultant or distributor, to know that their business is compliant. What would you say are, in your mind, the top issues regarding compliance that someone needs to be adhering to in order to make sure that they themselves are being compliant in the marketplace?

Jeff Babener: Okay. Well, maybe we ought to talk about this issue from the perspective of the company and from the perspective of the distributor. But in fact they’re one and the same. We have two goals: one is to help make them successful, and secondly, to help keep them in business. We’ve represented a lot of the leading direct selling companies. We’ve helped to start a lot of MLM companies.

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What are the main reasons behind the failure of a direct selling company? Leaders of network marketing, MLM, direct selling, and party plan companies must receive training in order to compete and survive. Most MLM operations fail or are weakest in the following areas:

1. They failed to create a compelling “story'”

2. The company story won’t make a difference if the company isn’t designed properly

3. Most MLM firms do not have the proper product mix and/or have products with the wrong markup ratio to pay to compensation plans

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