Will the stock market rise tomorrow? Who will win the Kentucky Derby? If one knew the answers these questions, he or she would be rich beyond imagination. How much one might earn in a compensation plan is subject to too many moving parts to make any sort of accurate prediction: the compensation plan itself, percentages paid on product, profit margins of product, personal sales, down line sales, the factors are endless. Two important resources are available that will give you a good place to start on this arithmetic: (1) leading companies post average earnings disclosure charts which indicate the average earnings for consultants at various levels and stages of their direct selling program; (2) many companies provide online earnings calculators which allow consultants to plug in their own assumptions on their personal and group sales and activity, which are then used to calculate the payout based on their expected sales performance. These aren’t fool-proof tools but they will give you realistic expectations on potential earned income.

It’s important to be honest with yourself as well. Very few consultants make it ‘big time’ in direct selling, and that is because sales is hard work, difficult work and many give up shortly after running through their warm market (friends and family). But if you’re the type that loves to sell to every person that you come across in your daily life then you may be a great candidate for a consultant who earns really high auxiliary income.

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Your cost of goods is calculated as your acquisition or manufacturing cost. The more frequent question we come across relates to pricing. Most MLM experts agree that you must have adequate margins to pay commissions and to make a profit. Different products and services carry different profit margins. In addition, smaller margins may be satisfactory with high-priced products because there is still room for profit. Most MLM companies are likely to pay total commissions equal to between 30 and 45 percent of the price sold to distributors for resale, or prices for which consumers buy directly from the company. A typical company will try to achieve a minimum 5-7 times markup to allow for commissions, overhead and profit. Typical markup for resale by distributors is 25% of their purchase price. A good place to visit this issue is at the MLM Startup Conference, offered by www.mlmlegal.com, where experts discuss margins, pricing, profit, proformas, and a whole lot more.

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