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The Power of Network Marketing in Providing an Individual,
Soundly Based Business Opportunity for Self Employment

  • Copyright© 1996, 1997, 1998, 1999, 2000, 2001 AloeVera Company UK. All Rights Reserved.

The purpose of this article is to discuss the mechanism and power of network marketing in providing an individual soundly based business opportunity for self employment. Part 1 provides an introduction to the concepts of network marketing with particular reference to Forever Living Products. Part 2 presents the Forever Living Products network marketing plan. Part 3 provides details of "passive income", "car plan", "profit share royalties" and the structure of advanced levels and benefits in the Forever Living Products network marketing plan. Part 4 presents the practical requirements of building a successful business in Forever Living Products: "The 4 Case Credit Strategy". Part 5 illustrates the Forever Living Products earning pathways to various income levels: Retailing, Team Building and Leadership.

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Part 1: Introduction to Concepts of Network Marketing

OVERVIEW OF NETWORK MARKETING WITH FOREVER LIVING PRODUCTS

Rex Maughan, President and Founder of Forever Living Products, devised his network marketing scheme over twenty years ago. His is recognised as one of the most generous Marketing Plans in today's network marketing arena. Perhaps because of this, FLP is the number 1 distributor of health, nutrition, skincare and beauty products in every country where it has been established long enough - including the UK. During the mid to late 90s Network Marketing has come of age here: clearly, it is difficult to ignore any kind of business which consistently more than doubles its size annually! We are more familiar with the notion that growth of 4% is phenomenally good in the UK, so 40% and more seems almost beyond belief.
 

So why does network marketing work so well? What is so special about this method of moving goods from the manufacturer to the customer? Why have network marketing companies in general, and FLP in particular, grown even faster during the recession than they did in the booming 80s? This is the reverse of the trend in conventional marketing enterprises, like retail shops and stores, and mail-order catalogues. Even huge franchises like MacDonalds and Kall Kwik are having difficulty finding new high-level locations: the major High Streets and Shopping Malls are finite entities, and the secondary areas will not generate the required turnover.
 

Perhaps it is because Network Marketing offers so many of the advantages of franchising, without the disadvantages, that it is enjoying such success. For example, as an independent distributor of Forever Living Products:
 

  • you are your own boss - nobody can make you redundant - yet you are part of a very large, very successful, very well-established company, with a billion-dollar worldwide turnover
     
  • you are running your own business - yet you are supported by your Sponsor into the business and the superb FLP Area Manager system
     
  • you have no initial outlay, there are no annual fees, and you will never need to hold stock - you buy products, as and when you need them, from your local Product Centre

  • you can work the hours you wish, at your own pace, to achieve your personal goals, and you will have very low overheads since you will almost certainly work from home

  • you have freedom to move location within the UK or to another country - your business continues to earn income for you - wherever you are

  • the Area Development Directors run regular free Business Briefings in your area - you can take along your guests to introduce them to FLP, and they will hear presentations by experienced top-level speakers on the business, the marketing plan, and the products
     
  • local training is available all over the UK to help you learn more about the products, and the concepts of network marketing and team-building
     
  • there is absolutely minimal paperwork - FLP does it all for you
     
  • you can only move UP in FLP - all positions in the Marketing Plan are permanent, so there are no penalties for taking a month or two away from your work
     
  • you are never required to pay your team member's bonuses - bonus cheques are sent out by FLP, directly to each individual distributor, on the 15th of every month - without fail
     
  • bonus payments are based upon the Retail Value of all products purchased at wholesale price during the previous month
     
  • invoices are logged daily, so if you achieve a higher level in the Marketing Plan in mid-month, your higher bonus will be applied immediately to all subsequent invoices
     
  • distributors below you in your team can never pass you by to reach a higher level - you will automatically be moved up to the same level
     
  • In short, you are empowered to develop your business to your specific requirements to achieve the financial and personal goals you set.

     

THE CONCEPTS OF NETWORK MARKETING

Marketing in general is the provision of goods or services to meet consumer needs. For a product-driven company, marketing may be more closely defined as the process whose primary objective is to distrubute the maxium volume of product from the manufacturer to the consumer. Assuming no limitations in manufacture of product and a limitless reservoir of consumers, the effectiveness of the marketing process is determined by the distribution mechanism. The general marketing process is illustrated as follows:

In the conventional marketing process, the distribution mechanism consists of four major elements each of which has its own particular structure: advertising, sales force, wholesale and retail operations. The general structure of the distribution mechanism in conventional marketing is static - each of the elements is connected in line and each element is designated a fixed set of tasks. The static structure of the distribution mechanism is independent of the customer.
 

In contrast, the distribution mechanism in network marketing consists of a single major element: the individual independent distributor. The independent distributor performs all the functions required to sell and distribute the product to the customer. Each independent distributor is linked to other distributors through a dynamic hierarchical non-linear network which grows by geometrical progression. [The details and functionality of this dynamic network are described below] Moreover, the process of generating new customers provides a natural path for developing the distributor network. Each new customer represents potentially a new distributor source. Thus a positive feedback loop is established which naturally expands the distributor network. The dynamic structure of the distributor mechanism in network marketing is therefore dependent on the consumer element. This is shown in the following diagram:



The extent of the positive feedback relationship is determined by the particular company. For Forever Living Products, which is product-led, this consumer-dependent relationship is strong.

The dynamic hierarchical network is characterisesd by geometrical progression. For example, a distributor signs on two new customers as distributors and they in turn each sign on two further distributors and so on. In this simple growth progression, by the fifth generation, the total number of distributors in the network has reached 31. This sum is easily calculated from the formula:


where S is the total number of distributors in the network reached by the n th generation and R is the ratio between terms. In this example R = 2, n = 5 and S = 31. If each distributor signed up 5 instead of just 2, then R = 5, n = 5 and the total number of distributors is S = 781. This represents a dramatic increase for just 3 additional people per distributor and demonstrates the power of geometric progression. It is clear that the network grows rapidly and that in practice the network is more complex since: each distributor at each generation may sign on more or less than the number given in these examples, some distributors may cease to operate and the network generation may extend well beyond the 5th generation. A simple more realistic 4th generation distributor network may look like this:

The 1st generation shown in the diagram as the white circles is defined as the frontline in network marketing parlance and represents those distributors directly signed up under YOU. The 2nd generation level shown as the cyan circles and the 3rd generation level shown as purple circles constitute the remainder of the downline. The specific advantages of the network marketing mechanism are as follows:

  • Each distributor builds his or her team network using the principle of duplication of training methods at every level of the network. In the case of Forever Living Products, integrity is essential in the duplication process. Within the broad pattern of the duplication process there is a modicum of room for individual implementation.
  • Each distributor uses the products and is convinced of their efficacy.
  • Direct contact by word of mouth provides the most powerful proven method of advertising. Sharing experiences with personal contacts, friends and family provides the cornerstone of most distributor networks.
  • A personal bonus scheme is applied on the personal volume of product sold. The personal bonus percentage increases as the distributor rises up the ladder. An additional group volume bonus scheme is applied depending on the performance of the network belonging to the distributor and varying bonus levels applied within the given network. It is the group volume bonus that provides an additional positive feedback mechanism which drives the incentive of each distributor to continue expanding their network.
  • Forever Living Products' bonus schemes are generous compared to those of other network marketing companies. The particular marketing plan operated by Forever Living Products is discussed in Part 2.

The recruitment process consists of two essential ongoing activities: building and expanding the network team of individual independent distributors as well as building and expanding the consumer customer base. The understanding of the relationship between these two activities is critical to the development of a sound network business. The relationship is illustrated in the following diagram:

To develop the distributor network at the expense of the development of the customer base will severely limit the flow of money throughout the system and may consequently inhibit the recruitment process, as pointed out by Edward Ludbrook in "The Fundamentals of Network Marketing"(see reference at end of this section). Similarly, to restrict the recruitment process solely to the development of a consumer customer base will result in limiting peak performance levels resulting from the cost balance of maximum sustainable customer maintenance levels and customer losses. Clearly, the recruitment process is compromised by neglecting either activity. For optimum recruitment performance both the building and expansion of the customer base and the independent distributor network are essential and should be developed in parallel. Moreover, in addition to recruiting directly for new distributors, the consumer base further provides a built in positve feedback mechanism for the growth of new independent network distributors as previously discussed above. As suggested in the current diagram, a natural pathway exists between retail and wholesale customers. When total retail sales to a given customer reaches a specified value, the customer may then be offered the opportunity to purchase at the wholesale rate, market the products at the retail rate and join the network team. Thus, the conversion from retail customers to wholesale customers represent a strong possibility to create additional new independent distributors - this is the wholesale positive feedback loop. Of course there will be a fraction of retail customers who recognise directly the advantages of becoming an independent distributor and join the network team straight away - this is the retail positive feedback loop. The success of the recruitment process is determined by two primary growth lines: the independent distributor growth time line TD, and the customer growth time line TC. These growth time lines are indicators of the growth rate of new distributors and customers respectively. The customer growth time line TC is further subdivided into retail TR and wholesale growth timeTW lines respectively. In practice, effective recruitment process management requires the ongoing maintenance, continous followup and promotion of all the growth time lines.

For further reference we direct you to these excellent texts:

"Boom Business of the 90's" by Francis Hitching, 1994. Published by User Friendly Textbooks, Swalcliffe Manor, Swalcliffe, Banbury, Oxfordshire England OX15 5EH

"The Fundamentals of Network Marketing"by Edward Ludbrook, 1998. Published by Ludbrook Research International, P O Box 4815, London England SW6 4YF. ISBN 1-899949-04-6

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    Part 2: Forever Living Products Network Marketing Plan

    The Forever Living Products (FLP) Network Marketing Plan, shown graphically above, is an excellent plan: it aims to reward distributors generously at every level of the business. There is no fee to sign up as an FLP Distributor, there are no annual fees to pay and it is not necessary to hold stock. Everyone in the Distributor Level progression from Assistant Supervisor to Manager buys their FLP products at the same 30% discounted price. The additional monthly Personal Volume Bonus varies from 5% to 18% depending on Distributor Level position along the progression starting from Assistant Supervisor and is calculated on the Retail Prices of all purchases each month. Hence the total profit on purchases will vary from 35% at the Assistant Supervisor level to 48% at the Manager level. In addition, as the network team grows, a Group Volume Bonus(Team-Leading Bonus) is applied according to the Distributor Level in the team. It is this Group Volume Bonus that provides the drive power of the marketing network engine. The colour coded graph above displays the basic structure and mechanism of the marketing plan up to Manager Level [Advanced Manager Levels are discussed in Part 3 of this article]. The following discussion illustrates the Distributor Level progression as a function of Case Credits over a period and the corresponding Personal Volume Bonus(PVB) and Group Volume Bonus(GVB).

     

    DISTRIBUTOR LEVEL PROGRESSION

    • Independent Distributor: You join the company as an Independent Distributor by signing the single-page Application Form, which is countersigned by your Sponsor into the FLP business. You receive your unique FLP identity number and you buy products from your Sponsor at the Retail price.
       
    • Assistant Supervisor: To go from Independent Distributor to Assistant Supervisor you must purchase products to the value of 2 Case Credits (see explanation of Case Credits - CCs - below). You might buy the Touch of Forever Combo Box, or two of the Mini-Combos (either option will immediately qualify you), or loose products over a period of time. At this point you receive the Authorisation to Purchase (ATP) at the 30% discount price. Thereafter you will receive a monthly Bonus cheque direct from FLP representing 5% PersonalVolume Bonus on the Retail Prices of all purchases in the previous month.
       
    • Supervisor: You reach Supervisor level when you and the members of your team purchase products totalling 25 CCs over any two-month period. At this level the Personal Volume Bonus on all the products you purchase is 8% and you receive an additional Group Volume Bonus(Team-Leading Bonus) of 3% on all products purchased by your Assistant Supervisor team members. If someone in your team becomes a Supervisor, you cease earning the Group Volume Bonus on their team until you progress to Assistant Manager level.
       
    • Assistant Manager: To rise from Supervisor to Assistant Manager you and the members of your team purchase products totalling 75 CCs over any two-month period. At this level the Personal Volume Bonus on all the products you purchase is 13% and you receive additional Group Volume Bonus(Team-Leading Bonus) of 5% on all products purchased by frontline Supervisors in your team, and 8% on frontline Assistant Supervisors.
       
    • Manager: To make Manager you and the members of your team purchase products totalling 120 CCs over any two-month period. At this level the Personal Volume Bonus on all the products you purchase is 18% and you receive additional Group Volume Bonus(Team-Leading Bonus) of 5% on all purchases by frontline Assistant Managers in your team, 10% on frontline Supervisors, and 13% on frontline Assistant Supervisors.
       
    • It is clear that the Group Volume Bonus kicks in at the Supervisor level and that higher levels along the Distributor Level progression accrue an increasing Group Volume Bonus from levels below. The Group Volume Bonus is the positive feedback mechanism which provides the incentive to maintain, develop and expand the 'downline' network.
       


    CASE CREDITS, PROFITS & BONUSES - Examples
     

    Case Credits: The international currency unit used by FLP for calculating Distributor turnover and bonuses is the Case Credit. Every product in the FLP range has an assigned Case Credit value which is related to the monetary value of each item. In the UK, the wholesale value of 1 Case Credit = 94.12 excluding vat. The corresponding wholesale vat inclusive value of 1 Case Credit = 110.59. This gives the retail vat inclusive value of 1 Case Credit = 157.99 taking the standard 30% discount price.

    Profits and Bonuses: Your Bonus Cheque is based on the retail value of all purchases you personally make in a month and the total retail value of purchases made by your network group. Your Total Profit consists of three components: the Baseline Profit(BP) which is defined as the difference in value between all retail and wholesale purchases at the Vat inclusive value; your Personal Volume Bonus(PVB) percentage contribution and your Group Volume Bonus(GVB) percentage contribution. Both the Personal Volume Bonus and Group Volume Bonus contributions are calculated on the Vat exclusive retail value of purchases. Your total profit is the sum these three components:
     

    (1) Baseline Profit (BP) = [ R - W ] = 30%R __where R and W are the total Vat inclusive Retail and Wholesale value of purchases you make respectively and 30% is the standard discount price whichever position you are in the Marketing Plan.
     

    (2) Personal Volume Bonus(PVB) = X%[R/1.175] __ where X% is the personal volume bonus percentage which varies on distributor level over the range {5%, 8%, 13%, 18%}.
     

    (3) Group Volume Bonus(GVB) = Y%[R*/1.175] __ where Y% is the network team or group volume bonus percentage which varies as a function of distributor level over the range {3%, 8%, 13%} and R* is the total Vat inclusive Retail value of all purchases made by everyone in your network team below your distributor level.
     

    Consequently,

    Total Profit = 30%R + X%[R/1.175] + Y%[R*/1.175]
     

    The following practical example illustrates the contribution of each of the components in generating the total profit.
     

    Personal Volume Bonus: Say you spend 1050 wholesale on products (Vat inclusive): their retail value is 1500 (Vat inclusive), so this 30% discount price generates sales which amount to a Baseline Profit(BP) of 450 - whichever position you are in the Marketing Plan. However, your Personal Volume Bonus(PVB) will vary with your marketing plan position and the corresponding value of the personal volume bonus percentage X%. So, the Vat exclusive term X%[R/1.175] = X%[1500/1.175] = X%[1276.60]. The profit obtained from the Personal Volume Bonus and Baseline Profit terms are as follows:
     

    ................................................ X%............................ PVB.............. BP......................
     

    Assistant Supervisor: .........5% on 1276.60 = .63.83 plus 450 = 513.83

    Supervisor:.............................8% on 1276.60 = 102.13 plus 450 = 552.13

    Assistant Manager:.......... 13% on 1276.60 = 165.96 plus 450 = 615.96

    Manager:............................ 18% on 1276.60 = 229.79 plus 450 = 679.79
     


    Group Volume Bonus: Of course, from Supervisor onward you will be making additional Group Volume Bonus(GVB) based upon the retail value of purchases by everyone in your network team below your Distributor Level. For simplicity, let us assume that the total retail Vat inclusive sales value of all the frontline Assistant Supervisors in your team is 2350 (Front line distributors are those distributors directly signed up under you). So, the Vat exclusive term Y%[R*/1.175] = Y%[2350/1.175] = Y%[2000]. The profit obtained from the Personal Volume Bonus, the Group Volume Bonus and Baseline Profit terms are given below. This is how it will affect your profits if your Distributor Level is Supervisor or higher:

    ................................................ X%............................ PVB................Y%..................... GVB.......... BP.....................

    Supervisor:........................... 8% on 1276.60 = 102.13 plus _3% on 2000 = .60 plus 450 = 612.13

    Assistant Manager:.......... 13% on 1276.60 = 165.96 plus _8% on 2000 = 160 plus 450 = 775.96

    Manager:............................ 18% on 1276.60 = 229.79 plus 13% on 2000 = 260 plus 450 = 939.79


    This example shows only the increase in Personal Volume Bonus and GroupVolume Bonus for the same level of frontline Assistant Supervisor turnover along the distributor progression (Supervisor => Assistant Manager => Manager). It does not take into account that Assistant Managers will have further contributions from their frontline Supervisor team turnover and that Managers will have contributions from their frontline Supervisor team turnover and from their frontline Assistant manager team turnover. A more detailed example of the team or group volume bonus based on frontline distributors at different levels with a more complex team structure is given in Part 5.

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    Part 3: Passive Income & Advanced Levels in Forever Living Products
    Network Marketing Plan

    Royalty Bonuses - Manager Levels: There are 7 Manager Levels: Manager, Senior Manager, Soaring Manager, Sapphire Manager, Diamond-Sapphire Manager, Diamond Manager, and Double-Diamond Manager. You earn Bonuses on the first three generations of Manager in your business: these are calculated as a percentage of the total turnover in each of your Manager Businesses. The first six levels are shown below:

    Passive Income: As you work with your Team, helping them to become Managers in the business, you start to access Royalty Bonuses. FLP pays these additional bonuses on three generations of your Manager business at a starting level of 6% on your 1st generation Managers, 3% on the 2nd generation, and 2% on the 3rd generation. As you develop more and more Manager-businesses, this can rise to a maximum of 9%, 6% and 5% Royalty Bonuses respectively for a Diamond Manager. The 7th Manager Level - Double Diamond Manager is reached when the distributor develops 50 recognised 1st generation sponsored managers.


    Company Cars - the Earned Car Scheme: FLP will provide 36 monthly payments of 250 (Level 1), 375 (Level 2), or 550 (Level 3) if you - with your Team - hit specific turnover targets in 3 consecutive months. At the end of the 36 months the car is yours to keep permanently. In fact, after three years most people will have requalified, so FLP will pay for another new car, frequently at a higher level than the first.

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    Part 4: Practical Requirements of Building a Successful Business
     in Forever Living Products:

    The 4 Case Credit Strategy


    BUILDING A FOUR CASE-CREDIT BUSINESS


    CASE CREDITS The international currency unit used by FLP for calculating Distributor turnover and bonuses is the Case Credit. Every product in the FLP range has an assigned Case Credit value which is related to the monetary value of each item. For example, the Combi Box is valued at 2 Case Credits (CCs), and cases of the Gel, Juice and Berry Nectar are worth 1.257 CCs each. In the UK, the relationship between the monetary value of each product and its Case Credit value is exact: The wholesale value of 1 Case Credit = 94.12 excluding vat. The corresponding wholesale vat inclusive value of 1 Case Credit = 110.59. This gives the retail vat inclusive value of 1 Case Credit = 157.99 taking the standard 30% discount price.

    When you turn over 4 CCs each month in your business, this will be worth roughly 632 at retail and 442 at wholesale. This means you will have made around 190 gross profit on the monthly sales and you will receive a bonus cheque for just over 26 (based on the retail price ex vat - at the 5% bonus level). That amounts to just over 216 total profit on an outlay of 442.

    4 CC BUSINESS It is vital for everyone to aim for a 4 CC business: (i) to generate the essential turnover that drives money around the system and creates our bonus cheques, and (ii) to lay the foundation for team-building and moving up the FLP ladder. A good proportion of this turnover should come from Customer Sales - as well as goods for your own use, and the sponsoring of new distributors. Note: the 4 CCs must all be in your name - this is your personal turnover each month.

    RETAILING A customer base of 20 or more is recommended for the development of a sound networking business. You are aiming for customer loyalty - people who re-order every month or so without prompting. Inevitably some customers will only buy occasionally, and some will drop out completely (they may even join your team!) - so keep on looking for new customers. It is essential to have a sound follow-up system: if you look after your customers well, they will come back to you over and over again. Set a time frame to achieve 20 customers - three months, perhaps. These customers should generate 1 or 2 of your required 4 CCs total. Be ready around week 3 of the month to boost the CCs by additional sales through, for example, Aloe Awareness evenings, fundraising activities, a table at local events. Aim for 2 to 3 CCs from personal Retailing and own use.

    SPONSORING Try to Sponsor 1 new person a month into your team. Ideally, they will buy a Combi Box from you to get their business off to a flying start - worth 2 CCs to you. If they need to retail their way into the business, you will aim to do three Product Launches with them in the first month or two which should easily give them the 2 CCs they need to qualify for Authorisation to Purchase at the wholesale price. You will start coaching them from Day 1 to do what you have done - achieve 4 CCs per month personal volume and Sponsor a new person each month. Aim for 1 to 2 CCs per month from Sponsoring - don't forget to ask your best customers if they would like to join your business and buy their products at the wholesale price.

    TRACKING Keep a running total of your CCs to ensure you are achieving at least 4 CCs personal volume every month. Train your team to send you the pink copies of their orders promptly to keep track of your team CC total. Carry forward the total from the previous month: new positions are based upon CCs over a 2-month period (Base month & Qualifying month). Careful tracking is needed to ensure you reach the correct 2-month total CCs for success. Keep coaching your team members to do the same. Remember, you can use the second qualifying month for one position as the base month for the next.

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    Part 5: Earning Pathways in Forever Living Products:

    Copyright© 1996, 1997, 1998, 1999 AloeVera Company UK. All Rights Reserved.

    INTRODUCTION

    The FLP Earning Pathways graph represents an example of the annual income achievable as a function of time for three distinct pathways: Retailing, Team Building and Leadership. The curves shown in this example demonstrate the time-dependent relationship of the different earning pathways. In reality a "family" of curves would be generated, shifting significantly along the time axis, since some distributors take the fast track, develop large teams quickly, and achieve substantial income growth in their first year or two, while others may be satisfied with moderate income growth over several years. It is helpful for distributors to be able to estimate their expected income over any specific period, according to their position on the Marketing Plan, and the size and "shape" of their team (the number of downline distributors they have at each level in the Marketing Plan).

    In the following discussion of the three earning pathways we have chosen examples which give some idea of the earning capacities of the different pathways. We make use of a general formula:

    Total Profit = 30%R + X%[R/1.175] + Y%[R*/1.175]

    where R is the vat-inclusive Retail value of personal turnover and X% is the corresponding personal bonus percentage; R* is the vat inclusive Retail value of the network team turnover and Y% is the average network team bonus percentage. Bonus percentages are calculated on the Retail turnover value minus the VAT component (currently 17.5%). As is evident in the formula, the total profit consists of three contributions: the 1st term, 30%R, gives the personal profit on sales; the 2nd term, X%[R/1.175], gives the personal volume bonus and the 3rd term, Y%[R*/1.175], gives the approximate group volume bonus or "network team" bonus. The formula for total profit is now employed to estimate the annual income of a distributor on different earning pathways over a given period in time.

    Note that when a distributor turns over 4 CCs every month for 12 months (in line with the 4 CC strategy), this amounts to a vat-inclusive Retail turnover value of 7584 per annum (R = 4 x 12 x 157.99 = 7584) where the retail vat inclusive value of 1 CC is taken as 157.99.


    RETAILING

    When a distributor chooses to concentrate solely on retailing products, and to work on a very part-time basis of around 6 or 7 hours per week, then it is clear that earnings will grow to a point which is self-limiting: there is insufficient time for further sales to be made. If it is assumed that the distributor is at Assistant Supervisor level in the marketing plan and averages 4 CCs per month, then:

    X% = 5%, R = 7584, Y% = 0, R* = 0

    and the total profit per annum given by the formula yields an income of 2597.92 per annum.

    This level of additional disposable income approaches a practical maximum of about 3000 per annum, yet may be extremely useful for an individual - making it possible for them to take a family holiday, for example, or to buy a second car. It is difficult to achieve the next level of Supervisor or beyond by retailing alone (though, of course, there are exceptions to this rule).


    TEAM BUILDING

    When distributors decide to start building their own networks by recruiting like-minded people to work with them in their business, they can generate significantly larger incomes. They will be earning group volume bonuses or "team-leading bonuses" on their downline distributors, whilst maintaining their retail customer base. It is vital for everyone at Supervisor level and above to ensure they personally turn over at least 4 CCs of product every month, in order to earn bonuses on turnover produced by their network downline distributors. To calculate the value of the average group volume team bonus Y%, it is essential to know how many distributors are at each level (Assistant Supervisor, Supervisor and Assistant Manager). By using the following simple mathematical formula, it is possible to calculate an average bonus percentage for any team, up to and including manager level in the marketing plan:

    Y% = [PasNas + PsNs + PamNam] / [Nas + Ns+ Nam]

    Here Pas, Ps, Pam are the group volume or "team" Percentage bonuses that a team leading distributor may receive from his network downline distributors at assistant supervisor (Pas), supervisor (Ps) and assistant manager (Pam) levels respectively. These will vary in value according to the particular level of the team leading distributor in the marketing plan:

    Group Volume " Network Team" Percentage Bonuses

     

    Marketing Plan Level

    Pas

    Ps

    Pa m

    Manager Level

    13 %

    10 %

    5 %

    Assistant Manager Level

    8 %

    5 %

     

    Supervisor Level

    3 %

     

     


    Nas, Ns, Nam are the Number of distributors in the network downline who have reached the network marketing plan level of assistant supervisor (Nas), supervisor (Ns) and assistant manager (Nam) respectively. The following two worked examples highlight the relationship between the extent and structure of the network team and the overall contribution of the network team turnover to the total annual income.

    (1) Let us assume that the team leading distributor has achieved assistant manager level in the marketing plan, so that their personal volume bonus percentage X% = 13%, and that this distributor averages 4 CC's per month so that the total personal retail turnover R = 7584 per annum. In this example, the downline team is assumed to consist of 15 active distributors of which 13 are frontline assistant supervisors and 2 are frontline supervisors. Referring to the table gives the corresponding percentages in the formula for Y%. Hence, the data to calculate Y% are:

    Pas = 8%, Nas = 13; Ps = 5%, Ns = 2; Pam = 0, Nam =0

    Substituting these values into the formula:

    Y% = [PasNas + PsNs + PamNam] / [Nas + Ns + Nam]

    gives the following result:

    Y% = [(8 x 13) + (5 x 2)] / [2 + 13] = 7.6%

    So with this specific extent and structure of the downline, the average group volume team bonus Y% comes out to 7.6%. Now if the combined network downline produces an average of 45 CC's per month, then the corresponding vat-inclusive retail turnover by the network R* = 45 x 12 x 157.99 = 85,314.60 per annum. The assistant manager's annual income can then easily be calculated from the formula for total profit:

    Total Profit = [30%R + X%[R/1.175] + Y%[R*/1.175]

    Substituting these values gives:

    Total Profit = 30%x7,584 + 13%/ x 7,584/1.175 + 7.6% x 85,314.60/1.175 = 8,632.50

    The total profit per annum given by the formula for this team leading assistant manager is 8,632.50

    (2) Let us next assume that the team leading distributor has developed his network team further and as a result has now achieved manager level in the marketing plan. This means that the personal volume bonus percentage X% is now 18%. Also, to earn bonuses from the downline network, this team leading distributor continues to average a personal turnover of 4 CC's per month so that R = 7584 per annum. In this example, the downline team is assumed to have grown to 20 active distributors of which 15 are frontline assistant supervisors, 3 are frontline supervisors and 2 are frontline assistant managers.

    Referring to the table above gives the team bonus percentage data required to calculate Y% :

    Pas = 13%, Nas = 15; Ps = 10%, Ns = 3; Pam = 5%, Nam =2

    With this particular extent and structure of the downline, Y% comes out to 11.75%.

    Now, assuming the combined network downline produces an average of 55 CC's per month, then the corresponding vat-inclusive retail turnover by the network R* = 55 x 12 x 157.99 = 104,273.40 per annum. The manager's annual income can then be easily calculated from the formula for total profit and comes to 13,864.34. This level of annual income may serve as a modest primary income, or perhaps as a robust secondary income stream.

    However, having achieved manager status, the distributor has completed the basic team-building process - the critical developmental stage on the path to Leadership and passive income, if that is the way he wishes to proceed.


    LEADERSHIP

    As indicated in the graph above, the Leadership process may begin at any time from 1 to 5 years or more, according to the time and energy the individual distributor can invest in the business, and their leadership abilities - but 18 months or more into the team-building process is common. Leadership Bonuses are earned when a Manager in the business works with individuals in the team and helps them to reach Manager status: at this point the downline Manager business becomes a discrete entity and Leadership Bonuses come into play. As more downline distributors are brought up to Manager status, each one becomes an independent business unit, and graded Royalty Bonuses are payable on the total turnover of each unit as the distributor moves up through the senior Manager levels.

    Each Manager business may be expected to generate an income of around 1,000 to 2,000 per month for the Senior Manager - so a single Manager business unit, plus the remaining downline turnover, should generate about 20,000 per annum. A more mature team with two downline Manager units will commonly produce an annual income in excess of 30,000. As the team continues to grow, and more independent Manager business units are developed, then the Royalty Bonuses will grow also: after only six years in this country, there are FLP distributors earning in excess of 200,000 per annum. It is clear that the leadership growth curve as shown in the graph illustrates a very steep rise and thus provides an earning pathway which generates a handsome primary annual income. Thus Leadership and Manager-development is the path to a passive income, which will grow as the team continues to grow. As long as the Manager remains active (turning over at least 4 CCs every month), then the bonus payments will be made - whether or not there is any effort being made to develop the team further.

    Other benefits that may be earned at this level include the luxury car scheme, international travel and profit-sharing. These will depend upon reaching specific group turnover levels within a defined 12-month period, and may additionally require certain other targets to be met.


    SUMMARY

    The Retailing pathway alone may provide a supplementary annual income ranging from about 2,000 to 3,000 (on a very part-time basis) but tends to be limited in income growth potential.

    The Team building pathway offers a modest primary income, or a robust secondary income stream, and a continuous modest growth potential. Team building may typically provide an annual income in the range of 3,000 to 13,800 or thereabouts.

    The Leadership earning pathway provides a handsome primary income ranging from around 20,000 to 30,000 plus per year, but which is virtually unlimited in its growth potential. The Royalty Bonuses paid on downline Manager businesses produce a passive income which continue throughout the lifetime of the distributor. The business may be passed on to a family member (provided they are 18 years of age or older and maintain their active distributor status) upon the distributor's death. As long as the family member maintains a 4CC turnover per month, he or she will continue to receive the inherited royalty bonuses.

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