Value Of Your Multilevel Marketing Business As A Customer Or Distributor.
By this, I referring to the total profit of an average customer over the lifetime that they do business with you. This can include all future sales and upgrades; one-time and passive. This is not the gross sale but the commission earned.
Let's say the average customer/distributor brings you $10 per sale (ie: 10% of $100 monthly purchase).
They re-purchase 12 times in a year and their average order amount is $100. On each $100 reorder, you make $10 gross profit. We know that an MLM distributor or customer will not be there forever so the "lifetime value" is relative to the average time they might be with you. You can decide what this length of time is but I will use 4 years for this example.
Therefore, you earn $10 commission, per month, per customer/distributor and that's $120 per year or $480 in 4 years. Does that make sense so far?
How much can you spend to bring in one customer?
If the average distributor earns you $480 over this period of time; then you can gauge what is prudent to spend in marketing in order to acquire this customer or distributor.
At the end, if you could generate these distributors for a cost of $40; then you can add as many as possible and you are in a good position here. Now, before I get any flack on this; I am in no way taking sides on this and it could easily be argued that people in MLM may not be around 4 years as there is too much churn. I will leave that up to you...
One quick note: use this to calculate potential earning. Such as if you had 1,000 distributors and you earned $120 per year, per distributor that would mean ($120 X 1,000) $120,000 in annual earnings If they spent $100 on average and if the true payout of your MLM was 10% (reports indicate that even with check matching bonuses, other bonuses, this and that it's closer to 5.6% payout).
A separate article will cover product and compensation plan breakage and shed light on the actual payout of plans in MLM. Suffice to say that if the actual payout is closer to the reported averages for MLM at 5.6%, then the above would indicate an income closer to $67,200 annually for this organization of 1,000. Final point about this is the viability that people actually duplicate and if a 1,000 person organization is reasonable in your mind.
1% of MLM distributors think about this. You want to spend everything you can justify to bring in a customer as long as that customer costs you less than they earn you. If you can't afford to spend more than the entire profit from the first sale, remember you'll be making money just in a few months from them. Start out spending what your cash flow can justify. After a quarter or several months after their re-order profits come in, then you can step up your ad budget.
Another argument is to consider a much bigger profit upfront in MLM such as those commissions in business models outside of this profession. In real estate and mortgage we earned large incomes upfront but nothing in the way of residual or passive income. The question is...is there something that can achieve both lucrative commissions upfront and passive income.
This is not only important to your potential income but can determine how much you can justify to spend in marketing to acquire a distributor and even the caliber of that potential business partner.
Imagine passive income but also upfront commissions of $1,000 per distributor and a lifetime value of that same 4 year period of the area of $13,000 to $20,000. Certainly the need to build an organization of 1,000 or more people is not necessary and six-figure income can be had with 100 people; even less.
In addition to that, the large initial commissions and there is no need to be a sponsoring superstar and just a few upfront commissions can be a much shorter time period to actually earn a decent income which is a complaint of many that say that MLM typically requires 3-5 years to build a decent residual base.
Al Rodriguez is a business coach with extensive experience in business and personal growth. He has owned many successful six-figure plus businesses in real estate, mortgage, real estate investing and coaching. His time in personal growth has cleared the way for him and his business partners to "think outside of the box" and find business solutions. He now works from home and enjoys time coaching others and spending lots of time with his wife and young children.
Here's more information to explore that model http://Oneyearincomeolan.com and as always the key to succeeding in any business (offline and online) is effective marketing that you can implement today and mindset training to keep you in the game. Explore that here http://Join-The-Tribe.com
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