The Business Models Drive the Behavior in the Field

Part 3

Let me give you another example of the concept that the business models drive the behavior in the field. I'm sure you've seen network marketing companies that brag about having a huge, multi-million dollar home office.

Let’s talk about this in terms of an actual network marketing company.  We’ll call this “ABC Company.”  They have pictures of it on the website, flash presentations, and all the brochures. But the millions of dollars that paid for that building is money that you will never get back in the compensation plan.  When I was trying to figure all of this stuff out, I didn’t even think about a building.

One of the most important things that you MUST understand when you are trying to build your business is this.  All the profits, to pay you, any commissions from any company, any legal company anyway, come from one thing.  ONE THING.  It is the sale of a tangible product to the end consumer.  The difference between the cost of the product plus the overhead equals the amount of commission that they can pay to the field. 

You have to understand that in network marketing, the only place that money is made, whether by the distributors or the company, comes directly from the compensation plan.  And it only comes from the compensation plan.

The network marketing company does not have another stream of income that generates money for them. It always and only comes from the compensation plan.

That’s the whole idea.  Everybody who has ever been involved in anything wants to know, “What kind of compensation am I going to get from this?”  So when you see that kind of spending on the part of the company, that is money that will never come back to you in the compensation plan.

Does this all make sense to you so far?

Really?   Because it doesn’t make a lick of sense for me… except for one reason.  Pay attention to this stuff and see if you can figure out what that reason is.  But I have got to warn you.  Here’s where it gets really ugly. So are you ready for this?

Okay. “ABC Company.” That beautiful, gorgeous, building with all of the bells and whistles and a guy cranking an organ with a monkey wearing a fez hat that matches his own…that building that the company built requires maintenance. They need a cleaning staff because you want it to look nice.  These buildings get cleaned every night.  You have to shampoo the carpets, clean the windows and maintain the windows.  You’ve got to sprinkle the grass, mow the grass, re-stripe the parking lot, paint the building, re-roof the building.  They have a water bill, and an electric bill.  You’ve got to heat the building.  You’ve got to have air conditioning to cool the building.  You have to put lights on in the building. 

WOW!!  I wonder what the monthly overhead on THAT is.  They do everything necessary to make that building a showplace for the company.

Who is paying for that monthly bill? Where's the money coming from?  The answer is the compensation plan.  That is money that you will never receive in your checks.

IT’S…  GONE.

Now ... when do YOU plan on using that building?

You will never use that building, yet you are paying for it. And that's not all. These huge network marketing companies who brag about building their company for over 20 years make me laugh sometimes.  “ABC Company” brags and brags that they have a huge call center, and the 400 employees they have sitting there waiting.  They are poised and ready to take product orders and distributor enrollments.  They’ll explain to you that their business model is one of outstanding customer service.

The thing is, every one of those 400 employees, 400 humans is a salaried employee.  You’ve got to pay them right?  So they get health benefits in case they get sick, maternity leave, vacation leave, sick leave, the company has sexual harassment insurance.  You have to have managers, and assistant managers.  And did you know managers make two to three times as much as regular people make.  Because you can’t just put 400 people in a building and think they are going to know what to do without leadership and direction, right?  Well you have to pay them too.  You’ve got to match their social security, match their 401k, and pay their Worker’s Compensation when they get a hangnail or a paper cut.  You have to pay them time and a half for overtime and holiday pay.  Those employees get bonuses over the years, raises.

Shouldn’t they get raises?   They deserve to get a raise.  They are out there working their tails off building for this company.  Blood… and sweat… and tears.  They deserve the compensation. 

Each one works in an office or at least has a cubicle and a desk.  Hardware, Software.  400 phones and 400 computers.

AND, OH YEAH… you have 400 employees, 400 human beings.  Do you know you how many restrooms you have to have so 400 people can do their own personal business?

That is a monthly bill. Who is paying for that?

YOU ARE!!

Do you know how much overhead “ABC Company” pays per month?  Just one month?  Take a guess…

The monthly overhead for per month is about two million dollars…PER…..MONTH.

Keep in mind that this is does not even enter into the concept of product manufacturing.  That is another overhead cost entirely.  This is simply overhead in order to pay for product orders and distributor enrollments.

Again, I feel I should reiterate, that is more money that will never come back to you through the compensation plan.  “I can’t wait for that check for $2.83 on my $897.00 worth of retail sales.  Thank you “ABC Company.”

Now ... where do you think THIS business model will go in the future? Do you think they'll have fewer expenses or more expenses?

As the building gets older, it needs more maintenance. The longer people work there, the more salary they expect. As the business builds, they'll outgrow the building ... and, of course, build another new building.  And of course the overhead is just that much higher, which makes it that much more difficult to compete.  So what can the company do about this?  One option is to go into new countries. They open in new countries, because they cannot compete in the US anymore. And their US business & distributor base just falls by the wayside. 

Another good indicator of the heart of a company is, where is the warehouse located?  Most cities have a warehouse district, very low-rent, low cost. It makes sense for businesses to keep their stock there. But most MLM companies have the warehouse right next to their big new building. Why do you think that is?

Because it's more impressive, and they can say, "Look at us! Look what we've done!  Look how BIG it is!  We’re so great!"  But who pays for that extra expense?  The distributors.  That is YOU.   

GREED AND EGO.  That’s all it is.  Think about that one.  

THE BUSINESS MODELS DRIVE THE BEHAVIOR IN THE FIELD.

Kristopher Curry

Mentoring For Free

“Be a mentor with a servant’s heart.”