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Dec292014

The Earning Opportunity : Is It Your Best Product?

The ideal product line sold in the direct selling channel is unique, not offered at retail, and is coveted by customers, creating "buzz" among sellers and buyers.  It helps when the COGS is between 10-15%.  And it would take a competitor a lot of time and money to duplicate it.

Just as important is the earning opportunity.  This is where the coveted product connects with the compensation plan and incentives for sellers to reach higher levels of achievement to create a spark and ignite a full fledged fire of business and career fulfillment.  Without this synergy, a sustainable earning opportunity is not possible, and although your company may flourish for a while, the sales force churn or the lack of consistent field leadership achievement is a dead giveaway that there is trouble with the earning opportunity, product, or both.

What is the key indicator that a compensation plan is both motivating and affordable?  A rule of thumb is that it should promote early earnings, and propel sellers to the first significant "leadership" position.  It should give leeway to reach goals without being too confining, e.g., stipulating how many people must submit a certain amount of revenue each month in order to be paid commission at various leadership levels.  As a percent to net sales, when starting out, commisions could be 33 - 36%; when leadership is developed at the higher levels it can reach 38-40% or more.  This is where having a low product COGS is critical, as the earning opportunity can be richer than if COGS is higher.  

Most importantly, the compensation plan should be the living motivational, immutable force that company leadership uses every day to communicate with and motivate the sales force.

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