Category Archives:MLM & Party Plan Startup Consulting

Starter Kit Strategy Part 1

Starter Kit StrateDan Jensen Consultinggy by Andi Sherwood, Dan Jensen

Consulting Starter Kits. Business Kits. Enrollment Kits. All of these names refer to the same thing: a packet of materials and/or products that is purchased at the time an individual enrolls with your company to become an Independent Business Owner (IBO). More importantly, this represents a strategy.

There are many types of companies in our industry.

– Internal/Self Consumption companies center their pricing strategy on the IBO/Wholesale (discounted) price, which results in most customers enrolling as an IBO in order to purchase at that price. – Customer/Retail Biased companies center their pricing strategy on the Retail Price and their IBOs focus on selling their products to customers who will purchase at the Retail Price and use the products without enrolling as IBOs. – Affiliate Programs are kind of a hybrid of the two. I say “kind of” because it is not really as simple as that sounds. There are some unique nuances and very few companies fall into this category. For that reason, the Affiliate type is not addressed within this article.

While this explanation of business types has been simplified, it isn’t necessarily a choice of one or the other, it’s a spectrum with Internal Consumption on one end and Customer Biased on the other end and most companies fall somewhere in between. There are companies that have succeeded and failed throughout the spectrum so there is no right or wrong choice. Alignment to business type, including the Starter Kit, is critical to success.

The Starter Kit strategies differ based on where your company is on the spectrum and it is vital that you understand how this impacts your desired business type. For purposes of this discussion, we will refer to strategies of the Internal Consumption and Customer Biased companies, even though many companies have a bit of both.

In this three part series, we will address the following Starter Kit related strategies: 1) Pricing 2) Products/Materials 3) Presentations

Strategy #1: Pricing The Starter Kit is not merely materials and products, it is a strategy that creates a healthy “barrier to entry” that can (when desired) separate customers from business builders. It creates a monetary gateway that an individual passes through, whether low or high, when enrolling as an IBO. While you may question the logic of creating barriers for a potential IBO, it is important to understand how this decision will impact your business type.

When the price of the starter kit is low, your barrier to entry is low. Many of the people that join your company are likely to be customers who want to buy your products for the best possible price – like a buying club. This is the nature of the Internal Consumption business type and is reflected in common starter kit pricing ranging from $10-$30.

In this low price scenario, very minimal commitment is made at enrollment so while the customers become IBOs, they do not act like IBOs. These companies will have some business builder IBOs that develop very successful teams made up of a few business builders and lots of customer-IBOs. While the average per IBO sales volume may not be high, the number of IBOs makes up for that.

Higher priced Starter Kits create a stronger barrier to entry. This often results in fewer IBO enrollments but higher commitment to building a business and thus higher per IBO sales volume. In Customer Biased companies, the IBOs count on the retail profit that they make when they sell to customers (who purchase at Retail) as a major source of income. In order to protect this vital aspect of the business, companies of this model should price their kit high enough to discourage customers joining solely for the discount and ensure that the starter kits have the proper mix of materials and products (this will be addressed in strategy #2).

Unfortunately, failure to price the Starter Kit appropriately has destroyed many companies in our industry. A Customer Biased company that fails to protect the retail profit will find that their IBOs do not make enough money for it to be worth their time selling and building a business. When earnings are not sufficient, an IBO will stop working their business and become a customer purchasing at discount. The company will find themselves unintentionally moving more towards an Internal Consumption model.

For example, an IBO who sells $1,000 in products to customers might earn a 25% retail profit of $250. If those same customers enrolled as IBO’s, they would get a 25% discount – in other words the retail profit to the seller becomes a discount to the buyer. The sponsor (seller) who would have earned $250 had they stayed as customers might now earn 10% on the IBO wholesale price ($750) = $75 total (instead of the 25% profit on the retail price). If the sponsoring/selling IBO had spent 10 hours finding those customers and taking their orders, then they would have earned $25 per hour for their time when those individuals were customers. When the customer became IBOs, that dollar-per-hour dropped to $7.50. When an IBO joins your company to make money, the $25 per hour is critical to achieving their goal as quickly as possible, thereby making the barrier to entry vital to protecting the retail profit.

As a rule of thumb, the higher your Starter Kit price is, the more Customer Biased you are and likewise, the lower the price, the more Internal Consumption focused you are. If I were to place a price on the Starter Kit for a company right in the middle of the spectrum, in today’s economy, it would be somewhere in the range of $50-60.

Please note that there are some legal requirements regarding the Starter Kit pricing in the USA. The are a number of states which specify a maximum amount that you may charge for the kit and there are rules that govern the cost of goods for the kit versus the selling price. Please check with your industry attorney for specific information on the legal aspects of the Starter Kit. In summary, the pricing of your Starter Kit is a very important strategy that should be considered in your business in order to create alignment between your kit and the business type that you intend to be.

Shave Years Off Your Learning Curve At The Direct Selling Symposium

Launching a new Direct Selling Company (home party or MLM) and getting it off the ground can be a very complex and difficult process. Especially if you’re doing it on your own. Unlike many things, the world of Direct Sales is not something that you can just YouTube and find easy-to-follow tutorials on how to effectively build and grow a Direct Selling Company. There are many areas that must be considered, such as building your compensation plan (and keeping it legal), training your field, compliance, legal, your sales pitch, how to motivate your sales force, recruiting, retention, logistics, what software are you going to use, how do you keep a balanced budget, communication with your field, customer service, social marketing, and the list goes on and on. The best practices for each of these disciplines is truly unique for the world of direct selling.  Much of what drives the peculiarities is the fact that your products will be demonstrated and sold by an army of independent field sales reps – who will make a decision each day whether or not to work their business and stay with your company.

Because of these complexities, only 20% of all direct selling startups are in business after one year.  The other 80% have failed in their attempt to launch.  However, what we have found is that if the entrepreneurs will take the time early to learn and follow proven best practices and processes for starting and running a direct selling company – that success rate is as high as 80% still in business and growing after one year.

We want more successes and less failures!  We’re sure you do to!  Failures are bad for the industry and leave thousands of independent sales reps’ dreams laying in the wake.  Successes breed confidence and good will in the direct selling industry and help independent sales reps reach their dreams and aspirations.  To increase success rates – YOUR success, we have brought together in one place, at one event, the industry’s leading experts in these different fields to educate you on Best Practices of Starting, Building, and Growing your Direct Selling Business.

The Direct Selling Symposium is a place of education, learning, and mentoring – and includes front-of-the-room instruction as well as individual coaching sessions.  It is NOT a time when services are sold – in fact it is prohibited.  Whether you’re an entrepreneur starting from scratch or leveraging your existing business by diversifying into the direct selling space – attending the Direct Selling Symposium will shave years off your learning curve, and dramatically increase the likelihood of success.  We look forward to seeing you there!100_6124.JPG

Dave Taylor

 

Starting a Direct Selling Company: Direct Selling Symposium

Successful businessman sit at his desk while talking on mobile iSo . . . you’ve decided to start a direct selling company.  Or at least you’re seriously considering it.  You’re contemplating entering into that great world of MLM or party plan marketing – or some cross between the two.  I still remember when I entered direct selling.  It was over a decade ago.  I was acting as an advisor to executive teams and I was leveraging specific areas of expertise that I had developed outside of network marketing.  I had started, operated, and sold a half-dozen businesses of my own.  As I began my career as a consultant to direct selling companies, a colleague who was experienced in the industry gave me some sage advice.  He said:  “Dave, about 70% of what you know about traditional business will apply with just a bit of adaptation.  But the other 30% is REALLY different.”  I remember thinking at the time – how different can it really be?  Well, it’s very different.

Here’s what you’re getting into.  Your products or services will be sold through a network of independent representatives – let’s just call them distributors.  Each of those distributors will decide to “join” your company because someone they know and trust (another one of your distributors) recommends it to them, and because they like the products or services you’ll be offering.  Most of them have probably already had some kind of personal experience with network marketing – and most of the time it probably wasn’t all that positive.  If they haven’t been directly involved in MLM before, they most likely have some negative stereotypical ideas about it.  But they’re taking a leap of faith.  They hope your products and services actually provide the benefits that have been touted.  And they hope they can make some extra money, like their friend has told them.  They hope you’re a great company with a great leadership team, as has been promised.  But they don’t yet believe.  And they don’t even know you, your company, or your executive team yet – let alone trust you!

This is the very person, times thousands, who will make or break your business.  And every day they will decide whether or not they are going to continue using your products or services and whether or not they are going to recruit others.  They will do that based a great deal on how they “feel” and how much trust and belief they have in you and your company.  And how you handle every single interaction with them, from the time they sign up, to when they open their first shipment, to every call they have with your customer service team, to the training you provide them, to the compensation system you offer, and on and on – will determine whether they move forward and do anything, or do nothing.  A few even slightly negative experiences because you haven’t got the right systems in place – and you’ve lost them!  And without them, you have nothing!

So, attending the Direct Selling Symposium is an acknowledgement that you are stepping into a unique, and very powerful, and potentially very lucrative business model – and that you must learn the best practices from industry experts who are most qualified to teach them to you.  It is an investment in your future, and dramatically increases the probability of your success.  Welcome to the wacky world of direct selling!  I look forward to meeting you, and serving you!

Dave Taylor

Break Down Startup Barriers With Help From MLM Consulting Teams

Breaking down the startup barriers can be challenging, but with help from the world of MLM consulting, the challenge may become more bearable.

For anyone who understands the drive and motivating factors behind starting and running an MLM company, the potential for talented individuals to re-invent themselves as business owners will come as no surprise.  Through teamwork, resilience and the “sky’s the limit” attitude, anything is possible.

In our daily and weekly work in MLM consulting, we assist new businesses with the long list of challenges they face in taking a bright idea to market.  We also find that they value mentoring and training that gives them the edge in their new venture.

For instance, a visionary husband-wife team from Corona, California launched their business a year ago and they are already being pushed by the business to transform from visionary entrepreneurs to experienced executives.  “It came faster than I could have expected,” confessed CEO Mark Stidham.  “But then, the obvious steps are to strap in and ride hard.”

And ride hard is an understatement.  Stidham and his gifted partner (and wife) show no fear in the face of extraordinary growth.  “To go from an idea to $10 million in annualized sales in a year pushes us beyond anything we could have anticipated,” continues Stidham.

He describes his venture as the launching pad for a lifelong endeavor to make a difference, especially in the lives of stay-at-home moms who want a fresh, profitable, and flexible business.  Working with a team that specializes in MLM consulting has lifted confidence levels, which in turn  has boosted momentum.

His advice?  “Keep it simple, stay focused, and maintain your sense of humor.”  That, and work with professionals that have dedicated themselves to the field of MLM consulting.  “When you consider how much you can lose by not keeping up with the demands of the business, or by experimenting in ways that you have no business (or time) experimenting and dabbling in, you will quickly see the value in MLM advisory and MLM consulting services.”

We couldn’t have said it better.

Terrel Transtrum is Founder and CEO of ServiceQuest, a global consulting and training firm specializing in MLM and direct selling.  terrel@servicequest.com

What To Look For In A MLM Startup Consultant

MLM Startup ConsultantI was recently asked, “as an MLM Startup Consultant, will you please tell me how I can differentiate myself in the direct selling market?”

The first thought was that one of the reasons for early business failure is the lack of real differentiation (read: lack of unique value propositions).  Thinking as an MLM startup consultant, I realize quickly there is plenty of noise and chaos by those without uniqueness fighting for the table scraps.  This seems to be a slow killer of direct selling businesses.

Aware of this condition, you can address the true value you bring to the table which is unique and different from others in the marketplace.  The most efficient starting point is at your “why.”  Why are you in business?  Why are you spending time and money to create your business?  If your answer is, “to make profits,” then keep digging.  Otherwise, there is no real differentiation.

When you put a finger on it, eureka!  Bluegreen Resorts starts with their “why” . . . To Share Happiness.  Melaleuca proclaims, “to enhance lives by helping people reach their goals.”  ServiceQuest cries, “unleash and empower freedom!”  This is our why.  Start with the why and discover how the unique differentiator flows from there.

The futurist Simon Sinek reminds us that people don’t buy “what” you offer, they buy “why” you offer it.  As a busy MLM Startup Consultant, I encourage you to start each day of your journey at the starting point—declare your “why” and spend the day building it.

Terrel Transtrum is Founder and CEO of ServiceQuest, a global consulting and training firm specializing in MLM and direct selling.  terrel@servicequest.com

Working With A Qualified MLM Consultant Can Mean The Difference Between Success And Failure

The payback from working with a qualified MLM consultant can mean the difference between success and failure.  The incidence of failure of a new MLM startup closely follows the success / failure rate of small businesses across the USA.

According to the US Small Business Administration, 8 out of 10 businesses fail.  It breaks my heart.  The trend in startup MLM companies is the same, if not even slightly higher in failure rate.  At surface level the primary reason the new MLM startup fails is that it simply runs out of cash.  But the cracks in the foundation start well before the heartbreaking day of financial collapse.

An amazing thing seems to happen when an entrepreneur identifies the great opportunity for a direct selling business: they retreat to a cave!  Some are not in touch with distributors (and their wonderful, quirky demands and needs).  Yet the distributors and consultants (in home party companies) hold the key to success deep in their dreams, behaviors, and values.

Of the best solutions, one is dialogue and the other is a qualified MLM consultant.  From our many years in and around distributor service systems, we are reminded of the question asked by Nathan Furr and Paul Ahlstrom (co-authors of the book Nail It, Then Scale It): “Which would you rather do – talk to customers now and find out you were wrong or talk to customers a year and thousands of dollars down the road and still find out you were wrong?”

The other solution is a relationship with a qualified MLM consultant.  In our circles, there are several MLM consultants that seem to float to the top in qualifications.  This doesn’t mean that those in top web search positions are necessarily the most qualified.  In fact, we have found that some of the very best resources are quite difficult to find because they are in the trenches with their sleeves rolled up.

When looking for a qualified MLM consultant, start with the simple, intuitive questions such as these:

  • Where did you get your start in the world of direct selling?
  • How can I be sure that you are qualified to guide me as an MLM consultant?
  • How many of the global top 100 MLM companies and home party companies have you served?
  • How many MLM startups have you helped, and of those, how many are still in business?

Be encouraged, and move and think quickly.  Nail your business model with the help of a qualified MLM consultant.  Otherwise, you’re in the 80% statistic crowd.

Terrel Transtrum is Founder and CEO of ServiceQuest, a global consulting and training firm specializing in MLM and direct selling.  terrel@servicequest.com

MLM Consultants are Focusing on the Wrong Things

mlm-consultants-are-focusing-on-the-wrong-thingsIn my 25 years working around MLM consultants, I’ve observed different approaches from a variety of backgrounds. With a burning desire to understand how I can be the very best, I’ve peeled back many layers to understand who are my consulting peers, and what has been the foundation for their methodologies, their perspectives, and their claims to be able to guide the MLM startup journey.

First, all MLM consultants come from their own unique perspectives. For instance, one comes from a highly technical background as a business and software analyst. Perhaps out of sheer volume of startups that he has observed, he puts a toe into the consulting waters and through commitment and tenacity as a marketer has established himself prominently in web search rankings.

Next, MLM consultants work from their respective bases of experience. The analyst sees metrics and key performance indicators as nails for his hammer. His focus comes from the analyst’s perspective. The former distributor sees enrollments as the nails for his hammer. The former software programmer sees back office, genealogies, and commissions as the nails for his hammer. And so on through the list of MLM consultants.

Eventually, when the question is asked, “what qualifies you to lead me through the process of launching and running a successful MLM company?” the true capabilities of the MLM consultants should surface. Question the one that hasn’t built a downline; study the one that has never sat in the CEO or COO hot seat; and drill the one that has never sat next to a customer service rep to listen to a live distributor call.

The central focus of any worthy leader from the circle of MLM consultants must always be on the consultant’s perspective – the passion – for successful, happy distributors. At the heart of all successful (truly successful) MLM companies is respect, understanding, and deep experience serving and sustaining the field. MLM consultants that have not taken live distributor calls are not worthy or capable of guiding meaningful and lasting company launches.

To drive the point, consider the executive circle consisting of the traditional C-level executives: The CEO, CFO, CIO, CMO, and COO. Who speaks up for the distributor each week in this high-level conclave? Add the Chief of Distributors (Chief Customer Officer) and the team is complete. In fact, every decision should be checked against the voice and expectation of the distributor. MLM consultants who do not help their clients to understand this core building block impose unspeakable harm upon their clients.

Terrel Transtrum is the Founder and CEO of ServiceQuest, a consulting and training firm of MLM consultants dedicated to distributor service and retention, and now a recognized leader in supporting launches and new ventures. Contact Terrel at terrel@servicequest.com