the Forever Living Products earning pathways to various income levels:
Retailing, Team Building and Leadership.
Part 5: Earning Pathways in Forever Living Products
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.
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).
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
(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.
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.
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.
Independent distributor of Forever Living Products