He argued that a company where you could make $10,000 by only sponsoring 400 people was a better company to be in than one that required 2000. I disagreed with him and stated that the comp plan in the long run is not all that relevant. This is due to the law of large numbers and exponential or geometric growth and some other factors that I will get to. Let me show you what I mean.
Let’s look at these two companies we will call the 400 recruit company ABC and the 2000 recruit company XYZ.
The average person in network marketing only recruits 2 people into their company. Now of course some don’t recruit any and others recruit hundreds, but statistics show the average to be about 2. Now let’s assume you are an above average marketer and are able to recruit 5 people in your first month in the business. If each of those people on average recruits 2 people who recruit two people and so on and so on, here is what your organizations growth would look like the first year:
Month 1 Total Downline = 5
Month 2 Total Downline = 10
Month 3 Total Downline = 20
Month 4 Total Downline = 40
Month 5 Total Downline = 80
Month 6 Total Downline = 160
Month 7 Total Downline = 320
Month 8 Total Downline = 640
Month 9 Total Downline = 1280
Month 10 Total Downline = 2560
Month 11 Total Downline = 5120
Month 12 Total Downline = 10240
So if we recruit at this pace you would reach $10,000 about 2 months faster with ABC than with XYZ. But by month 12, you will be making good money with either company. That is assuming you could build both companies at exactly the same pace. In this scenario, I would agree that ABC Company would be a better option; however there are other things that need to be considered.
Logic would tell you that in order for ABC to pay out the same commission on 400 that XYZ is paying out on 2000, one of two things must be true. Either the product is 5 times as expensive, or the commission payout per product sold is 5 times more. If the product is 5 times as expensive, you may find it more difficult to build your organization as it will take longer to find customers and consultants willing to spend that amount of money. If the commission is 5 times greater your than need to look at what percentage of the gross revenue is being paid out in commissions, if it is too high the company may not be able to sustain itself and could end up cutting commissions, this has happened in many a company. If the payout is too low, then only the top executives in the company are getting wealthy, which is not the basis of the network marketing business model.
You must also look at who your customers are going to be. Are those 400 people in ABC all going to be consultants? Meaning, do you have a product that you can sell to the general public or are you relying on your down line’s auto ship to provide you with a paycheck. In a nutshell, will it be easier to find 400 people who want to join your business, or 2000 that want to buy your product?
There are many good companies in the network marketing industry that can enable you to have the freedom you are looking for. Before you dive into any opportunity take some time to investigate not only their pay plan, but also their product and marketing plan. All of these will have an impact not on whether or not you become wealthy, but on how quickly you get there.
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