Homework MLM
Homework MLM
Commission Structure
Commission Structure
Commission for Sales Reps with > $1,000 in monthly sales 32%
Key Ratios:
COGS as a % of Sales 41% 41% 39% 40% 40%
SG&A as a% of Sales 52% 51% 51% 51% 50%
Operating Margin 7.0% 8.0% 10.0% 9.0% 10.0%
Exhibit 3a Estimated U.S. Direct Sales ($ in billions)
$40.00
$35.00 $32.2
$29.7 $30.5 $30.8
$28.7 $29.6 $29.6
$30.00 $28.3
$26.7
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
2001 2002 2003 2004 2005 2006 2007 2008 2009
Exhibit 3b U.S. Direct Sales by Product Group
Home/Family Care/Home
Durables 24%
Wellness 23%
Personal Care 21%
Services/other 18%
Clothing & Accessories 10%
Leisure/Educational 3%
100%
0.103
0.033 0.239
0.184
0.228
0.213
Exhibit TN- 1. Annual Productivity and Sales Representative Growth
Revenues
$ Volume
Monthly
(Average) 2006 2007 2008 2009 2010E
1st Year Sales Reps $648 $4,999,968 $5,859,994 $18,581,530 $18,777,485 $29,701,210
2nd Year Sales Reps $778 $4,799,969 $5,625,594 $17,838,268 $18,026,385
3rd Year Sales Reps $933 $4,607,971 $5,400,570 $17,124,738
4th Year Sales Reps $1,120 $4,423,652 $5,184,547
5th Year Sales Reps $1,344 $4,246,706
Total Sales Reps $4,999,968 $10,659,963 $28,815,094 $46,439,975 $74,283,586
Sales Productivity
Key Assumptions:
Commission rate (>$1,000) 32%
Commission rate (<$1,000) 25%
Franchise Commissions
Leader
Level 1 Team Members 5.00%
Level 2 Team Members 3.00%
Level 3 Team Members 2.00%
Level 4 Team Members 1.00%
NO TEAM
Monthly Sales $1,000
Annual Commissions $3,840
Key Assumptions:
Commission rate (>$1,000) 32%
Commission rate (<$1,000) 25%
Franchise Commissions
Manager
Level 1 Team Members 10%
Level 2 Team Members 6%
Level 3 Team Members 4%
Level 4 Team Members 2%
NO TEAM
Monthly Sales $1,250
Annual Commissions $4,800
Sales, net of
Commissions
Average Monthly Sales Annual Sales Commissions
Year 1 $648 $7,776 -$1,944 $5,832
Year 2 $778 $9,331 -$2,333 $6,998
Year 3 $933 $11,197 -$2,799 $8,398
NPV $15,885
Exhibit TN-5. Breakeven Commission Rate - Leader
Current Structure
Leader
Level 1 Team Members 5.00%
Level 2 Team Members 3.00%
Level 3 Team Members 2.00%
Level 4 Team Members 1.00%
NO TEAM
Monthly Sales $1,000
Annual Commissions $3,840
Revised Structure
Leader
Level 1 Team Members 16.59%
Level 2 Team Members 3.00%
Level 3 Team Members 2.00%
Level 4 Team Members 1.00%
NO TEAM
Monthly Sales $1,000
Annual Commissions $3,840
Difference 11.59%
Difference 11.59%