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RESIDUAL Income Spelled Out by, David G. Eisenstein, Esq.
All too often it is brought to my attention that a distributor who has been induced to build a productive downline organization through a promise of residual income has been unfairly and/or illegally stripped of that hard earned item of personal property.
In other words the downline which has been built in reliance upon the company's repeated promise in its literature, from the stage or the front of the meeting room, on conference calls, and in trainings, that if the distributor will invest time and money in building his or her distributorship through product purchases, trainings, tools and hours upon hours of three way telephone calls and business opportunity meetings, when the organization of downline distributors has been built, the residual income built in the process will not only be forthcoming, but will be continuous and permanent.
Unfortunately, residual income is more myth than reality because all too often the company finds excuses to reduce or eliminate altogether this property right which should be held sacrosanct, much like a retirement account or pension earned by employees in corporate America.
If a company is not prepared to back up its promises of residual income to its distributors it should not make those promises in the first place.
In order to help distributors and corporate executives alike remember the importance of considering the promise of residual income to be a rock solid commitment from the company to the distributors, regardless of future conditions in which the company finds itself, consider the following components of residual income.
Repetitive income paid out to the distributor who has earned it regardless of whether the distributor continues to be active with the company, and regardless of the company's condition.
Enforceable in arbitration or a court of law.
Secured by the company's assets and net worth.
Independent contractor business is the personal property of the distributor and the income earned from it cannot be forfeited for any reason.
Definite and paid like clockwork for the life of the company on the basis of downline production.
Upline distributors should support the rights of downline distributors to residual income regardless of the status of the downline distributors with the company since some day the upline distributors will want to receive or assign their residual income.
Assignable to the buyer of a distributor's business and can be devised by will or trust to the heirs of the distributors.
Liable, as in the company is liable for breach of its promise of residual income.
Source: Law Offices of David Eisenstein, Esquire. - As a Supplier Member of the Direct Selling Association - DSA - Mr. Eisenstein is available to consult with or represent MLM, network marketing companies with legal needs such as lawsuits in the courts and problems with the FTC (Federal Trade Commission), state AG - Attorney General. Click here for more information
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ARE NETWORK MARKETING DISTRIBUTORS BUSINESS PEOPLE?
by David G. Eisenstein, Esq.
Perspectives from a network marketing attorney whose practice emphasizes distributors rights
In the network marketing industry, there are many successful distributors who have found a nice niche as a home based business owner. Many more are diligently working to be successful. But, do they really own their own businesses, or are they more like employees of the companies for whom they are often called "independent distributors?"
The answer is more difficult than the corporate marketing departments of most network marketing companies would have you believe.
While the corporate types hype the "financial freedom" and purport to cater to the "be your own boss" mentality of home based business people, the answer to the question of whether the distributor really owns his or her own business, or is actually treated more like an employee by the network marketing company whose products and services the distributor sells, must be arrived at on the basis of answers to some very specific questions about the opportunity in which the distributor has become immersed.
How much control does the "company" exercise over the distributor?
This is a familiar distinction in the context of the IRS definition of employee versus independent contractor and in the legal context in general. If the company sets requirements as to the precise means and methods by which the distributor accomplishes his or her objectives, down to such details as required uniform, work hours, and micromanaging the efforts of the distributor through a thousand pages of company policies and procedures--in substance providing a "supervisor on paper" to "look over the shoulder" of the distributor, the distributor, arguably, is then under the "control" of the company as much as if that distributor reported for an 8 to 5 shift at the company's home office Monday through Friday. There is not a thing which is independent about such a distributor "employed" by the company.
Does the "company" allow the distributor to freely sell his or her distributorship or will it to heirs?
A true test of whether a company allows its distributors to actually be in business for themselves and not just have a JOB with the company is whether the company's policies allow for an easy exit by the distributor through sale of the business, with few if any strings attached.
Remember the concept of working to build your business so that you can earn "residual" or "walk away" income that would continue to be paid regardless of whether you continued to be active?"something an employee never has the right to do and a key reason why network marketers have been drawn to the valuable business asset which residual income represents and which their successful hard work at business building could bring to them, that no JOB could.
This unfettered right to sell one's own distributor business should not be lost or taken away by the company, when the company decides to terminate a distributor who has built a business. A reasonable opportunity to sell their distributor business, say one year , should be given to those distributors who have parted ways, voluntarily or involuntarily with a company.
Are the company's policies and procedures regarding cross-recruitment overreaching and extreme or are they fair and drafted to allow for the least amount of interference required to protect the businesses of the company's distributors?
We all know the drill by now. The companies which draft their anti cross-recruitment policies narrowly and without unnecessary restrictions are allowing their distributors to truly be independent distributor business owners. Reasonable approaches to cross-recruiting allow a distributor to correctly believe that he or she is truly an independent, intelligent business person, not an indentured servant who is stuck, hogtied or handcuffed to any particular company forever.
However, the policies, and even the distributor advisory board contracts which read like a sentence to a term of years in the company's confinement are anti-competitive and illegal in restraint of trade in many states, because they go well beyond what is reasonably necessary to protect the company's distributors' business expectancies.
Unduly harsh restrictions on distributors freedom of association, while not always adopted with bad motives, have resulted in some unnecessarily egregious results in the lives of distributors, many of whom have behaved honorably, when those undue restrictions are enforced or enforcement is threatened by the company, the entity which writes the checks and therefore carries near absolute leverage in the relationship.
As a distributor owner of your home based business are you spending and investing your earned income responsibly so that the money sticks to you or do you spend it faster than you make it?
It never ceases to amaze me how so many successful distributors do not do the things necessary, such as spend less than they make, and save and invest the difference in their own portfolio of diversified assets, so that the money they make sticks to them. Even in network marketing, as the owner of your own distributor business it's not how much you make, but how much sticks to you.
This means if and when you have a medical, legal or other emergency in your life or business, just like any other owner of a substantial business"which is exactly what you own when you generate significant commission income on a monthly basis --- you must have the money readily available to rectify the urgent necessity just like any other true business owner must do.
If you are a distributor and can answer the above question in the affirmative, then the main question posed by this article---are distributors really business people?---can be answered, as to you, with a resounding, "Yes I am."
Source: Law Offices of David Eisenstein, Esquire. - As a Supplier Member of the Direct Selling Association - DSA - Mr. Eisenstein is available to consult with or represent MLM, network marketing companies with legal needs such as lawsuits in the courts and problems with the FTC (Federal Trade Commission), state AG - Attorney General. Click here for more information
7. TOOLS OF THE TRADE
Editors note:
Below are some of the tools I personally use and recommend. These tools have passed my test, which isn't easy. If you would like to recommend a tool you use daily with great results, please send a note to the editor.
Just completed this for the December Noni Pearls Magazine, thought I would share it with all of you. Hope you enjoy it.
Avoid the most common mistakes
Here are the 10 most common mistakes that networkers make. These mistakes are often ones of attitude, missed judgment calls, or misinformation.
Common mistake in network marketing -#1
Inflated Earnings Expectations
There are many millionaires in the Network Marketing Industry. There are also many millionaires in the NBA as well, but how many schoolyard ballplayers make it to the NBA? VERY FEW!
This is the case in Network Marketing and those who become millionaires as well. While a large number home based business owners earn a great part-time income. The average individual spends more time dreaming about what they are going to do, or spends their time in fruitless activity. Realistic expectations for the average part-timer should be an extra $400-$500 per month. Don't sell anyone else the millionaire line. It may happen, but it simply is not the average.
Common mistake in network marketing -#2
Go For the Product, Not the Plan
I hear it nearly every day. Just last night I received an unsolicited call. The conversation went something like this:
..."Hello, I understand you want to start a home based business and make boat loads of money"......I stopped her at this point and asked her if she has used that introduction very long. She said, "oh yes, I have been doing this for years now!" So I asked her how effective she was in calling phone numbers with that opener. She said, "I make lots and lots of money".
Our conversation went on for about 10 minutes with her telling me how much money she was making and how easy it was to make "boat loads" of money. Ten minutes into our conversation, she had yet to reveal what it was she was representing--what was it she was selling to make BOAT LOADS of money with? This should be one of the first things you speak about.
It was at this point in time I informed her that I currently had a home based business and was not looking to enter into another business. "Could we please speak business to business here as I am not a prospect". She stammered a little bit but politely agreed.
As it turns out, she simply copies pages out of the phone book and calls each name one at a time. She has been doing this for a year with very little positive results, and is struggling tremendously to earn more than $200 per month. You guessed it, I asked her if she would be interested in learning more about my company and the team benefits.
In the end, I mailed her a copy of the current magazine and some additional literature. She was excited to hear that we work with our team members one on one coaching and mentoring. She stated that the person who signed her up has never spoken or responded to communication in more than 3 years. This is just sad and pathetic.
Too often, the temptation is to speak with our recruits or prospects about the "money" which can be earned. As a result, you may sign a few new people up who are looking only for the money...while this may work, you are missing one of the biggest, best and most effective sales tools.......YOUR PERSONAL TESTIMONIAL.
How effective is a man, who has never cleaned, cooked, or used a vacuum cleaner in his life going to be at selling items to make these chores easier? It is much more simple to speak about the "business end" when your audience believes you because you believe in the products.
Of course, a fair compensation plan, which provides good incentives, is important. But in the long run it is the company's quality products which people bond themselves to. The management and the vision make all the difference in the world.
Common mistake in network marketing -#3
Dont Think Short Term
The Network marketing business is like any other worthwhile endeavor. Realistically, a distributor should not expect to see the real fruits of their labor until at least six months into their business. Those who have been truly successful have been at it a long time. Don't expect it overnight and never quit working towards the goal.
Common mistake in network marketing -#4
Its Not Easy Money
We have heard it a million times, we may have even believed it a time or two. This is one of the things I hate most about the industry. People seem to think that the pitch should be "easy money", you don't have to work, you don't have to sell, you just make a list, sign a few people up and they do all the work for you! Sound familiar? Still waiting for the pigs to fly into your mailbox delivering great big checks?
Experienced Network Markers will tell you that it is not an easy money game. It is not merely a recruiting game. Distributors who are successful know their product, know their customers, know the company's vision, and are prepared to do that which is necessary. HARD WORK. Look at the name Network Marketing.
Common mistake in network marketing -#5
Free-Bee Product Forget About It
You get what you give and you take what you get! Its not about offering something for nothing, its about adding value to what you have! I cannot stress this enough.
If you want to sit on a roller coaster of ups and downs. Downs being the money you spend for a freebee or a gimme product, the Ups being the instant traffic or interest you have while someone walks up to you.... with their hand out for your freebee. You will generate a great deal of Interest only in the trinket, but not what it is you have to say!
Once they have what they want, they will never look back. You want activity, likewise, you also want FRUITFUL activity. If you must offer something for free, associate a value with it that benefits the individual. We offer a $25 Gift Certificate for all new Case Autoship Qualified Distributors.
They in turn may use this with the company on a future purchase. Why do we do this? Because the chances of them trying another product from the company is high--we know the quality is second to none and feel that the additional exposure will show them the true value of other products.
Common mistake in network marketing -#6
Dont Ignore the Company Track Record
A distributor who is looking to increase their odds of becoming successful is looking for a company with a good, strong, firm, and consistent track record. A track record demonstrates quality of management and products. This is very important for those who are genuinely "business builders".
Common mistake in network marketing -#7
Run --Don't walk!
You should avoid a company who requires you to carry large investments of inventory. The monthly minimum should be what you can realistically use in a single month. Autoship programs for both customers and distributors, represents a far more fair and long-term approach than large front load requirements.
Common mistake in network marketing -#8
Look for Products with Profit Margins
There are many Network companies in the world today. A great deal of them offer very low if any profit margin return. As a business builder, you know that Network marketing isn't for everyone. However if you have a good product, the product can be sold to everyone, you have a good thing going.
Far too often distributors concentrate on the compensation plan and earnings hype then spending time looking at the profitability of the products or services offered by a company. A company with an exclusive product, these companies, can justify a higher profit, which means the ability to pay commissions in the long term from the sale of the products.
Historically, this is why the largest and most successful Network Marketing companies have had, as their mainstay, consumable products that are proprietary. These products are unique to the company, allowing for sufficient profit to pay commissions. If the products are available in every shopping club, grocery store or nutrition store, chances are, that is where the public will make their purchase.
Common mistake in network marketing -#9
Don't be a junkie or a ping-pong
Very few distributors in the industry have developed the ability to work multiple programs effectively. These types of distributors are few and far between. As the average distributor is part-time to begin with, you should carefully pick a company and stick with it.
History favors the long-term committed distributor rather than the next-opportunity-junkie who hops from opportunity to opportunity. Focus and energy is hard to maintain with one company and its products, let alone several. Splitting your time and energy with several companies will most likely end with limited or paled results. Focus in on yourself, your goals, and your desires in one direction.
Common mistake in network marketing -#10
Turn off the TELEVISION
Activity is the name of the game in network marketing. You must do more than complete the distributor application; call your friends and sit back waiting for the money to be rolling into your mailbox. Turn your television off and get proactive. Do you know how many hours you could find in a day if you simply were willing to turn the television off?
The most successful people in network marketing are the ones who are constantly recruiting, selling and calling upon the same prospective customers and recruits multiple times. Those who sit back and watch the television in all their spare time will have unfulfilled expectations.
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