Friday, March 21, 2008

Herbalife Compensation Plan - A Review

Earlier this month, I wrote a post explaining how different MLM compensation plans work and what you should look for when reviewing the compensation plan of various MLM companies. If you read that post, you will know that I promised to take some time to review the compensation plans of different MLM companies as an example so you can have a better understanding of how to review a MLM compensation plan. If you are interested in reading my previous post, you may do so here.

Today, we take a look at the compensation plan for Herbalife International. This compensation plan explains how a Herbalife independent distributor gets paid when they get involved in the company.

The first area you need to take a look at when evaluating the compensation plan is the start-up cost to join Herbalife's team of distributors. The initial start-up fee is only $49.95, which I believe is a very reasonable and very affordable fee to get started in a business. This automatically puts you at the first level in the compensation plan and entitles you to a 25% discount.

So, for example, one of the most popular line of Herbalife products is the ShapeWorks® QuickStart package. This package contains 3 of the company's main line of products. The retail price is $85.50 so if you can purchase this package at a discount, you can buy it at $64.13. Therefore, by selling these products, you can expect to make a little over $20 a sale.

Sell just 3 of these packages and you have made your money back. They have some higher price packages as well, where if you can sell just one of them, you can make your initial investment back. So if you want to make $500 a month, you will need to sell about 25 of these packages.

One advantage to Herbalife is that they have a nice variety of different products that you can market. Some of the products include the following:

shapeworks
total control
tea
weight loss
shake
niteworks
formula 1
health beauty
diet
vitamin
And more!

Sounds good in theory right?

Here's the problem. There's no guarantee that you are going to be able to move the product at the full retail price. For example if you do a completed items search on Ebay and you will find that the ShapeWorks® QuickStart package sells for anywhere between $25 and $70 on Ebay plus shipping and handling. That doesn't leave you a whole lot of room for profit if you are paying $64.13.

So basically, you will either have to be really good in your marketing to get full price for a product that people are getting on Ebay for below the wholesale price you are paying, or you are going to have to settle for significantly small profit margins if you are retailing the product.

You can also come into the company at a higher level in the compensation plan by making a minimum product purchase. This allows you to be able to purchase product at a lower wholesale price. You also save money on shipping costs because you are getting your product all at once, which is cheaper than buying the product one at a time. With a lower price and lower shipping costs, this now allows you to enjoy either higher retail profits if you are able to move your products to customers at full retail OR it gives you more room to work with using vehicles to sell your products not a full retail but still at a higher price point than your wholesale price (i.e. like Ebay).

There are three additional levels that you can enter the company as. They are Senior Consultant, Success Builder and Supervisor. These levels require one time product orders of approximately $300 (Senior Consultant), $580 (Success Builder) and $1450 over 2 months or $2320 over one month (Supervisor). There are also ways that you can count the volume of the distributors you sign up in your organization towards your volume to help you to qualify for a higher position. However, keep in mind that you DO NOT earn any income off your organization unless you are at the Supervisor level.

Now keep in mind, I am not a distributor for Herbalife. However, if I was considering joining the company, I wouldn't join at any other level but the Supervisor level. This is because I personally didn't join the MLM industry just to make a couple of hundred dollars a month. I joined this industry because I wanted to build a multiple six figure income stream for myself and my family on a part time basis that wouldn't interfere with my wife and I's full time businesses. While I'm willing to do it however long it takes, if there's a faster way to do it, I want to know what that is and I'm willing to make the investment necessary to get it done faster.

In Herbalife, the fastest way to a six figure income is to join at the Supervisor level.

Here's why...

1. Supervisors get to order the product at a 50% discount. So using the example above, the ShapeWorks® QuickStart package that has a retail price of $85.50, a supervisor can order that product for only $42.75. With these packages going for as much as $70 on Ebay, a Supervisor can sell product for below the retail price and still make money.

2. Supervisors earn the difference between what their distributors pay and what they pay for their products on ALL distributors that are not at least Supervisor in any line of sponsorship all the way down to the next Supervisor in that line of sponsorship. That's huge! Let's say I recruit a distributor who joins at the distributor level. He recruits a distributor that joins at the same level and so does that recruit. I now have 3 people in one line of sponsorship all at the same level. Let's say they each order 2 Quick Start packages that month. They pay $64.13. I pay $42.75. That means I make $21.38 per order. That's 6 orders for a grand total of $128.28! What if I had 5 lines of sponsorship just like that and they do that every month? That's over $700 a month coming into my bank account and I only recruited 5 people personally one time.

3. Supervisors earn 1 to 5% royalty overrides on the personal volume of anyone who is on their first three levels in their line of sponsorship that qualifies at the Supervisor level.

Now there are some downsides to joining at the Supervisor level. For instance, it's going to cost you over $2000 to get started in the business as oppose to $49. You now have $4000 worth of product that you have to move in order to make money. Any product that you DON'T move means money down the drain. Also, you have to requalify once a year to maintain your Supervisor status, otherwise you will get demoted down to the Senior Consultant position. You will lose all your privileges as a supervisor AND you will LOSE any team in your organization that contains a Supervisor. That Supervisor and organization will move to your UP LINE supervisor and there is NO WAY to get them back, even if you later requalify as Supervisor.

There are of course additional bonuses and compensation available to those distributors who move past the Supervisor level to some of the higher levels in the compensation plan.

With that said, let's take a look and see how Herbalife stacks up using the three consideration points I highlighted in my previous post.

1. How easy is it to make $500 to $1000 a month?
Well if you get started as a Supervisor, you need to move $1200 worth of product your first month and $1000 worth of product each additional month to make $500 a month if no one in your organization moves any product. If you are focusing on retailing the QuickStart package that I highlighted above, that works out to 14 sales of that product the first month and 12 sales of that product each additional month.

Let's look at how many prospects you will need to expose per month assuming a 50% sign up ratio, a 25% sign up ratio and a 10% sign up ratio:

50% = 28 prospects a month (7 per week)
25% = 56 prospects a month (14 per week)
10% = 140 prospects a month (35 per week)

I have no idea what your ratio is, but all of these numbers can be achieved by a part timer. Keep in mind this is simply off your own personal production. If you are recruiting as well and your recruits are buying product and recruiting, it becomes even easier to make $500 to $1000 a month.

2. How much does the product cost and how much does it cost to get started as a distributor?
The products are a little on the high side in my opinion. You can get products similar to the products that Herbalife offers for much less than what Herbalife is charging. However the nutritional and weight loss market is heavy brand focus. That means once someone tries a product that works well for them, they are going to generally stick to that brand regardless of price point, simply because they don't know if the lower price brand is going to give the same results or not. The cost to get started as a distributor is VERY HIGH in my opinion, when you factor in that in order to make the real money you have to get started as a Supervisor and invest over $2000. There are many other MLM companies that you can get started at a much lower price point.

3. Is there competition for your product/service? Absolutely, there's lots of competition for Herbalife products. Not only are you competing with other companies that offer similar products, you are also competing with other Herbalife distributors, especially if you get started at a level lower than Supervisor. It's tough to compete when you get only a 25% discount and there's another distributor selling the same product that gets a 50% discount. That distributor can sell the product at a price that would be AT COST to you and still make money. In addition, some distributors may be willing to even LOSE MONEY on the front end, in hopes of the customer developing a great success story so that they can make their money off recruiting that customer as a distributor.

The bottom line, does Herbalife have a good compensation plan?

It's decent. I've seen worse. If you love the products and have a good story and experience with them, you will do well. Don't worry about how long the company has been around and saturation. There's plenty of people out there that have never even heard of Herbalife.

However, I personally would not join Herbalife as a distributor. There are other companies out there that you can join that don't require you to purchase large amounts of inventory to get started and make money right away. There are also companies out there that you can make $500 to $1000 a month with a lower amount of sales volume than Herbalife.

If you are interested in more information about the company I am with, you can check out a link for the company that I believe has the best MLM compensation plan.

If you are interested in Herbalife but you don't have anybody to sponsor you, I recommend Emmett Gould. He is a product of the product, a student of this industry and a great guy overall. You can visit his website at http://www.weightloss222.com for more information

If you are already in Herbalife or you are going to join and you are interested in learning how to sign up more customers or recruit more distributors into your organization, I highly recommend you check out my web site and learn how to recruit new Herbalife distributors all online without picking up the phone..

2 comments:

nkouon said...

JE SUIS EN CÔTE D'IVOIRE ET JE VEUX ETRE IR REPRÉSENTANT INDÉPENDANT DE HERBALIFE DITE MOI QUOI FAIRE

Ace31 said...

Very informative, thank you! I'll have to read your previous entry too.