Re: The difference in MLM business models and ordinary business models

> Let's clear up some misconceptions, eh?

With all due respect, your post contains more misconceptions that it clears up

> I write books and magazine articles. I have had a book published. Here's
> how the chain of money goes:

> The publisher prints the book. They resell to jobbers at about 30% of the
> cover price (about a 10-15% profit.) The jobbers sell to distributors at
> about 50% of the cover price (10-15% profit for them.) Distributors sell
> to stores at about 60% of the cover price (10-15% profit) and book stores
> sell at 100% the cover price (about 20% profit when it all works out)

> Now... here's how that works under MLM:
> Publisher prints the book. They resell to "top line"
> "top line" sells a few books but then sells the
> "opportunity" to second tier.
> "second tier" sells a few books and sells opportunity to third
> teir.
> "third tier" sells a few books and sells opportunity to fourth
> teir.
> "fourth tier" sells a few books and sells opportunity to
> "fifth tier"
> "fifth tier" sells a few books and sells opportunity to
> "sixth tier"
> ... and so on in an endless chain. And every book that sells (that 80%
> profit, remember) gives a kickback of 5-10% to the upline. All the way up.

First off the FTC shuts down companies who "sell the opportunity". There must be a product for sale and the act of recruiting can not be the source of income.

> There comes a point when that profit getting to the top is just about
> zero, so the MLM starts "restructuring" the payment plan. Notice

Profit for the company is built into the distributor cost. The company profit is the same when the distributor is front line to the company or 100 deep.

> that nobody's getting the 20% that the original model provides to the
> resellers. Notice that the original model says that "if you earn it,
> you can keep it."

> There comes a time when you pay out so much in compenstation to a huge
> downline that NOBODY gets any mone. You can't pay a downline of 10 people
> 20% of a product's cost. That's about twice the cost of the original
> product and you're losing money fast (which is why a lot of MLMs collapse
> quickly.)

Whatever gives you the idea that an entire line of sponsorship gets paid on one sale? That simply doesn't happen in ANY company. Every distributor has a "payout window". The size of the window depends upon the type of pay plan. For example in a 5x5 matrix a distributor would be paid through his 5th level. If someone on his 6th level makes a sale, he earns nothing. Infinity bonuses sometimes come into play but are misnamed because infinity ends at the first equal or larger pin.

> If everyone gets 20% of the previous person's sales, then there comes a
> point when tht 20% equals a few pennies.