Some direct selling companies charge their independent representatives’ annual renewal fees. Watch our video to learn the basics about renewal fees.
Then, read the rest of this post to learn more.
Required Or Optional Monthly Fees
When it comes to charging your independent reps required or optional monthly fees, your direct selling company has choices. This post is about these choices and each choice has strategies and consequences.
Mandatory or Optional Monthly Fees
If you are or will be charging your independent representative’s monthly fees for services, you will need to decide if your fees will be a requirement to remain a representative or if they will be optional to receive specific tools, benefits, or services, none of which are required.
Required Fees
When you choose to make your monthly fees required, you will observe the following effects:
- For a very small percentage of reps, your monthly fees will motivate them to continue selling and/or recruiting for a short period of time.
- However, because most reps do not generate sales and earn income every month, for most of your reps the required monthly fees will become the final reason they quit.
- Some of your reps will continue to pay the required monthly fees for extra months when they forget to quit, which is financially healthy for your company.
Optional Fees
If you believe that the tools, benefits, or services your company provides are essential to the success of your representatives, you probably want all of your reps to use them. However, when you make these fees optional, most representatives won’t pay for them!
A survey of direct selling companies with optional fees for replicated websites revealed that only 20-35% of representatives choose to pay for them.
The majority of your reps will choose not to pay for optional tools, benefits, or services for these reasons:
- They don’t believe the tools, benefits, or services are worth the money.
- They are not earning income every month from their independent rep businesses to cover the cost each and every month.
Nearly all representatives don’t like to be charged fees in months when they are earning no money.
Delayed Fees
Some direct selling companies include in their enrollment options or starter kits one or more months of optional or required services. This approach looks great on the surface, but it merely delays the inevitable effects. When the specified number of months has passed, the effects listed above will be observed.
Innovative Approaches
Did you know that you have other options? If not, you will know this momentarily. Keep reading!
Mandatory When Active
Here is one innovative approach you may wish to consider for your company that will put your important tools, benefits, or services into the hands of every representative, but not charge every representative for them.
Make your monthly fee mandatory, but assess them only upon representatives whose monthly income exceeds the monthly fee. In months where one’s income is less than the mandatory monthly fee, no monthly fee will be assessed.
Bury Your Fees
Don’t charge monthly fees. Instead, calculate the expected revenues from your mandatory or optional monthly fees per representative over their first year and add this amount to your enrollment fee or starter kit prices.
Optionally, implement an annual renewal fee to collect this amount again on representative annual anniversary dates.
Consequences
Now you know understand how when it comes to charging your independent reps required or optional monthly fees, the approach your direct selling company takes has consequences. Choose wisely.
Also, don’t forget that your MLM software will need to support whatever approach you choose.
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Conclusion
We recommend that if you charge a renewal fee, include something of value in exchange for it. Don’t charge a fee just “because” without explaining what is being paid for.
If your company charges a renewal fee, how much is it?
If you need help deciding whether to charge a renewal fee, we can help you with that. We can be reached at 503.244.8787.
Jay Leisner, the President of Sylvina Consulting, is a top compensation plan and direct selling expert, a trusted adviser to new and established network marketing and party plan companies. For more than 30 years, Jay has enjoyed assessing and improving network marketing, party plan and referral marketing companies across the globe.
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