The Detriment of Front End Loading with a Home BusinessAuthor:
Donna Lessard Stewart
Here are 5 questions to ask to help with understanding the detriment of Front End Loading.
- Does the company require a large investment of product to start? Large, meaning $500 or more to get started.
- What kind of commission do you earn when you get someone to start with a large order of product?
- Are the majority of commissions earned on the initial purchase of a new member?
- Can you buy your status? Meaning can you purchase a certain amount of product to 'Get to' or 'Maintain' your status with wth business?
- Are you advised that you can recoup your money from your big product purchase by retail selling?
I know, I know. Some of you reading this may be saying, 'What\'s wrong with any of those statements?'
I say, 'A lot!'
Now, stay with me here for just a moment.
So many companies make most of their revenue on 'Front End Loading'. Sad but true.
What is Front End Loading? Basically it means the majority of product(s) sold are to the 'Distributers', not the end consumer. The company makes the majority of their profits from new distributers buying a lot of product up front or to 'Get To' or 'Maintain' a status.
Even if the new distributer is unable to retail sell the products, the company still makes money because it has already been purchased by the distributer, not an end consumer.
Most companies that front end load their members, will give a nice commission to the distributer that gets someone to buy in with a big order. This creates a major promotion of the 'big buy in' when someone starts.
The distributer is excited about their new venture of starting their own home business, and eventually realizes that they are unable to retail sell the products and they are stuck with it. Unfortunately, this happens all the time.
Sure, most companies have a return policy, however, it is typically a short time frame. By the time the distributer figures out they are unable to retail sell it, the time frame to return the product(s) has lapsed.
When this happens, many distributers try to give the products away as a method to lure potential customers and business partners. They may get a few, and the entire sad cycle begins again.
The company earns their profits while the distributer does not.
Now, lets dive a little deeper.
Let\'s say you have achieved a status of … let\'s call it 'Queen Bee'.
As a 'Queen Bee' you are required to have $1000 dollars worth of product purchased (from you or your customers) in any given month. (This does NOT include your initial buy in.)
So, you\'ve joined and paid $500 to start and have products on hand. You need to go out and produce another $1000 worth of product purchases (sales) in a given month to be a 'Queen Bee'. And you do it!! YEAH!! You\'re a Queen Bee!!!
You earn XYZ amount of commissions, you\'re happy and on your way to achieve the next status of 'Ultimate Queen Bee!!'
To achieve 'Ultimate Queen Bee!!' you need $2000 worth of product purchases (sales) in a given month and one of your customers (business partners) needs to achieve, 'Queen Bee' and have at least $1000 worth of product purchases (sales) in her business for the month.
Now you have your sales in line for the month, however, your business partner is 'short' about $500. Hmmmm…what to do??? How do you get her to work so you can advance to 'Ultimate Queen Bee'?
Well, your business partner could call the company and purchase that $500 worth of product herself to get to status of 'Queen Bee', which means she could advance to 'Queen Bee' and YOU would also advance to 'Ultimate Queen Bee'!
Soooo, you pressure your business partner to either go out and have parties and make the sales or just buy the amount of products needed to reach the status and ‘hopefully\' sell them next month.
Do you know what happens down the road?
You have a lot of people getting to and maintaining 'Queen Bee' by personally buying the amount of products required. (In hopes of retail selling)
You have a lot of people getting their business partner to buy products to maintain their status.
Hardly any, if any product is getting sold to the end consumer.
People get stuck with products they don\'t need or use and are unable to retail sell it. They are unable to get their money back because the return policy time frame has lapsed.
Yet, the company continues to make money while many, dare I say most of it\'s members lose their money.
Be Careful Out There
To Your Success,
The decision to work from home may be a great choice for some people. With today\'s economy and lack of financial security, starting a home business has proven to be a viable option for many. With over a decade of having a successful home business, not only have I been able to create financial security for my family, but I have helped so many others to do the same. I hope to continue to help others to achieve what ever their goals may be.