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Party Settle vs. Party Close?

Party Settle vs. Party Close?

IDSTC

Party Settle vs. Party Close?

So you’re starting a Party Plan company but not quite sure about how the consultants will get paid? You’re not alone. This is a big decision for party plan companies that drives the business and relationships the consultants have with corporate. The two most common options are Party Settle and Party Close.

With Party Settle, the consultant retains earnings from the party the same day, assuming the proper cash/check amount was collected in person during the party.

In Party Close on the other hand, payments first go to corporate by way of the consultant using their personal credit card to pay the company for products ordered in the party. Once the orders are fulfilled, then the consultant receives their profit through a monthly commission check.

Both offer a varying degree of convenience and also some drawbacks.

For instance, Party Settle can open up the company to unwanted exposure. How? By allowing the consultant to keep the cash and checks she could potentially use the funds for something personal instead of fulfilling the orders. If she does this and then later reimburses the party and places the orders, this could potentially leave the party guests to wonder why it’s taking so long to get their goods. The answer from the consultant? She could blame the tardiness on party order delivery by the company. Moving to a Party Close model protects the company from this kind of situation. However, an important benefit of Party Settle is that it does encourage your consultants by giving them immediate results for every sale in the form of hard cash/check.

On the flip side, Party Close limits payment options for party attendees. Party Close requires credit card payment for orders during the party before the host order and closing of the party can be completed. Not allowing either cash or checks, something that is available in Party Settle, can make Party Close somewhat undesirable for consultants due to less flexibility in payment choices for party attendees. A benefit to Party Close is the straightforwardness it offers – no complicated settlement calculations, no waiting for party profit via a commission cycle (end of month, etc.) and no custom reporting to communicate this information to consultants. A big argument for Party Close is that it is simple, period.

As you decide whether to setup Party Settle vs. Party Close, you should keep these points in mind. There are many other things to consider between these two options and whichever you choose has a great impact on business operations for your consultants. This means your company needs to carefully evaluate the risks and rewards of your party compensation style.

Do you have questions about how to choose between these two Party Plan options? Contact Us today and we would be happy to help! IDSTC has been the trusted technology partner to the Party Plan industry for over 15 years and we have the experience it takes to help your company make these important business decisions.

 

Growing Business = Growing Tax Concerns

A growing business leads to growing tax concerns.

As the famous quote goes, there are two certainties in life: death & taxes! As your company grows so too inevitably will your tax concerns. Now is a good time to make sure you won’t find any unexpected surprises when preparing your MLM or Party Plan Taxes for fiscal 2015. It’s a big job! It’s gotta get done because a growing business leads to growing tax concerns. Use these tips from Avalara.com to make sure your heading in the right direction.

Sales Tax & The Direct Seller

A while back, 1960 to be exact, there was a Supreme Court case, Scripto v. Carson, that expanded the definition of how states determined a ‘physical presence’ or nexus for companies that used a direct selling model.  Scripto was a company using commissioned brokers or agents to sell their product throughout Florida but was not charging sales tax on these transactions.  Scripto had no offices in Florida but the state claimed that they had an obligation to collect sales taxes based on the agent model they were using to push product.  These agents were not employees of Scripto but Florida argued that their “continuous local solicitation and forwarding of orders” triggered the obligation to collect.  The Court ruled in favor of Florida and thus began the sales tax burden for Direct Selling and Multilevel Marketing (MLM) organizations.

The exponential growth that can occur in your affiliate base helps drive revenue but also can exponentially increase your sales tax compliance requirements.  It’s important to note that Direct Selling companies are required to collect and remit the sales tax for transactions, not their agents or affiliates.  Here are some common challenges that MLM and Direct sellers need to be concerned with as their agent network grows:

•    As was referenced above with Scripto v. Carson, wherever you have an agent, you have nexus.  This requires you to register for a Sales Tax ID in the necessary states and locals.

•    Accurate calculation of sales tax for all of the appropriate jurisdictional taxes including the state, county, city and special taxing jurisdictions.  There can be up to 6 taxing authorities on one ‘roof-top’ location so it’s important you get it right.

•    Specific product taxability requirements in many states and jurisdictions that vary. Examples of products that have different tax rules depending on when or where you sell them include clothing and apparel, dietary supplements or food items.  I’ll spare you the details here, but the taxability of a dietary supplement can vary depending on having ginseng on the label versus cod liver oil.

•    Filing Returns and paying the states or jurisdictions on time and correctly.  Your filing schedule can be annual, semi-annual, quarterly, monthly or even weekly depending on the states rules and your annual revenue.  Customers appropriately call it the “monthly filing crunch” as you’ve got to file and remit payment before the 20th of the month or you’ll be subjected to penalties.

•    State sales tax audits are inevitable for growing companies that make it past the 3 year mark.

•    ‘We’re now a real business’ period.  Keeping a detailed audit trail is critical which includes sales and use tax transaction history, exemption certificates and copies of sales tax returns filed.  Important to note, most states have a look back period for audits of up to 7 years, which means they have a lot of data they can scour through to try and find mistakes.

Managing sales tax is just a cost of doing business and you need to do it right or you’ll expose your business to audit risks.  So what are your options?  You can try to do it on your own.  You can hire your own tax team to try and handle it.  You can pay a bunch of 3rd party accountants to manage it.  Or you can automate it with a company that offers a solution that marries compliance with technology.  Whatever you do, you cannot bury your head in the sand and think it will go away.

Direct selling companies are moving away from manual sales tax management to ‘cloud-based’ solutions that integrate with their ‘order-to-cash’ systems and automate their entire function from calculation to reporting to filing.  The reasons are tied to cost, risk reduction, having a platform that easily scales with their growth and the obvious one, NO ONE likes dealing with sales tax.  These solutions are allowing them to focus their resources on activities that grow their business instead of doing the government’s business.  Less Taxing, More Relaxing is a reality for companies that automate it!

IDSTC integrates with Avalara for automated tax calculation, reporting and filing. Having a solution seamlessly integrated with your MLM / Party Plan software provider reduces the hassle and headache associated with keeping on top of your taxes and fillings.

Here are some upcoming webinars from Avalara to help guide you through this tax season:

February 16 at 11 am PST
http://www.info.avalara.com/CPRWebinar-feb?partnersource=0014000000GiyTyAAJ

March 29 at 11 am PST
http://www.info.avalara.com/CPRWebinar-March?partnersource=0014000000GiyTyAAJ

Looking for a place to start? Contact IDSTC today to lean more about how we can help you find solutions for managing your Party Plan or MLM company today.

Why MLM / Party Plan Companies Fail

Have you ever asked yourself why many MLM / Party Plan companies fail? From a recent study, there are between 1800 and 2400 new start-ups each year in the industry, but the average life expectancy is only 7 months. Failure can be the result of numerous reasons, but the main reasons they fail may not be what you think! Here are our top four reasons:

1. Lack of Knowledge:

Many MLM /Party Plan companies are started by successful Distributors or Consultants who are really good at building organizations, but have no real business skills. While being a successful consultant in the industry brings expertise at sales and relationships, it is completely different than actually running a company. You don’t need to be in charge to be in control!

The Solution: Bring in a COO or CEO who knows business.

Bonus: If you can find a proven executive from the industry, you are increasing your chances of success. They will have the know-how and answers to all the unique complexities in this industry.

2. Lack of Funds:

Most startups are underfunded and attempt to cut corners or make the business fund itself. But product, consultants, software, attorneys, and fulfillment all cost money!

The Solution: Seek out qualified investors. It may be tough, but in many cases, it can mean the difference between success and failure.

Bonus: Be prepared to present an articulate and powerful pitch on why your product/service will be successful, with the data to prove it! Don’t be that minnow in the shark tank with no answers – be the shark of your business.

3. Cut Rate Software:

Not all software is the same. If the price looks too good to be true, most likely it is. Unless your project is the simplest offering on the market, you can expect to pay $15k to $25k and up depending on your requirements and compensation plan.

The Solution: Separate your needs from your wants. Find a software that meets your initial needs to get the business operational and earning money. The business you start today will be a different business six months from now. The initial purchase is just the beginning of a long-term relationship. IDSTC is your trusted software solution with 15 years of experience and hundreds of successful deployments. We’ll be there as a partner throughout the growth of your company.

Bonus: Your’re operating a MLM / Party Plan company, so don’t let “website development” vendors convince you they can get you going for $500. The power of social selling comes with costs and those costs are the extra layers of complexity to operate your business efficiently with the right software solution.

4. Rapid Growth:

From a logistical standpoint rapid growth can be a pain, but from a merchant processing standpoint it can be a death sentence! Most people don’t understand how a merchant account works. A common mistake is believing “If I make a sale online, that’s my money.” Unfortunately it’s not that simple. That is actually Visa or MasterCard’s money and they are not always your friend. Basically they just gave you a loan for 6 to 18 months. If you are processing $100k a month, that is your monthly loan, because in some cases customers have up to 18 months to Charge Back. All new merchant accounts have a limit and when you reach that limit, they are likely to set some of your money aside (10% to 20% for 6 months) just in case customers Charge Back.

The Solution: Simple, secure more than one merchant account, monitor their processing, and have the ability to switch between accounts if needed.

Bonus: Work with your chosen software solution to find out which merchants they recommend and do a lot of business with. This can certainly help you avoid any ‘mishaps’ with processing orders and collecting payments.

Where is your MLM / Party Plan Company At?

Like the insurance commercial says, “It’s the little things you don’t know that can hurt you”. You can leverage our years of experience at IDSTC to your advantage. If you have not had our software Demo, contact us today! If you have, let us show you how we can meet your software needs now and in the future!

IDSTC joins DSA Australia

IDSTC Joins DSA Australia

IDSTC Joins DSA Australia

We are excited to announce IDSTC has officially joined DSA Australia as a supplier member!

Your trusted Direct Selling / Party Plan software solution continues it’s expansion around the world looking for new opportunities and challenges. We are actively engaging companies ‘Down Under’ and look forward to grow our client list this year.

Do you have questions about IDSTC participating with DSA Australia? Are you looking for a premier, trusted software solution for your Direct Selling or Party Plan company? Contact us today!

Happy New Year from IDSTC

Happy New Years from IDSTC

Happy New Years from IDSTC

With 2015 over in less than 24 hours, we at IDSTC would like to wish everyone a Happy New Year!

2015 has been an amazing year at IDSTC. We’ve welcomed dozens of wonderful new clients, solidified excellent strategic partnerships and are very near completing our super secret project that will blow the doors off 2016!

As we turn the page on 2015 into 2016, we take time to reflect on our mission to become the premier trusted partner for the MLM/Party Plan industry. We hope all of you are also taking the time to reflect on your personal and business lives. A great post on Entrepreneur discusses 5 Ways to Boost Your Business in 2016

Set goals, evaluate your systems, delegate(!), increase automation and find ways to WOW your customers in 2016. Each of these are excellent topics to make sure your evaluate for the new year.

Have a wonderful and safe New Year and contact us today with any questions on how we can become our trusted software provider.

Cheers!

 

IDSTC Partners with Fragmob!

IDSTC is proud to announce our official partnership with Fragmob! With Fragmob as a partner, IDSTC is expanding our cutting edge mobile solutions available to all of our clients, current and future.

“This integrated data provider partnership will allow clients who use Fragmob as a mobile platform developer and IDSTC as a robust back office solution to have their systems work seamlessly together.”

Check out the press release from Fragmob here!

As your trusted software provider, IDSTC constantly seeks ways to improve the services we offer our clients and prospects. With this new partnership, IDSTC is paving the way in the Direct Selling / MLM industry by offering the latest in mobile solutions for your company.

Want to learn more about how IDSTC and it’s strategic partnerships can propel your business to the next level, contact us today!

IDSTC Welcomes Nutracelle to our TEAM!

Nutracelle partners with IDSTC

Nutracelle partners with IDSTC

IDSTC is ecstatic to introduce our newest client, Nutracelle!

Nutracelle was founded by Melanie Wildman, who holds amazing accomplishments including the International Women in Business Award for Executive of the Year, the 2015 Finalist for the Western Canada Entrepreneur of the Year, a former Mrs. Canada and First Runner Up in Mrs. Universe! Melanie is a wonderful person who represents the epitome of entrepreneurship in the Direct Sales industry.

Nutracelle offers industry leading nutraceutical products that are scientifically developed to support rapid weight loss, maintain essential muscle mass, and increase fullness while reducing cravings.

We warmly welcome Nutracelle to our IDSTC Team and look forward to all the exciting opportunity and growth to come!

If you are interested in the direct selling industry or want to learn more about how our software can help you grow your company, contact us today!

This is why you want an actual web team working for you

Having a powerful and elegant website is one of the most important aspects of running a business today and the MLM/Party Plan industry is no exception! In fact, leveraging powerful corporate and replicated websites is one of the most important factors to your company’s success in the industry. Corporate needs a site that’s simple yet powerful, elegant but not confusing while consultants need all of the above plus the individualization that sets them apart. This is why you want an actual web team working for you.

There are dozens of website building tools available today that promise easy, robust and inexpensive solutions for creating your own website. While most of these tools promise to make managing your website as seamless as possible, there are still many important items to consider before committing to a specific website platform. These topics are even more important when you consider the MLM/Party Plan industry and how these websites need much more complex functionality compared to a generic e-commerce store. A recent example of how these easy-to-implement website tools can be a nightmare for your business was noted by The American Genius in their article “Google temporarily de-indexes Wix sites”:

Wix’s easy-to-use site building process eliminates the need to hire web development experts, making it an attractive option for start up businesses hoping to save money. Unfortunately, because all Wix sites use one main platform, individual webmasters experience much less flexibility and control than they would with a personalized platform.

The main issue The American Genius discusses is a huge Google Index drop that all Wix users just experienced. A recent issue has caused any Wix websites to see an enormous drop in the Google activity tracking which can directly impact your business each day. Being de-indexed by Google causes your sites activity to plummet which means less visitors and that translates into less profits.

Having an actual web team working for you might not be the cheapest solution but it would certainly reduce your businesses exposure to these types of website risks. Here at International Direct Selling Technology Corporation we have an entire web team dedicated to providing our clients with the most cutting edge websites. We have experts not only in website design and user-experience functionality but also Google Analytics and other SEO tools so that your company is always ahead of it’s competitors.

Contact us today to see how our expert team here at IDSTC can improve your MLM/Party Plan website and business!

What to consider before purchasing your MLM software

Your software is more then just a tool it’s a your weapon! You need to be sure that it’s there when you need it and supplies you with all of the force necessary to accomplish your goals. If you are looking to purchase software geared towards the ever growing Multi-Level Marketing or Party Plan industry you need to choose your weapon wisely! There’s a lot of competition out there and having the proper software in place for your business can be the determining factor in who wins the war. Here are some questions to consider when choosing a software provider.

Are you just getting started with your MLM/Party Plan or are you looking to upgrade an established business?

Before you can choose the best software for your business’s needs you need to etablish your business’s requirements. If you’re an established company chances are you’re looking for advanced features that a newer company may not be ready to purchase yet. If you’re just getting started make sure you understand what your basic requirements are before you start to consider a provider:

Tools that a newer company might need:

  • Corporate website and replicated websites
  • Reliable inventory, order and shipping management
  • Company Logo and Branding
  • Compensation plan (if you have one is it supported?)
  • Marketing materials for your consultants (For example: PowerPoint presentations, printable sales sheets, auto-responders, event management, replicated websites)
  • Full support and training
  • Reliable and scaleable back office system
  • The ability to update and expand your software as your company and it’s needs grow

Tools that a pre-existing company might want to add or update:

  • Refreshed website and content need to be updated?
  • Are you still on a legacy system?
  • Will your full functioning compensation plan be supported?
  • Do you need access to extensive and dynamic report creation?
  • Do you currently have the ability to create revenue through your consultants replicated websites?
  • Are you looking to add Party Plan focused apps like Party Invites, Enhanced Party Settlement options, etc.?

 

What compensation plan does your MLM/Party Plan use?

Beware that there are a seemingly endless amount of compensation and bonus plan structures in today’s market. Does your company’s structure use more then one of these systems? Do you plan on offering different methods of compensation or potentially changing your plan in the future? Many software companies offer multiple options when it comes to tracking, updating and paying out compensation plans and bonuses. Take the time to research and test the software you are interested in to be sure it will work with your companies established or proposed method. If a provider is offering you a pre-existing plan structure make sure it’s legitimate! Never let a software provider talk you into using a plan that you don’t understand 100%. Your compensation and bonus plans are the muscle structure of your business. It gives you and your consultants the strength, energy and propulsion to move your business forward. Your consultants want to know and understand how they’re going to be paid. Can you blame them? Make sure you (at the very least) have an idea of how you want your structure to operate. Don’t get talked into a plan that you can’t easily explain or understand yourself.

What are the potential needs of your evolving and expanding company and can your software provider meet those needs?

You have a vision, but it may take you a while to see it through. That doesn’t mean you shouldn’t plan ahead. Set as many concrete goals as possible and have a plan in place to help you reach those goals. Plan for your future from the very beginning. Establish where the strengths and weaknesses of your operation exist. Consider what tools you will need to boost the strength of your business. What’s working for you right now? What’s not working? How can you improve your areas of weakness and where should you start? Start by finding a software provider who has experience and can fill your current requirements and offer you the ability to add, update and expand you future requirements. Direct from the box MLM/PP software option is not the best option for companies that need to be able to expand and adapt. If you’re looking for the ability to grow and update the methods your company uses, or create your own, look at companies that will work with you to design a product specifically tuned to fulfill your needs.

Don’t purchase software that doesn’t offer you a demo!

It’s just that simple. Always try before you buy. If a company doesn’t offer you a free demo or trial of their software they may have something to hide. A good provider will jump for joy at the ability to show off what they can do for you.

Experience matters!

Wow you got a great deal on that software ….. if only it did what you needed it to do. Take a long hard look at the background of your MLM software provider. Do they stand up to the test of time? Do they have a customer response team in place? Do they provide you with trials or demonstrations of their products? Are they easy to contact? When problems arise are they ready to work with you as a team to find and fix your issues? If not you may want to consider what you’re getting yourself into. You get what you pay for, and in our modern “buyer beware” market you don’t want your chosen software provider to be the reason your company can’t reach its full potential.

Don’t hesitate to contact us today and schedule a free demo so that we at IDSTC can show you how our software solutions can get your company on the path to success!

How fast does a downline team grow in an MLM?

So, how fast does a downline team grow in an MLM? Let’s find out.  Assumptions…

  • Assume a standard time period of one month (for simplicity)
  • Assume a distributor does not get any new enrollees the month they join or the month after
  • Assume that starting with their 3rd month (2nd full month), distributors get 1 new enrollee every month
  • Assume everyone in the downline follows a similar pattern (i.e. we are only concerning ourselves with productive enrollees, and ignoring deadwood)

If you plot this out on a whiteboard and count the nodes (See image), you get this…

MLM Growth

 

Month New Enrollees (team) Team Size (dist + downline)
1 0 1
2 0 1
3 1 2
4 1 3
5 2 5
6 3 8
7 5 13
8 8 21
9 13 34
10 21 55
11 34 89
12 55 144

Does the sequence on the right look familiar?  It is the Fibonacci Sequence.  Every number in the sequence is the exact sum of the two previous numbers.  The Fibonacci sequence appears frequently in nature, and is usually associated with population growth.  Fibonacci discovered the sequence while considering rabbit populations.  Apparently the rules for rabbits apply to distributors as well.

Also notice that the number of new enrollees every month is itself a Fibonacci Sequence.  This means the population growth rate is Phi, also known as the “golden ratio”.  The value of Phi is , (1 + sqrt(5)) / 2, or about 1.618.  Put another way, the team will grow about 61.8% every month.  Finding Phi here is not really a surprise, it is exactly what we would expect to find if an MLM organization is a scale-free network, which it is.  (Scale-free meaning the organizational structure looks the same regardless of where you chose to look at it.)

Lastly, because MLM’s are “self-organized scale-free organizations”, this math and these ratios, as well as other nifty advanced fractally type stuff, will apply at any node, i.e. for any distributor anywhere in the company, or for the company as a whole.

Obviously, as a model this is something of an oversimplification: it does not consider attrition, distributors will not perform at the same rate, etc.,  but it gives us a starting point for considering an “ideal” structure.  I suspect overlaying this with some sort of decay model would get us pretty close to the real world experience, but that’s an exercise for another day.