First Step Marketing

How do you keep track of who is in your downline? All networkers, when they join a network, are given a personalised number. This number identifies them as belonging to a particular network. You may ask: ‘But how can I keep track of all the people in my downline?’ The answer is that you don’t need to. In network marketing each individual works three levels deep. You are directly responsible for the distributors you recruit (level one), the people they recruit (level two) and the people they, in turn, recruit (level three). That’s not too much to manage.

Most large professional network companies provide you, at a nominal fee, with regular computer printouts of your downline. If you have a personal computer, they will supply you with a ‘network organiser’ program on a disk. The programs are simple to operate and can be loaded on any personal computer. They not only monitor who is in your downline but show you who falls under whom.

What happens when someone in your downline buys directly from the factory and not from you? How do you score rebate points? Whenever anyone orders, they have to put their personalised number on the order form. The rebate points are automatically credited to your account.

Who pays the distributors’ costs, such as travelling, stationery, telephone expenses? Every distributor pays her own costs. As an independent distributor, unlike a company employee, you are responsible for your own business. However, if your costs, such as telephone calls, increase, your network should also grow due to better personalised contact. This means that you will earn more rebates which will pay your expenses.

How much time is spent on bookkeeping or record- keeping? This depends on the size of the network. More and more time is required to manage a network as it grows. These tasks include stock ordering, despatch, newsletters and training sessions. You may have to employ a part-time or full-time assistant or a partner to help you. However, with the use of a personal computer, the financial side and bookkeeping is made easy, even for the largest networks.

Can I buy goods on credit? The policy on this question varies according to the company you work for. Most network marketing companies try to keep it a cash business, which reduces the number of bad debts and write-offs. But some companies offer leeway to their more established downliners whose reliability is proven.

How much space is required for stock? This depends on your company’s product range, the volume of goods you sell and the time taken to deliver this stock. Most network companies pride themselves on the fast shipments of goods.

What is the VAT situation? By law in South Africa, you are required to register for VAT (value-added tax) once your annual net sales (sales less discounts or rebates received) exceed R150 000. To register, simply contact your local Receiver of Revenue where you can obtain the necessary forms.

What is the tax situation? Any person or business that earns an income is required by law to pay tax on a portion of that income as deemed by the Receiver of Revenue to be taxable. However, because you are running your own business there are several legal tax deductions you can make (operating expenses such as telephone costs, motor vehicle expenses, computer depreciation, stationery, and so on) which will drastically reduce your tax payments.

Before starting your business, consult an accountant or professional bookkeeper who will advise you. A few rands spent here would be well advised. After all, why pay more tax than you need to?

How do I know the correct rebate will be passed on to me? All networkers keep records of the sales they make, and the rebates claimed from their sponsor each month (or directly from the company in some cases). It is not in anyone’s interest to cheat and try to hold on to another ’s rebate as this would effectively kill the development of the downline.

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This entry was posted on Monday, March 10th, 2008 at 10:25 pm and is filed under Business Plans, Corporation Law, Franchising, Home Based Business, Legal, Marketing, Sales, Startup, Tax, VAT, financial. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.