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MLM For Service Contracting Professionals
Randall Hilton

With so few opportunities to advance in this industry, is there any wonder that many launch their own shops or start handing out advice to DIY homeowners?

Sally and Bill were comparing business notes. Bill bragged, “Since I achieved Golden Leader status, I'm making $5,000 per month on my downline of distributors, and that doesn't count my personal sales commissions.”

Sally responded, “That's exciting, Bill. I'm glad you're doing so well. Especially since I'm your Platinum Leader and you're in my downline. That means I'm making money just because you are!”

Unless you live in a cave, the above conversation probably invokes visions of home-based entrepreneurs hawking soap, herbs, legal advice and other products. If you happened to buy something from one of these entrepreneurs, they probably introduced you to the opportunity of becoming a distributor or agent beneath them. Welcome to MLM - multilevel marketing. To some, MLM is a four-letter word; to others, it is a free-market opportunity to build wealth and break free from the drudgery of working for “The Man.”

Some MLM programs are nothing but thinly veiled pyramid schemes. Although these have tarnished the whole concept, that doesn't mean all MLM plans are crooked or illegal. Consider your PHC business, for example. Do you remember the first time your company handled a service call and you weren't the one doing the work? The power of multiplication, the secret to MLM success, was working for you. As you add technicians and plumbers, each one becomes part of your downline, multiplying the efforts you've invested into your business.

But, in order to truly multiply your efforts, the people who work under you need to have their own downlines.

The Power Of Multiplication: The PHC industry is sadly lacking in tiers for its professionals. In most shops, there are only a couple of rungs to the ladder. Typically, we start as an apprentice, rise to journeyman, then work like a pack mule for two or three decades. Professionals may earn more based upon additional skills they learn, but once their knees and back can't take it any longer, it's time to either launch their own shop or don an orange apron and start handing out advice to DIY homeowners. With so few opportunities to advance, is there any wonder that most of the PHC shops you see max out at only one or two service trucks in size?

The MLM world understands the power of multiplication. The more people they have pushing products, the more products they can deliver. For PHC trades, the power of multiplication is even more critical, because we don't just push products, we produce them on every job we do. Our industry needs more levels - more rungs in our ladder of success.

Maybe we need to offer our professionals a share in the production of the people they train or recruit. Multilevel opportunities may not solve every issue we face in our crafts, but in the battle to recruit, train and retain professionals, doesn't it make sense to have as many boots on the ground as possible?

Before we look at the numbers, let's keep one thing in mind: Successful MLM programs all calculate downline compensation into their selling prices. In other words, when Mary Kay ships out a lipstick, the selling price includes the usual overhead and manufacturing costs, as well as marketing costs, compensation for the beauty consultant who sold the product, compensation for the sales director who recruited the consultant, and a few other tiers as well. The customer gets a great product and personalized service.

The PHC industry also delivers a great product and personalized service. Why shouldn't we include costs for recruiting and training in our selling prices?

Service Shop MLM

Here's what a multilevel system might look like in a service shop. First, we'll define three levels. “Service Specialist” could be the lowest level of the program. This would be anyone who can operate a service truck. The next level up could be “Service Professional,” a Service Specialist who has recruited and/or trained someone else. And the upper tier of the service ladder could be “Service Mentor.” This would be someone who has recruited and/or trained someone who has, in turn, recruited and/or trained someone as well. Service Mentors are the heartbeat of a multilevel program because they truly are multiplying themselves.

Now, let's put some numbers to the program. Once a Service Specialist makes the leap to Service Professional, let's arbitrarily say he (or she) could earn 5 percent of any sales produced by the Specialists he has recruited. If the Specialist(s) also recruits someone, the Professional is promoted to Mentor and the Specialist becomes a Professional. The Mentor continues to earn 5 percent of sales from the Professional he directly recruited; in addition, he receives 2 percent of the sales of the Specialists recruited by his Professional.

For less than 10 percent of gross sales, the company is developing recruiters and trainers who are motivated and rewarded for multiplying your production capacity.

Let's see how the numbers would add up, based upon each service person achieving the same, modest $300,000 per year in sales. If the Service Mentor has recruited two Professionals, he (or she) would be earning 5 percent of $600,000, or $30,000. If each Professional has just one Specialist working under him, then the Mentor could be earning 2 percent of those sales as well, or $12,000. The Mentor is earning a total of $42,000 from the multilevel system, along with whatever he or she earns directly in the field.

Did you happen to add up the gross sales figures for this hypothetical operation? We're talking about $1.5 million in sales for this crew of five. Some of you are yawning at this level of performance, but others need to know that our profession can offer much more opportunity than we normally expect. Have you ever said, “I could really grow this company if I could just find the people?”

This is normally the point where I should be offering a distributor kit. There's no kit, but here's the sobering truth: If growth is not in your company plan, then your business is little more than a job. You can only carry the tools for so long. When you can no longer swing the wrenches, and you have no downline, what will you do? Sell cars? Or will you just put on the orange apron? Decide now to do something for your future, as well as for your profession. Here's what a growing company might include:

Service professionals with the ability to recruit and train would have potential to earn more in their later years, even as their ability for physical production diminishes. For many, this is a much more attractive option than taking on the headaches of launching their own shop.

Because they have a vested interest in building their “downline,” your Professionals would be more interested in training opportunities and would be more motivated to invest in the growth of those they have recruited. Translation: less effort for you, better incomes for your people, and higher sales and production for your company.

You would be developing a culture of growth, rather than a culture of survival. It's much easier to grow when everyone involved is looking for a way to grow, rather than just the next paycheck. (You should also budget for training materials and programs, so you can offer as much support as possible to those who are growing your company.)

Your hiring pool would include the best and brightest the trade has to offer, because the best and brightest are looking for opportunities to grow. Who knows, the PHC trades may even become attractive to high school career counselors.

Maybe it's time to hang up the running rope and caulking iron. Maybe it's time to find a different box to think outside of. Maybe it's time to explore the up-side of building a downline.

Note: Every company has different numbers. If you'd like to use a simple calculator to see what sort of impact MLM could have in your shop, just point your Web browser to www.upfrontprice.com/mlm.html. As one who is keenly interested in growing our profession, I'd also love to get your feedback on the MLM concept, as well anything else you're doing to provide a future for our craftsmen and women.