Let's Talk About the 50% Rule
Disclaimer: the examples in this blog post are strictly for educational purposes and are not meant to represent or imply income. As with any business endeavor, it takes work with Red Aspen to earn a paycheck.
Oh the 50% rule. For some of you, it’s something you have to consider every month. For others? Not so much. As our friends at Schoolhouse Rock told us in our childhood, “knowledge is power!” and we want to ensure you’ve got the knowledge needed to keep your business (and paycheck!) balanced.
So, what is the 50% rule?
The 50% rule is a rule in the leadership compensation plan states that no more than 50% of your downline volume (DV) can come from any one leg. This rule is necessary in the comp plan for so many reasons. First, it makes it so a sponsor that’s not earnestly working their business can’t automatically promote. For example, let’s say that Jane personally enrolled Mary and no one else. Mary’s DV is 20,000 and she’s leading her team and working her business. Should Jane be a Director just because Mary is? I think you’ll agree that the answer is no, and that’s exactly why the 50% rule is in place.
The rule also encourages leaders to continuously engage in business building activities to keep a healthy business, and motivates them to build a wide, then deep team.
But what happens when the picture gets a bit fuzzier? What about those who are actually working their businesses and engaging in all the right sales and sponsoring behaviors? It does happen, from time to time, that the 50% rule impacts these leaders as well, but it’s a huge opportunity. Check out this example:
No more than 50% of your DV can come from any one leg.
Mary is in Laura’s downline. Laura has her sights set on promoting to Associate Brand Director. The only thing missing from Laura’s ABD qualification is hitting 16,000 DV. Using the 50% rule, what does Laura need to do to achieve 16,000 DV? Let’s start by defining the situation and inputs. Check out example 1 below.
Great! Now that we better understand Laura and Mary’s relationship, let’s talk about what formulas we will use to determine how much DV Laura needs to earn outside of Mary’s leg, then put it into practice.
Laura needs 3,000 DV outside of Mary’s leg to promote to ABD. The silver lining? Because of the 50% rule, for every PV point Laura brings in outside of Mary’s leg, she gets two points applied to her DV (one from the other leg, and one from Mary’s leg). So if she brings in 3,000 DV outside Mary’s leg, she basically gets double the points! Here’s the math:
So there you have it! The 50% rule explained. The best thing to remember is that your success is YOURS. It’s up to you to lead your team and help them succeed, but it’s also up to you to continuously engage in the behaviors that will set a good example for your team, which means personal sales and personally enrolling new team members is of critical importance. We hope that these examples have showcased that having an ultra-successful team member does not put you at a disadvantage, rather, it GIVES you the advantage! For every DV point you bring in outside of their leg you get to add two points to your total DV. If you find yourself in a 50% situation, encourage your successful downline team member to keep going. After all, their success is your success and provides you with a TON of growth opportunities.