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Income Disclosure Statements: How They Work and Guidelines to Follow

The new era of direct selling is here, and with it come new ways to build credibility for your direct selling business. One such way is through an income disclosure statement. Income disclosure statements provide prospective distributors with information about the typical earnings of other distributors in the company's compensation plan. These income statements give potential distributors a realistic view of what they can expect if they sign up as a distributor under the company's opportunity.

Income disclosure statements are designed to help consumers evaluate a company's business opportunity. It must include the following information:

  • To give a more accurate picture of how much money someone could make from their work as an MLM distributor, the number of hours worked each day should be disclosed, irrespective of their rank or level.
  • To be fair and transparent, income disclosure statements should include the percentage of distributors who achieve average income at each rank.
  • It must also include the average earnings of each distributor at each rank. By including this, distributors can see which levels provide a realistic opportunity for earning money and which ones do not.
  • An income disclosure statement must include both the highest and lowest earnings achieved by distributors on a weekly average. This is to provide distributors with an understanding of how much they can earn in a given week. And whether or not they would be earning more or less than the average income for all distributors, which is calculated weekly.
  • An income disclosure statement must include strict guidelines for distributors while making their earning claims publicly. This is to restrain distributors who falsely represent their earnings to consumers, which is unethical and misleading.

Guidelines to follow while drafting an income disclosure statement

  • As an income disclosure statement is your first impression of a potential distributor— it should be clear and concise in an easy-to-understand format.
  • Strictly restrain from deceptive or unfair claims or practices. This requirement intends that people can make educated choices.
  • All claims must have substantiation irrespective of their origin—either from distributors or from the company.

This article was published on 14.07.2022 by Noufal P Bava
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