I got this information from a pro-Mary Kay blog where the poster was being chastised for being so “negative”. I went back to get the name of the blog, but the post is gone now, so I can’t find where it came from – I was on several blogs during the day. Take it for what it’s worth, but I found it to be pretty much a fair representation of what it takes.
I have to say too, this is one of the few times I’ve been glad that Steve is miserly with our money, his money, whatever. I’m glad I didn’t have a lot of inventory.
Also, remember these formulas when attempting to “replace” your salaried income with MK income:
Of every dollar (in profit, the 40% of the 60/40 split) you make:
1. 33% goes to taxes and savings
2. 33% goes to additional expenses (meetings, gas, event fees, Seminar Fund, Fall Advance Fund, Career Conference Fund, etc)
3. 33% goes to YOU to “replace your income.”
So for every 10 dollars you sell (retail):
$5 gets used for wholesale ordering
$1 gets used for shipping, Section 2 on that wholesale order
$1.33 gets set aside for your taxes at the end of the year and for savings (emergency fund)
$1.33 goes into an account to cover other expenses of working this business
$1.33 goes to you to replace your income
So let’s say you currently make $50,000 per year. Assuming you’re at the 28% tax rate with no other things coming out, you NET about $36,000 for your household. That is the salary you’re looking to replace.
$1.33 represents 13.33% of that $10 sold above.
To get $36,000 clear cash for your household based on the formulas above, you need to sell $270,000 retail per year.
Let’s break it back again.
Sell $270,000 retail per year (that’s about $740 per day):
$135,000 in wholesale orders
$27,000 for shipping and Section 2
$36,000 for the tax man and savings
$36,000 for your other expenses
$36,000 for you to replace that salary
Now all that may seem like ALOT. It IS. But it’s also a realistic picture of how your dollars need to be allocated if this is your ONLY source of income.
Expenses from this business, if you participate in everything (you know, show up to go up) are HIGH! So you cannot ignore those.
Cannot ignore the IRS, and if this is your only income, you surely better be saving a good chunk too!
And if you faithfully re-order at the 50% level for every dollar you sell, and don’t embezzle from yourself, then you can’t ignore that either.
Now let’s look at this the other way.
Let’s say you SELL your way to an Emerald Star Year ($3600 in WHOLESALE orders every quarter). Notice I say SELL your way and not ORDER your way (we’ll talk about debt in a moment)…
That’s $28,800 in retail sales.
$14,400 in wholesale orders
$2,880 for shipping and Section 2
$3,840 for the tax man and savings
$3,840 for your other expenses
$3,840 for you to replace that salary
Not close enough, eh?
There’s always recruiting, BUT even with that, you cannot neglect your personal sales. And your recruiting commission has to be split in 3rds also. And if you recruit enough to become a Director, your expenses only get higher.
There is an NSD local to us who did not quit her “day-job” until a few months AFTER she debuted as an NSD. There is some wisdom in that!
Of course, I look at all of this as a single, self-supporting female with no children and no husband.
If you are married with kids, while you may another another income coming in, your expenses are likely higher at the end of the day (kids are expensive!).
A spouse is helpful if you are going to lose your health insurace and other benefits once you quit.
If I were you, I would sit down with a financial planner and really look at whether or not this would be a fiscally responsible decision for you.
If you are realistic and honest, only 15% of every SALE can be “pocketed.” The other 85% has to go back into supporting your business and covering your expenses. That is the REALITY if you do this the “right way.” Oh, and if you do quit, resolve and vow and PROMISE yourself that you will NOT go into this venture in DEBT or making LOANS for inventory!!! You do NOT NEED thousands of dollars in inventory to run this business, especially if you do not have an established and loyal customer base yet, and if you are not especially skilled or confident in your selling ability! Just DON’T DO IT! I don’t care what your Director says, what your NSD says, DO NOT GO INTO DEBT FOR INVENTORY!!!