In 2015, upstart skin care company Rodan + Fields grossed $626.9 million, with revenues advancing at a breathtaking 93% per year. With its multilevel marketing structure and women-centered sales model boasting more than 170,000 U.S. consultants, Rodan + Fields is the digital successor to household names Avon and Mary Kay. The company’s top consultants boast six-figure incomes and lavish lifestyles, but how do they make their money — and can anyone’s Rodan + Fields business do the same?
A New Spin on an Old Concept
Rodan + Fields is the product of a 2002 partnership between Stanford-trained dermatologists Katie Rodan and Kathy Fields, whose first acne product, Proactiv, was sold primarily through infomercials. The doctors then developed the Rodan + Fields line, a growing list of anti-aging skin care products originally sold in department stores. Although that model was successful, Rodan and Fields opted to change to a consultant-based model, where sales representatives sell products outside of bricks-and-mortar stores and collect commissions on each sale.
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The company’s founders named this model “community commerce,” but to consumer affairs and financial experts it has another name: multi-level marketing (MLM). MLM is a way of bypassing traditional retail channels to bring products directly to consumers through word of mouth, networking and digital tools.
Rodan + Fields took the key features of Avon and Mary Kay, dressing up the Rodan + Fields consultant image as a sleek and competent businesswoman capable of creating her own destiny, all while driving one of the company’s top rewards — a white Lexus.
And while Avon and Mary Kay products remained mid-range in price, the skin care products sold by Rodan + Fields aim for the higher end, with most lines costing $150 and up for a two-month supply. The much-publicized success of Rodan + Fields, and its many celebrity consultants and customers, continues to draw new consultants hoping to cash in on a successful Rodan + Fields business.
How Does a Rodan + Fields Business Work?
To become a consultant, applicants need a sponsor — someone already in the organization who introduced them to Rodan + Fields. If an applicant doesn’t have a sponsor, Rodan + Fields will assign one.
The cost of becoming a Rodan + Fields consultant can be minimal. The basic business kit costs $45, which includes information about the company and its business model. That’s a small price, especially compared to how much some business owners spend to launch a startup or buy a franchise. Few people would need to take out a business loan to start as a consultant. The more elaborate business kits and portfolio packages include product samples and other business tools, and it can range from a few hundred dollars to around a thousand, according to part-time consultant Sarah Thiel. And the priciest kits may require some to charge them to a business credit card or take out a small loan.
Consultants get their own company-branded website, where sales are placed and fulfilled. Because products are ordered online, consultants aren’t required to purchase samples, though the more expensive business kits include products. (You can use the BusinessLauncher tool in your free account to turn your side hustle into a small business.)
Having emergency cash on hand can be your key to managing cash flow.
Income Starts With Direct Sales
Consultants make money in two ways: by selling products directly to customers, and by recruiting new consultants to a network. Direct selling usually starts with a consultant’s existing circle of friends, co-workers and family, either in person or via social media sites such as Facebook. Consultants are encouraged to find creative ways to build sales and keep customers coming back. Once they reach a certain level of sales, they become “commissionable.” As Thiel explained on her blog, that means “you get another 10% to 15% from the company. You also make 2.5% to 5% commission on everything that consultants underneath you sell.”
Successful Rodan + Fields representatives acknowledge that direct sales of the company’s products can generate money, but making a lot of money depends on developing a steady flow of returning and new customers, or recruiting other consultants.
The Money Is in the Network
The most successful multi-level marketing (MLM) ventures work to bring in new members to the team so they can make passive income off of their consultants’ direct sales as well as their own. When those consultants make sales, their recruiters make a commission — and this process is repeated all the way back up the line, so that those at the top collect commissions from the sales made by everyone further down. (Here’s a great article from the Federal Trade Commission about how MLMs work and what to look out for when signing up for one.)
With a large network that works hard to expand itself with more new consultants, those at the top can — and do — achieve the kind of six-figure success with the signature white Lexus that headlines Rodan + Fields’ promotional materials. The very top consultants and highest earners from 2015 data topped out making over $2 million that year — but those consultants only comprise 0.1% of the total consultant pool.
How Much Money Can Someone Make? Here’s the Average
The company publishes an income disclosure statement that outlines the low, high and average annual incomes for different consultant levels. These numbers give you a good idea of how much the average consultant makes in a year. The numbers show that the average annual income for all Active Consultants for sales in 2015 was $3,182. The majority of Rodan + Fields paid consultants (those who received payment for sales in at least one month) in 2015 fell into the lowest consultant level in the multi-level marketing organization — 41.4% overall. Those stats don’t include money spent on business kits or other expenses, but they also don’t include some of the brand’s signature bonuses and perks like expense-paid trips or that white Lexus.
Companies like Rodan + Fields are attractive because they promise freedom from the workaday world, the empowerment that comes from running one’s own business, flexible hours and no limits on the amounts earned. For some, these perks have an inherent value and are great for earning some extra income on the side. But the majority of consultants don’t make enough money to make their Rodan + Fields business a full-time gig. Read more on Nav about some of the side hustles you can turn into a legit business.